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In Defense of Free Capital Markets
Book

In Defense of Free Capital Markets

The Case Against a New International Financial Architecture

David F. DeRosa
Bloomberg Press, 2001
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Editorial Rating

8

Qualities

  • Controversial
  • Analytical
  • Scientific

Recommendation

Yale University adjunct professor David F. DeRosa argues that markets are smarter than government ministries. Therefore, he contends, economic development should be left to the free market, since tighter regulations will only distort development. His detailed analysis of economic conditions focuses on factors leading to several crises, including the decline of the Mexican and Japanese economies in the 1990s and the Southeast Asian collapse of 1997. The subject is complicated and interesting, and the writing is often technical and sometimes complex.getAbstract calls this book to the attention of scholars, executives and managers who have a serious interest in fiscal policy. And we do mean serious.

Summary

The Financial Crises of the ’90s

The failure of government regulation coupled with faulty fiscal policies caused the financial turbulence of the 1990s. A free-market economy works better, according to conservative economists, beginning with Adam Smith two centuries ago. As they consistently point out, a free-market economy - one that is unburdened by central economic planning and affected by only light government regulation of supply and demand forces - is the most efficient and reliable economic system. The 1990s saw a number of financial crises, including stock market crashes, exchange-rate problems and serious economic contractions, which led many people to question free markets. However, these crises were due to flawed government policies that interfered with free market operations.

One crisis occurred in Japan, which had experienced three decades of high growth through the 1980s. Then, in 1990, the country’s stock market suddenly declined; drops in real estate, banking and other sectors followed. Europe experienced currency crises in 1992 and 1993; Mexico had a peso crisis in 1994. The Southeast Asian currency crisis that created financial chaos in 1997 preceded...

About the Author

David F. DeRosa , Ph.D., is the president of DeRosa Research and Trading. He is an adjunct professor of finance and a fellow of the Center for International Finance at the Yale School of Management. He writes a column on international finance and politics for Bloomberg News.

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