First there were the first-generation fiscal and currency crises, which gave way to second-generation crises such as the one endured by the European monetary system in the early 1990s, and finally to third-generation ones occurring in Asia. All of them featured a variety of origins and transmission mechanisms. Now we are facing an international financial episode that many concur in labeling as the worst since the Great Depression, which originated in the developed economies, particularly the United States. Its initial symptoms are known: rapid financial innovation, credit expansion and asset price bubble. Its progression and repercussions, however, are unprecedented. On the other hand, our better understanding of the distortions that bad macroeconomic and financial policies can trigger, has made emerging economies in general, and Chile in particular, build a strong position to deal with a very weak international scenario. There is no better moment than this to get together and exchange our visions and opinions, and draw the first lessons from the events unfolding in the world economy. I want to begin with some comments on the present crisis. This episode has several unprecedented aspects stemming mainly from the complexity and sophistication of financial institutions and instruments, in a context of high financial and trade globalization. Of course, some elements have been observed before, such as the loss of confidence in key financial institutions by investors and the general public, and the uncertainty regarding its duration.
But since 1995, the gap has started to widen again as ICT investment has boosted productivity growth in the United States. The empirical evidence suggests that one of the most successful ways to speed up convergence in productivity is to promote international trade and investment, and openness more generally. Within manufacturing, the rate at which the productivity gap between Britain and the US closed during the 1980s and early 1990s was greater in the more open than the less open sectors. Against that background, let me suggest three areas for questions: First, why is the gap in the level of productivity between the US and the UK so persistent? And what are the obstacles that prevent the gap from narrowing - are they in the fields of trade, technology transfer, or flows of investment? What are the respective roles of business and government in removing them? Second, can the UK benefit as much as the US from the IT revolution? Is it a question of the speed with which business adapts? Or is it the need to fund our research-based universities on the scale of the best elsewhere in order to exploit our comparative advantage in the English language and regain Britain’s place at the frontiers of knowledge? Or is it a matter of raising standards of education in schools to enable the workforce as a whole to use the new technology?