debate trade is crucial the first issue is about trade. the critics argue that the expansion of world trade to include more countries as well as additional goods and services leads to the poorest countries being marginalised — developing countries are unable to compete with the wealthy nations in this process. some consider it would be better for the poorest countries to close their borders and build up their own industries. they would then be in a stronger position when perhaps they are ultimately incorporated in the world economy. a similar policy was advocated by some in the 1960s and ’ 70s and it was implemented in various guises in many countries, for instance in latin america. but the subsequent course of events provides strong arguments against such an approach ; isolationism has not been a good way of generating prosperity. on the contrary, countries that have staked their future on trade and international commitments have managed considerably better both in terms of growth and in combating poverty. there are many instances of this in asia, for example. as is clear not least from sweden ’ s own history, foreign trade is more or less essential for economic development, particularly in the case of small countries. in the past two decades world trade has expanded at an average annual rate of 6 per cent, which is twice the rate of global economic growth in this period. outward - looking countries have tended to grow faster than those which have been more introvert. countries such as india, vietnam and uganda, where the economy has been opened to the rest of the world and trade barriers have been reduced, have been able to combine stronger economic growth with greater success in overcoming poverty. world bank calculations indicate that the potential benefits from the elimination of all the existing trade barriers amount to between usd 250 billion and 680 billion. approximately two - thirds of the total would accrue to the industrialised countries but for the poor countries the gains would be twice as large as all the assistance they are currently receiving. neither are the poor countries ’ difficulties in competing with the industrialised countries the primary problem. when borders are opened, companies tend to locate their activities where production costs are lowest ; this frequently means developing countries, which accordingly get additional jobs, rising production and increased tax revenues. to attract investment on a large scale, however, it is necessary to have a reasonably effective judiciary, an adequately skilled labour force and other facilities ; these are by no means always available and here it is the developing countries that need to act. it is on account of problems such as these that investment from the industrial

on account of an interest in avoiding failures that would be costly both socially and politically. moreover, the provision of government funds has been frequently advocated by strong private interests in the major industrialised countries, particularly the united states. it should also be underscored that problems of this kind do not have self - evident solutions. a way out in some cases has been for private creditors, with government encouragement, to agree voluntarily to prolong their loans. one difficulty here is that the discussions with private creditors have to be initiated by the country that is in a crisis. in practice, the countries in question have been reluctant to take measures that might harm their future access to international capital markets. an international bankruptcy procedure, which should have been instituted long ago, is now being officially discussed again in the imf. such a system would probably help to make the management of acute financial crises more predictable. another subject for criticism has been the conditions attached to the loan programmes. this was the case not least in connection with the asian crisis, when critics considered that the imf ’ s economic policy stipulations were inappropriate and unduly harsh, being more likely to lessen instead of enhance the chances of a recovery. once again, we can refer to sweden ’ s problems in the early 1990s. when the fixed exchange rate had finally been abandoned in 1992, many argued that interest rates ought to be lowered both more quickly and further than was actually the case. i was one of them because i believed this was needed both for a quick end to the economic decline and to facilitate the consolidation of the government finances. in addition, it ought to aid a faster recovery in the banking sector. others, including the riksbank at that time, preferred a more cautious path in the hope that this would prevent a further weakening of the krona. striking the right balance in these respects is difficult and even with hindsight we cannot be sure who was right. the problems in asia were similar. would it have been more appropriate to lower interest rates in order to avoid the failure of companies with loans in the domestic currency and the collapse of the banking system, or to stimulate demand to a greater extent so as to keep the economy going? or were high interest rates on the contrary needed to prevent the flight of necessary capital, a weakening of the exchange rate and the failure of companies with foreign - currency debt? or was it perhaps the case that the high interest rates led investors to expect additional business failures and social unrest, so