Greater emphasis and clarity are needed as to the purposes and limits of public intervention, and the extent to which those interests warrant different degrees, modes, and timing of public and private sector involvement, depending on the particular country and circumstances. In this way all parties will be better placed to understand current developments and how the international community might react to future strains. The argument against standstills There are of course other points of view. I would note that some have suggested that perhaps we should go in a different direction, that we should seek to build time back in by calling a time out. In particular, it has been suggested that an early recourse to comprehensive payment standstills (suspensions of debt service perhaps amplified or reinforced by capital controls) would increase the manageability of crises and enhance predictability. My reading of the record convinces me that trying to freeze market processes would do the opposite. I would like to share with you my thinking on this point. •  The desire for certainty and control which seems to underlie standstill proposals is understandable, as it offers the promise of using less public money, and seemingly entails less risk that creditors will be bailed out for poor credit decisions. But the control and manageability that might result may be more seeming than real. •  For one, a perceived disposition to preemptively lock the door seems likely to send investors heading for the exits all that much sooner.
There is general agreement that in order for countries to enjoy sustained and stable growth, the following are crucial: •  a sound and stable macroeconomic environment, and  •  well-functioning and robust financial systems in both capital exporting and capital importing countries. Moreover, both of these are most effective when supported by a dynamic and adaptive policy regime. There is considerable agreement on many of the elements needed to achieve these goals, for example the importance of attaining and sustaining price stability. This agreement has been reflected, in part, in the development and promulgation of globally accepted codes and standards for best practice in areas ranging from transparency in fiscal policy and in monetary and financial policy, to public debt management, and core principles for bank supervision. Guiding themes across these various standards have included the importance of transparency—indeed the whole New Architecture initiative has been as much about putting in more and better windows as about laying in sturdier foundations—and of building stability up from the firm and sector level. The latter is accomplished by encouraging sound risk management and stronger balance sheets, and creating efficient systems of market, legal, and regulatory discipline. Unfortunately, there is no comparable degree of consensus on how best to handle international financial crises once they do erupt, or the proper roles of public institutions and the private sector in containing and resolving such crises.