Change of Course in present financial crisis

Romain Rancière, Aaron Tornell and Frank Westermann argue in Mint that “The $700 billion bailout bill is equivalent to 5% of gross domestic product (GDP). Adding to it the cost of other rescues—Bear Stearns Companies Inc., Freddie Mac and Fannie Mae, AIG—the total cost could go up to $1,400 billion, which is around 10% of GDP. In contrast, Mexico incurred bailout costs of 18% of GDP following the 1994 Tequila crisis. In the aftermath of the 1997-98 Asian crisis, the bailout price tag was 18% of the GDP in Thailand and a whopping 27% in South Korea. Somewhat lower costs, although of the same order of magnitude, were incurred by Scandinavian countries in the banking crises of the late 1980s—11% in Finland (1991), 8% in Norway (1987), and 4% in Sweden (1990). Lastly, the 1980s savings and loans debacle in the US had a cumulative fiscal cost for the taxpayer of 2.6% of GDP”.

And what is astonishing from the same article is “Over the last 25 years, Thailand grew 32% more than India in terms of per capita income despite a major financial crisis”