It is no secret that intellectual fashions in developing countries, as indeed many other kinds of fashion, are often lagged versions of what was earlier popular in the west. The mystery, then, is not that such a tendency should exist in India as well. Rather, the questions are why, even after the communications technology revolution, the time lags in their adoption persist, and how such imported ideas can continue to hold sway here well after they have been discredited elsewhere.
 
This is of course evident in all sorts of ways, whether in trends in cinema and literature, or even in terms of choosing objects of adulation. Thus, quite recently, much of the English language media in India expressed a near-hysterical degree of obsequiousness in covering the visit of Bill Clinton, a man who is already dismissed in his own country as a somewhat embarrassing lame-duck President. Quite apart from the servility reflected in a response which did not take into account the effects for our own citizens of the policies symbolised by this man, it was also an outdated reaction showing a retarded appreciation of current reality.
 
But nowhere is this slowness in adapting modes of thought more sharply illustrated than in terms of ideas about economic policy. The 1990s was the decade of the explosion of free market ideology in economic policy in the West, the period when dirigisme ran for cover and government intervention of any variety was seen as anathema. Even by the middle of the period, the flaws of simple-mindedness on this question were obvious. And by the close of the decade, extreme marketism was possibly even more exposed than the strategies it had defeated, especially with respect to financial markets.
 
In India, however, at least in the corridors of power, all this is yet to become news. The Finance Ministry apparently persists in the belief that financial markets can function efficiently to increase savings and allocate them to the most socially desirable investments with minimal government regulation, and that liberalising the rules for capital entry and exit in the country is the best way of stabilising and benefiting from such flows. Such axioms must have underwritten the latest financial liberalisation measures as outlined in the Budget, and recent official expositions on the subject have left no doubt of the firmness of these beliefs.
 
Elsewhere, of course, that optimistic vision has been greatly tempered, not only by the sobering experience of many emerging markets over the decade, but also by theoretical developments in economics which have highlighted the possibility of many kinds of market failure specific to financial markets. What is now widely accepted is that some kinds of regulation may be necessary, not just to prevent or mitigate the effects of capital flight, but even to control periodic rushes of capital entry which can have destabilising effects.
 
This perception has now come home even to the multilateral institutions that have been seen as the high priests of market-driven economic philosophy. Thus, the World Bank, in its most recent edition of the annual publication Global Development Finance, makes arguments which - if made in India by less hallowed sources - would be immediately dismissed by market apologists as typical leftist ranting.
 
To emphasise this point, some of the discussion in this recent World Bank report deserves fuller quotation at some length : "All past episodes of surges in capital flows to emerging markets have ended in severe international financial crises. Hard landings rather than soft landings have been the rule... Booms in private capital flows to emerging markets have been punctuated by frequent banking and exchange rate crises in the capital-receiving countries, and have usually ended in severe economic dislocation or political conflict. By contrast, financial crises and debt overhangs were relatively rare during the Bretton Woods era, when capital controls and stringent financial sector regulation limited capital flows to emerging markets (although several exchange rate crises did occur).