Economics focus: Pumping up the spare tyre

摘要

Financial crises have a cruel way of revealing what an economy lacks. When many emerging markets suffered a sudden outflow of capital in the late 1990s, one painful lesson was that their financial systems had relied too heavily on bank lending and paid too little attention to developing other forms of finance. "The lack of a spare tyre", said Alan Greenspan, chairman of America's Federal Reserve, in 1999, "is of no concern if you do not get a flat. East Asia had no spare tyres." If a functioning capital market had existed, remarked Mr Greenspan, the East Asian crisis might have been less severe.