AUSTIN, Texas — Have you heard the one about the young lefty who was distributing pamphlets on the streets of London? His literature denounced the latest depredation by some international corporation, of course, and after he handed some leaflets to an old Tory, the fellow came back and started to lecture him about how capitalism is the finest economic system on Earth. Free markets are the answer to everything, the invisible hand of Adam Smith — on the old Tory went, blah, blah, blah.

Finally, the young man turned and snapped at him: "Oh, why don't you just go back to Russia?"

You might have to be an old lefty to fully appreciate that.

Meanwhile, as Congress spends all its time being as shocked as Claude Rains in "Casablanca" over the president's sex life, the world economy is collapsing. This is not a rock music video. Thousands of major players — finance ministers, central bankers, CEOs of financial institutions, important economists, Saudi princes — have just finished their annual meeting sponsored by the International Monetary Fund and the World Bank. The bottom line is: They're scared, and they don't know what to do.

The chairman of Merrill Lynch told The New York Times, "By the end of the day, I wanted to jump out the window." An optimist from Britain told the Times, "You've got a lot of people looking at the problem, so surely something will be done."

One thing that became clear during the meeting was the fissure between the IMF and the World Bank. The IMF wants to stick with its strong-medicine/strong-discipline approach, which so far seems to have killed at least a couple of patients. The World Bank sensibly indicates that there's no point in disciplining economies if the upshot is such gross social inequity and suffering among the people that political stability goes out the window. Riot and revolution are not helpful to an economy.

The United States has at least two problems in trying to chart a sensible course.

Numero Uno is that the House of Representatives has still not agreed to re-fund the IMF, and because the contributions of many other nations are contingent on ours, the IMF is effectively hamstrung. Republican leaders, with the ineffable Majority Leader Dick Armey at their head (the same Dick Armey who was not considered the brightest porch light on the block when he taught economics at what's now the University of North Texas), are demanding that conditions be put on our IMF contribution.

The first is that the IMF open its books, which is a good idea. The IMF does go around preaching that foreign banks should be open to public scrutiny, so this makes perfect sense. The other demands are more questionable: that the IMF stop lending to foreign governments at below-market rates and that it shorten its lending period on most loans.

When what we're looking at is a giant credit crunch, how does it make any sense for the one public lending institution to make it even harder to get credit? And why shorten loan periods if the economic circumstances of a nation dictate that more time is necessary to pay off a given loan? Why increase the chances of a default?

Numero Two-o, we have just blotted our own copybook by bailing out the giant hedge fund Long-Term Capital Management. This is what is called "crony capitalism," and it's what we and the IMF have been so righteously denouncing in Asian countries. Great — now we look hypocrites and fools.

(It is possible that bailing out Long-Term Capital was indeed necessary, given the size of its potential losses, but if that is true, it only underscores the obscenity of leaving hedge funds unregulated. According to a new report by Cerulli Associates, a Boston consulting firm, hedge funds have soared in popularity with extremely wealthy international investors in this decade.)

One remedy that apparently received little attention was the so-called Tobin tax (named after the Nobelist James Tobin) on international capital flows. Of course, Nobel laureate economists are in some disrepute themselves these days, as two of them were among the geniuses behind the record-setting mess-up at Long-Term Capital. Still, you notice that Malaysia is one of the early "Asian flu" patients that now looks as though it will recover, and it's the one that has slapped restrictions on capital flow.

Prime Minister Mahathir Mohamad said in the Sept. 21 edition of Time, "The fact is that the economic disaster would not have happened if the speculators had not attacked the currencies and the share markets." Not that Mohamad is an otherwise admirable fellow, but he's got some good points on the financial mess.

One theory of advanced capitalism is that the speculators will always outrun the regulators. No sooner would we get some control of hedge funds in place than the speculators would dream up some other doozy of a scheme involving esoteric bets on derivatives or the performance of some weird "basket" of stocks vis-a-vis another weird basket. Maybe, but that's no reason not to try to get a grip. As most of American economic history tends to prove, only regulated capitalism works.

Molly Ivins is a columnist for the Fort Worth Star-Telegram. To find out more about Molly Ivins and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.