Editors' Summary

awakened the world to the importance of a sound financial system for economic stability. Each of the countries involved in the crisis had banks that loaned too freely, too often in foreign currencies, and too often to companies owned by bank shareholders. Furthermore, capital markets in each of the countries were poorly developed, accounting and disclosure standards were weak, bankruptcy systems were poor or effectively nonexistent, and little protection was afforded to minority shareholders. All of this is now conventional wisdom, although how essential it is for emerging-market countries generally to move their financial infrastructure in Western directions remains hotly disputed. Skeptics point to the rapid growth of the Asian economies before the 1997 crisis and assert that the characteristics of what is now called “crony capitalism” were present throughout this period, apparently without negative consequences. Advocates of reform counter that, however impressive the previous economic track records may have been, if emerging-market countries want to be integrated into the international financial system, they will have to upgrade their legal infrastructure to something akin to Western standards or else face the kind of punishment meted out to the Asian financial markets. If the latter view is correct—and we believe it is—then some countries may be tempted to say that they do not want to pay the price of joining the global financial marketplace. In fact, few countries have chosen this