Back in the early 1990s, the well-known Chicago economist Rudigar Dornbusch came to India and told a packed audience in New Delhi that India should simply stop trying to do cautious, step-by-step reform and go for a big bang approach.

Dornbusch had of course been advising Mexico, but did not accept responsibility when that country went into financial crisis.

Similarly, Jeffrey Sachs (whose CV in those days used to quote a magazine article that said he was perhaps the world's most influential economist) was advising Russia and some of the transition economies of Eastern Europe. Guess what? Russia too got caught in a domestic economic mess and an external financial crisis.

There were many in India who argued in the mid-1990s that the government should make a bonfire of all its foreign exchange controls and go straightaway for capital account convertibility. Their voices were stilled after the Asian crisis of 1997.

One should be careful when taking advice from experts, and not suspend one's own judgment. Experts can be wrong, there are trends in economic thought just as in the world of fashion, and practical knowledge of managing things is often more relevant than theoretical constructs (one wisecrack recently had it that economists look at what works in practice and then check if it works in theory!).

I offer this long preamble because I am going to get into dangerous terrain by suggesting that the international financial world has run out of control, and one integrates with it at one's peril.

The gist of the problem is presented in a masterly book by someone who was at or near the heart of the action when it came to many of the crises of the past couple of decades. Richard Bookstaber's A Demon of our own Design: Markets, Hedge Funds and the Perils of Financial Innovation (Wiley) argues on the basis of wonderful real-life story-telling that the financial world's combination of growing complexity and incredible speed has made it inherently prone to crises.

Why, the experts sitting in the biggest financial firms do not often understand what exactly their own divisions are doing, what the risks are, and how these could blow up in everybody's face. The long list of firms that have disappeared tells its own story: Barings, Salomon Brothers, Long Term Capital Markets, Bear Stearns...

Remember that the original function of finance was to fuel the real economy. But financial markets have grown in size, speed and complexity, to the point where they have become the master, not the servant.

Thus, financial profits account for over 40 per cent of all corporate profits in the United States, and the successful professionals in this world take home more by way of annual bonuses than even mid-size companies make in a year.

That would be fine if we did not at the same time have to live through stock market crashes, currency crises, the collapse of debt markets, corporate bankruptcies, and mortgage delinquencies.

Often enough, it is left to the market regulators to either bail out the guilty parties or pick up the pieces. And because a problem in the financial world is like a problem in your bloodstream, it quickly infects everything else.

Why is this relevant? Because we are living through another turbulent phase, and the experts are telling the Reserve Bank/government to open up and integrate with this same accident-prone financial world.

I am not advocating that we become a financial autarky; indeed, we should use international financial capital in all the ways that make sense to us, integrate where it makes sense, and understand the complexities of the business so that we integrate beneficially.

But at all times, one should be careful to ensure that finance remains the servant, indeed an efficient and competent servant, and never the master.