A quarterly magazine of the IMF

March 2002, Volume 39, Number 1

As 2001 drew to a close, there was a heaviness in the air and in people's hearts, as we wondered what the future held in store for us. Prospects for the global economy had worsened and become unusually uncertain, and the September 11 terrorist attacks against the United States raised the specter of a world gripped by fear, with nations hunkering down and turning inward. Was this what we were headed for, despite the promise of the technological revolution and the urgent need to tackle widespread poverty—the world's biggest development challenge?

The March 2002 issue of Finance & Development probes this question by taking a fresh look at how the increasing integration of global markets—no doubt a defining characteristic of the world economy today—is shaping up. As IMF Deputy Managing Director Eduardo Aninat suggests, "perhaps never has so much been at stake, with so much potential within our reach." For him, the globalization debate seems to have undergone a subtle but possibly profound shift, accentuated by the events of September 11. Debating whether globalization is "good" or "bad" is now seen as simplistic; instead, all parties recognize the need to manage the process of globalization so that its benefits are widely shared and its costs kept to a minimum. This recognition opens the way for a renewed dialogue, already exemplified in this issue's Point/Counterpoint between Kevin Watkins of Oxfam and David Dollar and Aart Kraay of the World Bank. Both sides agree that "globaphobia" is unjustified, and they also agree that, besides trade, other factors—such as sound economic policies and institutions—play a critical role in promoting sustainable growth and development. But they disagree on the relative importance of trade and other factors and on how to interpret critical data on trade, growth, poverty, and income inequality.

As for the radical changes in global capital markets over the past two decades, several articles explore the driving forces behind them and their policy implications and repercussions—including the strong push by the international community to help countries improve their domestic financial institutions in the hope that if the parts are healthy, the whole will be, too. These interlinkages were tested in a way that no contingency plan ever came near to foreseeing on September 11, when the U.S. financial nerve center was hit. The New York Federal Reserve Bank's Christine Cumming tells us that, despite the devastation, the U.S. payment system performed well, and she offers thoughts on how to safeguard the financial system even more strongly against possible future disasters.

Finally, this issue underscores that even critical social issues—such as education, health, and the environment—cannot be tackled without a well-functioning economy and that they must be tackled by the global community as a whole.

With this issue, Laura Wallace, a U.S. national, becomes the Editor-in-Chief. She holds a BA in economics and English from the University of California at Berkeley, an MS in journalism from Northwestern University, and a Master in international public policy from the School of Advanced International Studies, Johns Hopkins University. Before joining the IMF in 1989, she worked as a journalist in Europe and the United States.