type are made every day within sweden and across our borders. globalisation, the freedom to make financial transactions across national borders, creates conditions enabling the financial systems to become more efficient in all of their functions. the possibility to find high yield investments increases, the possibility to spread risks increases and a large market also increases liquidity. when the financing costs become lower, there will be more investors all around the world, while savers will be able to obtain greater return for a given risk. it is for these reasons that the ppm ( premium pension authority ) and the ap funds ( national pension funds ) invest a large part of our pension money abroad. because the swedish institutions managing pension funds are now able to invest money in foreign shares and bonds, there is less risk for our future pensions. we will become less dependent on sweden as a nation being economically successful as some of our pension money is invested in other countries'shares and bonds. however, it also makes us owners of very mobile capital, which immediately flees a country facing economic difficulty. none of us would want the ap funds or ppm to invest their capital in argentina, would we? are poor countries negatively affected by globalisation? globalisation with regard to movement of free capital must be regarded as different when it comes to less developed economies. the population in these countries, e. g. in south east asia, is more vulnerable than others in well - developed welfare societies. let us finally look at the events in south east asia around 1997. domestic banks lent money to longterm projects, often with government guarantees, such as shopping centres, hotel complexes, airports, motorways, etc. banks and companies financed themselves by taking up short - term loans in the international capital markets, which had lower interest rates than the domestic markets. when the foreign investors became nervous at the possibility that those making the investments might not manage to pay the interest rates, they cancelled the short - term loans, the capital flowed out of the country and the banks suffered a crisis. no interest rate was high enough to attract the foreign investors to provide new loans. the foreign currency reserves dried up and exchange rates came under pressure. devaluation was the only way out. bankruptcies, bank crises and mass unemployment were the result. the large majority of citizens, who had nothing to do with the errors leading up to the crisis, were made destitute because their small incomes and savings declined in value. large parts of the growing middle class in the worst hit

countries in south east asia were wiped out. conditional support was often provided with tough requirements of economic policy restraint. a tight fiscal policy would create scope for financing restructuring in the banking sector. stringent monetary policy would counteract an overly severe depreciation of the currency. this can be criticised with hindsight, as in south east asia the countries often did not have problematic deficits in public finances or high inflation rates. the imf has admitted since that the restraint was too great, as they did not realise the extent of the financial crisis. the task for the bis, the imf, the world bank and other international organisations should be to continue the work on finding rules and methods, both to protect innocent people from ruination and to put the risk for bad investments on those making the investments. work on this is underway in the organisations i mentioned earlier. it involves capital adequacy rules for banks, but also reporting, auditing, financial supervision, bankruptcy legislation and transparency in conducting monetary and fiscal policy. the purpose of this is that those who have lent money will be forced to a greater extent than they are now to bear the costs of solving a crisis, in order to encourage them to show greater caution when making investment decisions. however, it is also important that the organisations mentioned counteract corruption and work actively to achieve an open democratic culture in the new countries taking part in the globalisation process. the recent globalisation debate has focused on a completely different issue, namely injustices in the distribution of income around the world and many believe that these injustices would be reduced if financial operators were prevented from rapidly moving money to where it provides the highest return. many people feel that multinational corporations all too casually move their production to the countries that can offer the lowest production costs and this has also come up for debate in sweden, particularly when swedish regions have been hard hit by factory closures. the problems mainly concern the trade exchange between rich and poor countries and direct investment by rich countries in poor countries. swedish history can also provide an illustration here. it has been calculated that the swedish productive capital stock was 50 per cent higher during 1870 and 1914, through the import of foreign capital, than it would have been without this capital import. sweden's industrialisation was thereby speeded up and welfare increased. a market economy is the form of economic activity that has proved superior to all other alternatives, such as a planned economy, in almost all situations. when it comes to small, less well -