Macroscope | New global economic policy rules are increasingly made in Asia

The aftermath of the global financial crisis has prompted a rethink of international economic policy doctrine.

We are moving from near-universal belief in the beneficial effects of unfettered capital movements towards a much more managed system of world money. Many of the characteristics of this new framework bear the hallmark "made in Asia".

In an imperfect world, this is fortunate. It holds out the prospect that the global economy may be better run in the next 20 years than in the last two decades.

Many methods for shoring up financial and monetary stability now practised by finance ministries and central banks around the world were tried and tested in Asia over the past 20 years. Criticised at the time, there is now growing recognition that they are the best available means for dealing with uncertainty.

These shifts surface at a time when coordination between monetary authorities is fractured and impaired, underlined by the different approaches to overcoming the lingering financial crisis in Europe, Asia and the US.

One of the biggest U-turns in the international rule book concerns capital controls, once taboo, now seen as part of a comprehensive set of tools to maintain stability.

During the Asian financial crisis in 1997-98, international policymakers, especially in the US, condemned Malaysia’s use of capital controls to restrict outflows.

The complaints were wounding and almost completely misguided, for – far from inhibiting growth by distorting markets – controls spurred Malaysia’s recovery.