In the years that preceded the Great Recession of 2008–09, many financial institutions in the developed world engaged in practices that increased the risk of systemic failure in the markets. The economics profession itself, overly confident of its ability to engineer stability, encouraged financial actors to exceed the traditional dictates of caution. The financial crisis that ensued also revealed many fault lines. One of the most glaring was an absence of international coordination, which encouraged regulatory shopping. Dramatic actions taken by public authorities in the fall of 2008 avoided collapse, but left a legacy of increased moral hazard, to which the best long-term answer is radical structural reform. Asian emerging markets were, by and large, spared the worst of the storm. They should learn from the mistakes of their peers in the developed world, but not reject wholesale the benefits of free markets.

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