Reforming the International Financial Architecture
Consensus and Divergence
The Asian crisis and its rapid spread to Russia and Latin America in 1997 and 1998 gave rise to a broad consensus on the need to reform the international financial architecture in order to reduce the inherent instability of the current system. This chapter critically reviews the ongoing debate from the developing country perspective and argues the case for a thoroughgoing reform of the current architecture. It looks at the current controversy which is organised in terms of distinguishing the areas in which there is some agreement from those in which there is still a considerable divergence of opinion. This is an expository device, based on the chapter's perception of existing consensus and divergence. The chapter focuses on reforms needed to prevent and manage financial crises — what may be called the ‘narrow’ financial architecture — leaving aside issues relating to development finance, in particular.