Many people associate economic globalization with the controversial issue of free trade. After all, the total value of world trade exploded from $57 billion in 1947 to an astonishing $6 trillion in the late 1990s. In the last few years, the public debate over the alleged benefits and drawbacks of free trade reached a feverish pitch as wealthy Northern countries have increased their efforts to establish a single global market through regional and international trade-liberalization agreements such NAFTA and GATT. Free trade proponents assure the public that the elimination or reduction of existing trade barriers among nations will enhance consumer choice, increase global wealth, secure peaceful international relations, and spread new technologies around the world.

To be sure, there is evidence that some national economies have increased their productivity as a result of free trade. Moreover, there are some benefits that accrue to societies through specialization, competition, and the spread of technology. But it is less clear whether the profits resulting from free trade have been distributed fairly within and among countries. Most studies show that the gap between rich and poor countries is widening at a fast pace. Hence, free trade proponents have encountered severe criticism from labor unions and environmental groups who claim that the elimination of social control mechanisms has resulted in a lowering of global labor standards, severe forms of ecological degradation, and the growing indebtedness of the global South to the North.

The internationalization of trade has gone hand in hand with the liberalization of financial transactions. Its key components include the deregulation of interest rates, the removal of credit controls, and the privatization of government-owned banks and financial institutions. Globalization of financial trading allows for increased mobility among different segments of the financial industry, with fewer restrictions and greater investment opportunities. This new financial infrastructure emerged in the 1980s with the gradual deregulation of capital and securities markets in Europe, the Americas, East Asia, Australia, and New Zealand. A decade later, Southeast Asian countries, India, and several African nations followed suit.

During the 1990s, new satellite systems and fiber-optic cables provided the nervous system of Internet-based technologies that further accelerated the liberalization of financial transactions. As captured by the snazzy title of Microsoft CEO Bill Gates' best-selling book, many people conducted business@the-speed-of-thought. Millions of individual investors utilized global electronic investment networks not only to place their orders, but also to receive valuable information about relevant economic and political developments. In 2000, ‘e-businesses’, ‘ dot.com firms’, and other virtual participants in the information-based ‘new economy’ traded about 400 billion dollars over the Web in the United States alone. In 2003, global business-to-business transactions are projected to reach 6 trillion dollars. Ventures that will connect the stock exchanges in New York, London, Frankfurt, and Tokyo are at the advanced planning stage. Such a financial ‘supermarket’ in cyberspace would span the entire globe, stretching its electronic tentacles into countless decentralized investment networks that relay billions of trades at breathtaking velocities.

Yet, a large part of the money involved in these global financial exchanges has little to do with supplying capital for such productive investments as putting together machines or organizing raw materials and employees to produce saleable commodities. Most of the financial growth has occurred in the form of high-risk ‘hedge funds’ and other purely money-dealing currency and securities markets that trade claims to draw profits from future production. In other words, investors are betting on commodities or currency rates that do not yet exist. For example, in 2000, the equivalent of over 2 trillion US dollars was exchanged daily in global currency markets alone. Dominated by highly sensitive stock markets that drive high-risk innovation, the world's financial systems are characterized by high volatility, rampant competition, and general insecurity. Global speculators often take advantage of weak financial and banking regulations to make astronomical profits in emerging markets of developing countries. However, since these international capital flows can be reversed swiftly, they are capable of creating artificial boom-and-bust cycles that endanger the social welfare of entire regions. The 1997–8 Southeast Asia Crisis represents but one of these recent economic reversals brought on by the globalization of financial transactions.

In the 1990s, the governments of Thailand, Indonesia, Malaysia, South Korea, and the Philippines gradually abandoned control over the domestic movement of capital in order to attract foreign direct investment. Intent on creating a stable money environment, they raised domestic interest rates and linked their national currencies to the value of the US dollar. The ensuing irrational euphoria of international investors translated into soaring stock and real estate markets all over Southeast Asia. However, by 1997, those investors realized that prices had become inflated much beyond their actual value. They panicked and withdrew a total of $105 billion from these countries, forcing governments in the region to abandon the dollar peg. Unable to halt the ensuing free fall of their currencies, those governments used up their entire foreign exchange reserves. As a result, economic output fell, unemployment increased, and wages plummeted. Foreign banks and creditors reacted by declining new credit applications and refusing to extend existing loans. By late 1997, the entire region found itself in the throes of a financial crisis that threatened to push the global economy into recession. This disastrous result was only narrowly averted by a combination of international bail-out packages and the immediate sale of Southeast Asian commercial assets to foreign corporate investors at rock-bottom prices. Today, ordinary citizens in Southeast Asia are still suffering from the devastating social and political consequences of that economic meltdown. . .