Explanations for the economic disasters in East Asia, Russia and Brazil over the past two years fall into two basic categories, say economists. One theory is that markets there were not sufficiently regulated and that a new "financial architecture" based on more regulations and international safety nets must be erected.

Other theorists -- including Milton Friedman, Walter Wriston and George Schultz -- argue that the crises were due to departures from the operation of free markets.

• The free marketers say the Asian financial crisis was aggravated by the intervention of institutions such as the International Monetary Fund which, in advancing credit, signaled the countries' vulnerability and produced a run on its currency.

• In Russia's case, insider dealing and outright fraud prompted IMF intervention leading to massive flights of capital -- which drove down the ruble by more than 60 percent and sharply depressed stock values.

• And in Brazil, large budget deficits coincided with pegging the nation's currency to an unrealistic rate -- resulting in investors shorting the currency and extracting their capital.

As the crisis countries attempt to work their way out of the mire, those that are succeeding are doing so along the lines prescribed by the free-market advocates.

• Foreign direct investment has resumed in reform-minded Thailand and South Korea.

• By restraining its deficit spending, Brazil has seen its foreign-exchange reserves, equity markets and currency value rise.

• Meanwhile, Russia, Indonesia and Malaysia -- which have shunned market-oriented policies -- continue to suffer share declines in gross domestic product, weakened currencies and depressed asset values.

Despite this evidence, the IMF wants to establish a new Contingent Credit Line facility back by a $90 billion replenishment of its resources. Financial experts see this as preparation for a repeat of its former failed interventionist policies.

Source: Charles Wolf Jr. (RAND Corporation), "Markets, Not Architects, Will Solve Economic Crises," Wall Street Journal, July 20, 1999.