GOING by the line propagated by much of the international media, the world has put behind itself
                      the spectre of global deflation - a fear spawned by the East Asia crisis in mid-1997 and heightened
                      by the Latin American and Russian crises in 1998.

                      International economy is one of smug complacency and even self-congratulatory as the relative
                      stability of financial markets in the past year evokes perceptions that global capitalism has, again,
                      managed its own contradictions quite successfully.

                      "This is utter nonsense, the crisis is not over," declares Charles Santiago from Stamford Centre of
                      Economic and Social Research.

                      His contention: The crisis-ridden countries have not debunked the Asian economic growth model,
                      centred on trade and financial liberalisation which led to the crisis in the first place; socio-political
                      change in these countries are not over; and the present initiatives taken by the G-7 to reconstruct a
                      new monetary architecture do not solve the underlying causes of the crisis.

                      Institute of Strategic and International Studies' Dr Zainal Aznam Yusof is equally skeptical of the
                      commitment and will of G-7 or the North-led grouping to structurally change the global monetary
                      system.

                      "There must be a Big Bang approach rather than the present little, whimpering efforts. What else are
                      we waiting for?"

                      A cursory comparison between the response to the Mexico crisis of 1994 and the present response
                      shows that the two do not differ substantially nor go far enough to prevent a recurrence:

                      A pledge to renew and revitalise the International Monetary Fund and World Bank as cornerstones
                      of a new architecture for the post-Cold War international monetary system (G-7 Summit at Halifax,
                      Nova Scotia, June, 1995);

                      A greater surveillance on IMF member countries' macroeconomic policies and a pledge to boost its
                      resources to cope with any future Mexico-like emergency - what managing director Michel
                      Camdessus then described as "a crisis of a new kind, the first of the century" (IMF Interim
                      Committee meeting at Washington, April 1995).

                      The present initiatives include the previous pledge to reform the IMF and World Bank; a greater
                      surveillance and monitoring system through closer co-operation among financial regulators and the
                      World Financial Stability Forum; a credit package, the Contingency Credit Line (a similar lending
                      facility was stillborn in 1995) for countries in distress.

                      There were talks of regulating hedge funds but these dissipated in inaction. The G-7 summit at
                      Cologne this June did not yield substantive action in altering the global monetary system.

                      As Santiago puts it: "The G-7 is merely concerned about demanding greater transparency,
                      non-corruption and corporate governance from the crisis-ridden countries and the US in pressing
                      Europe and Japan to double their efforts to suck in more goods from developing countries so that
                      these countries can export their way to economic health."

                      In June, Lawrence Summers, the US' newly ensconced treasury secretary, had expressed worries
                      that the US is still the world's "importer of last resort".

                      Many seem to agree with him but those who wax eloquent on the role played by the US economy
                      as the only engine of growth in the current international economic configuration should remember
                      that this is also due to the inflow of savings into the US from the rest of the world.

                      The G-7's rejection of the proposed Asian Monetary Fund, an Asean currency and the proposal by
                      Japan and Germany for a balanced currency band that includes yen, euro and dollar, shows it is
                      more concerned in promoting further financial liberalisation rather than addressing the root causes of
                      the crisis.

                      It wants the countries to behave like international corporations whose duty is only for stakeholders,
                      who would be mainly the international investors, and not the citizenry.

                      As for hedge funds, most disappointing is the US' point of view which finds nothing wrong with it
                      except for a little lack of transparency.

                      Even though the G-7 broadens the system-building process to include the active participation of the
                      big banks and international investors which dominate the international capital market, their presence
                      is irrelevant since there is active effort to validate their activities in the current form.

                      "The present measures do not strike at the key things that're wrong with the global system. There
                      must be some control over the economic agents, the speculators and investment bankers who
                      provide the money.

                      "Without a strong agreement to regulate the movement of short-term capital flows, there won't be
                      any substantial progress.

                      "The thinking that speculation brings stability and one has to live with these bloodsucking vampires
                      flies in the face of facts," says Zainal.

                      He adds that complacency has been embedded in the international system as to the severity of
                      crises, consequences of systemic risks and the ineffectiveness of conventional approaches to the
                      crises.

                      Many believe the worst is over. But the voluminous United Nations Department of Economic and
                      Social Affairs' publication, entitled The World Economy in 1999 shows that in terms of real
                      economic indicators, there is no evidence of recovery in the world economy and hence, the present
                      financial stability is inherently fragile.

                      World trade in volume terms grew by about 3.5 per cent in 1998 - which is the smallest of
                      increases this decade and less than half the rate in 1997.

                      This low rate of increase resulted from the almost five per cent decline in imports of developing
                      countries and the 10 per cent import drop in Japan.

                      The UN estimates that in 1999 import levels will begin to recover, albeit slowly, with import
                      volumes rising 2.5 per cent in developing countries and 0.25 per cent in Japan.

                      As has been constantly pointed out by Prime Minister Datuk Seri Dr Mahathir Mohamad, although
                      crisis-ridden countries managed to stabilise their currencies, exchange rates for many have remained
                      at values far below their pre-crisis levels.

                      This means a net loss of real income and hence purchasing power in these countries, already
                      compounded by the declining unit values of their exports.

                      "The world can no longer be dependent on G-7. Asian nations should articulate a different position
                      and solicit support from Europe.

                      "China, too, must ask itself how it can support the Asian cause. Roping China in is important as the
                      US takes China more seriously than Asia.

                      "Geo-politically, Japan and Europe must re-align themselves. Unfortunately, most European
                      governments are pro-US.

                      "At the same time, Asian nations must articulate a growth model which is sustainable," asserts
                      Santiago.

                      Zainal believes that what man does can be undone. But there is no serious undertaking to
                      reconstruct a new financial architecture.

                      Today's stability is hollow and is a prelude to yet another round of crisis in the future.