10 OCTOBER 1998, Page 28

Bar the door

IN TIMES of trouble, governments are always tempted to step in and make things worse. Their standing temptation is to reach for the controls. I know what, the tempters now tell them: let's control the movement of money. It flowed into all these so-called emerging markets and destabilised them and flowed out again, and we can't have that, so let's have exchange controls — and all hail to Malaysian Dr Mahathir, who has shown the world the ways not so long ago (as late as 1979) we had them ourselves. We were free to go in and out of the country, but if we wanted to take any money with us, we had to ask permission and could be sent to prison if we broke the rules. I cannot think that a world with more rules like that would be an improvement, any more than I think that excesses of money will go slopping into these markets again. The danger now is that, as one eminent banker puts it, the attraction of closing doors to a turbulent outside world may become irresistible. Then we shall be back in a world of barred doors of regulation and protection and tariffs to keep the com- petitive foreigner out. We shall all be the losers for that. The smuggest people here in Washington are the ministers and bankers from the continent of Europe who cannot wait to play with their shiny new toy called the euro, no matter what may be happening outside. Some of them lave always dreamed of a Europe proof against a hostile world, where the inhabitants will thrive by taking in one another's washing. It will not be much of a living.