"HISTORY," JAWAHARLAL NEHRU famously observed, "is almost always written by the victors. " I Financial history, it seems, is written by the creditors. When a financial crisis arises, it is the debtors who are asked to take the blame. This is odd, since a loan agreement invariably has two parties. The failure of a loan usually represents miscalculations on both sides of the transaction or distortions in the lending process itself. The East Asian financial crisis has so far been true to form. As soon as the crisis hit in mid-1997, the International Monetary Fund (IMF), which led the official international response, assigned primary responsibility to the shortcomings of East Asian capitalism, in particular, the East Asian financial markets. The IMF's principal strategy for the three countries hardest hit-Indonesia, Korea, and Thailand-was to overhaul their financial systems. The basic diagnosis was that East Asia had exposed itself to financial chaos because its financial systems were riddled by insider dealing, corruption, and weak corporate governance, We are grateful for excellent research assistance from Mumtaz Hussain, Dilip Parajuli, Amar Hamoudi, and Gopal Garuda, and for valuable input from Frank Flatters. We also thank very much our discussants, Richard Cooper and Barry Bosworth, for their comments and suggestions. This work was partially sponsored by the Office of Emerging Markets, Economic Growth Center, Bureau for Global Programs, Field Support and Research, U.S. Agency for International Development, under the Consulting Assistance on Economic Reform (CAER) II project (contract PCE-0405-C-00-5015-00). The views and interpretations in this paper are those of the authors and should not be attributed to USAID. 1. Nehru (1946, p. 287). 1 7. Sachs (1984); Cooper and Sachs (1985). 8. Diamond and Dybvig (1983).

Growing World Trade: Causes and Consequences WHAT ASPECT OF the American economy has changed most in the twenty-five years since Brookings Papers on Economic Activity first began appearing? If you took a poll of economic journalists, businessmen, or policy intellectuals other than professional economists, globalization-the growing integration of the United States with the world economy-would probably top the list. It is now conventional wisdom in many circles that the growth of world trade and investment has transformed the ground rules for economic policy. Admittedly, many international economists regard the popular conviction that unprecedented globalization has changed everything as considerably exaggerated; Americans are still so taken with the novelty of extensive international trade that they have yet to acquire a sense of perspective about its importance. Even today the shares of imports and exports in America's GDP are only about half of what they were in the United Kingdom thirty years ago; the U.S. economy is not now, and may never be, as dependent on exports as Britain was during the reign of Queen Victoria. Nonetheless, international trade has certainly increased considerably since the 1960s. In 1960 the share of trade-measured as the average of imports and exports of goods and services-in America's GDP was 4.7 percent; in 1994 it was 11.4 percent, an increase of more than 100 percent. While the growth of trade has not been quite as dramatic in other advanced countries, it has also been considerable: the average OECD country had a trade share of 12.5 percent in 1960, 18.6 percent in 1990. And a number of developing countries have seen I would like to thank T.N. Srinivasan, Richard Cooper, and William Nordhaus for helpful comments.

The Current Account and Macroeconomic Adjustment i n t he 1970s DURING THE PAST DECADE, the behavior of international capital flows, current account balances, and exchange rates have puzzled economists and preoccupied policymakers. The period has been marked by widely fluctuating exchange rates, huge OPEC surpluses, burgeoning debt of less developed countries (LDCs) and unprecedented current account deficits in many developed countries. The nature, direction, and scope of international borrowing have also shifted dramatically. The proportion of private to official capital inflows to LDCs has grown substantially; the international money market has expanded dramatically; and capital controls have been liberalized in many economies. The need for analysis is greatest on two sets of questions. First, what factors have determined the size and direction of current account imbalances in recent years? Second, what has been the relation between the current account and movements in the exchange rate? Answers to the first question have tended to focus on OPEC price increases and surpluses. Observing that the large surpluses must be balanced in the aggre-This paper is part of a research project on the effects of OPEC price increases on macroeconomic adjustment in the world economy, in collaboration with Michael

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This compelling account charts the relentless trajectory of humankind, and its changing survival and disease patterns, across place and time from when our ancient ancestors roamed the African Savannah to today's populous, industrialised, globalising world. This expansion of human frontiers - geographic, climatic, cultural and technological - has encountered frequent setbacks from disease, famine and dwindling resources. The social and environmental transformations wrought by agrarianism, industrialisation, fertility control, social modernisation, urbanisation and mass consumption have profoundly affected patterns of health and disease. Today, as life expectancies rise, the planet's ecosystems are being damaged by the combined weight of population size and intensive economic activity. Global warming, stratospheric ozone depletion and loss of biodiversity pose large-scale hazards to human health and survival. Recognising this, can we achieve a transition to sustainability? This and other profound questions underlie this chronicle of expansive human activity, social change, environmental impact and their health consequences.

Rates i n t he Short Run CONSIDERABLE FLEXIBILITY in exchange rates has marked the seventies. A series of events, starting with the appreciation of the deutsche mark in 1969, and including the realignment in the Smithsonian Agreement in 1971 and a second realignment, have brought the world into a period of controlled flexibility of rates. Flexible rates were the mechanism economists had long advocated for attaining external balance,' but the experience in the last few years has led many to reconsider it. That reconsideration is stimulated by some surprises in the performance of flexible rates. First among these are the recurrent, large cycles in ex-Note: We are indebted to Pedro Aspe, Roger Hankin, and Jay Helms for valuable assistance. Helpful comments from Karl Brunner, Jerry A. Hausman, and members of the Brookings panel are gratefully acknowledged. Financial support was provided by a grant from the Ford Foundation.

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