In the aftermath of the crisis, the configuration of the world economy will be transformed as changes in the pattern of global demand take place, as demands for greater efficiency and lower costs occur, as actions are taken for a reduced role of government in the economy, as new regulatory regimes are being introduced, and as efforts are being undertaken to enhance our capacity to manage systemic financial crisis. Many of these changes will involve cross border arrangements and collaboration. We are all stakeholders with interest in what the post-recovery world will look like. Indeed, the issue of new economic models in the context of these developments is relevant not just to Asia but also for other parts of the world. We have seen how within the short period of less than a decade, the rapid escalation of debt-driven consumption in North America led to chronic financial and economic imbalances that has resulted in a significant economic dislocation on a global scale. Several lessons can be drawn from these developments. The Asian economic model for the future needs to be redefined if the economic progress is to be sustained, taking into account the global changes that are taking place. Asia's success which has been described as a “miracle” has been well documented. It has been acknowledged that “the miracle” is not the result of any one single factor but rather, a confluence of factors. Structural change and pro-growth policies were coalesced synergistically with hard work ethics.
30  In spite of the cold war, proxy wars and several wars of independence of colonies, the period after the Second World War remains one of relative peace in the developed world, compared with any other period in history. 31  Most of the sub-periods during which debt grew fastest have coincided with periods of economic slowdown. But what is remarkable is that we have not generally seen a reduction in debt levels in good times that would match the increases in debt in downturns. 32  What the graph hides is the fact that most of the increase in the average OECD public debt-to-GDP ratio in the late 1990s has been driven by the steep debt increases of Japan in the 1990s. Taking out Japan from the sample shows a slight drop in the average debt ratio during this period. BIS Review 106/2008  7  Gallatin’s debt reduction efforts look even more remarkable when viewed through the prism of current fiscal developments throughout the developed world. If Albert Gallatin had been in charge of OECD public finances during the decade prior to the onset of the current financial turmoil, we might be in a more comfortable fiscal situation today. As it stands, our longerterm fiscal challenges are formidable and will demand courageous political and fiscal leadership. Albert Gallatin’s adopted home country is no exception. Regardless of who moves into the White House in January 2009, the new President’s longer-term fiscal policy options will be constrained by the legacy of the past.