The Editor, Sir:

We are being continuously bombarded by amazing developments out of the unfolding world financial and economic crisis. One of the latest was former Fed Chairman Alan Greenspan's contrite admission before the United States House of Representatives Oversight Committee that his orienting world view that shaped his understanding of markets for over 40 years was wrong. It is, perhaps, a measure of the shock and trauma Greenspan is feeling that he did not even seek to offer the rationalisation that while current realities have shifted dramatically, away from his philosophy of institutional behaviour in financial markets, his world view might have been somewhat true to the circumstances of yesteryear.

Such a far-reaching revision of sentiment, coming from one as widely respected as Greenspan, will bring added poignancy to the crescendo of voices calling for a reshaping of the architecture of the world financial system. Already, President Bush has called for a summit meeting, in November, of several major countries to address the financial and economic challenges facing the world (though it is a moot point whether such an initiative, led by an administration in its final lame-duck months, will yield any worthwhile results).

International response

Some key issues should loom large, going forward, in national and international response to the crisis that is upon us.

First, there is the question of the effectiveness, vis-à-vis the major economic powers, of the International Monetary Fund's (IMF's) role as the world's premier financial surveillance institution. Will a dispassionate review of IMF surveillance reveal that it exerted pressure on countries with little or no systemic impact, while paying insufficient attention to the gathering storm in the major economies, or while meeting with indifference to its policy advice on the part of these countries? Either way, any future regime must address the adequacy and the authority of IMF surveillance in countries of major systemic importance.

A second issue concerns the disjuncture between an increasingly seamless global financial system and a world order marked by hard political boundaries. It is tempting to suggest that this disjuncture be overcome by better alignment of world financial and political boundaries - either by rolling back the considerable interconnectedness of financial markets or by easing the firmness of political boundaries. For obvious reasons, neither of these options is an early prospect. It would seem then, that the difficult challenge facing the world is to work towards international arrangements which incorporate intensified coordination, combined with sustained policing of capital flows geographically, and across segments of the financial system. It is within this context that an understanding must be reached on the long-term future of the IMF and on an adjustment of the power structure within that organisation.

It will be critical to underpin all this with renewed attention to national financial regulatory regimes. Obviously, the present impasse has had its genesis in alarming regulatory failures in major financial centres. Which is ironic, as these are the very centres that have long been touted as the embodiment of excellence in financial regulation. But now we are seeing the emperor's fine clothes for what they really are - threadbare!

Wise and sober counsel

Hopefully though, wise and sober counsel will prevail as national financial authorities scamper to strengthen their regulatory systems. They must resist the temptation to swing the pendulum from inadequate regulation to overweening control that stifles creative innovation - though not necessarily of the type that spawned complex and incomprehensible financial derivative products several times removed from their underlying assets.

What of Jamaica and the Caribbean in all this? Surely, it should be unacceptable that small countries would not have a voice in the overhauling of the international financial system. This is not a matter of some inflated idea of our self-importance. Rather, it is a matter of our vital interest in our survival. The challenge is how to organise such a presence. Here within CARICOM, there is considerable expertise within and outside the public sector that should be mobilised to develop cogent proposals, both for strengthening intra-CARICOM financial integration and regulation and for servicing our presence at the global table in alliance with other groupings of small countries.

I am, etc.,

RODERICK RAINFORD

Maryland, St Andrew.