Controlling Capital?

[Ric Holt <holtri@xxxxxxxxxxxxxx>]

Dear All,
	Ok then, globalization etc. For a start I'd just like to suggest
that this debate has been played on and on on the IPE list so those of
you who are interested could have a look at those archives.

I'll restrict myself to a couple of points on Mike's post, which I
found interesting - particularly the explanation of the relationship
between globalization and comparative advantage. I could go on and on as
my Ph.D. research concerns 'Globalization, regulation and geography: the
development of the bahamas and cayman as offshore financial centres'.

My first point is really to question the idea that sovereign (a tricky
word in itself) nations have a duty to examine and maybe prevent capital
flows. Given the dynamic of competitive deregulation any one country is
not necessarily going to be better off by controlling capital flows. In
my humble opinion the nation-state as a level of analysis and policy is
to some extent circumvented. As nation-states are tied into webs of
interdependence it's difficult for them to tackle global problems, the
provision of the public good of international financial stability. The
problem - if one sees speculative capital flows as a problem, and I do -
must be tackled at the global scale. Would anyone like to discuss the
Tobin tax on foreign currency transactions?

> Fortunately (or unfortunately, depending on your political views) it is very
> easy to control these capital movements. It simply requires a new regulation
> from a country's treasury department which requires any bank wishing to
> transfer funds offshore to obtain a permit before doing so. Enforcement can
> be accomplished easily with electronic approvals required. The benefits of
> this regulation will be increased employment in the subject country
> resulting from the employment at home of capital that otherwise would go
> offshore.

Secondly, OK this control of capitl movements seems to be easy, but as
capital is mobile, more mobile than political authority, such an effort
to control movements by one country may well just push capital offshore.
Witness the effects of the US capital controls programme (Interest
equalization tax, Regulation Q, Voluntary Foreign Credit Restraint), and
the resultant (partially, but importantly) development of the Eurodollar
and offshore markets.

So, it seems to me that regulation by any one nation-state, even if its
the US, is unlikely to work. What is needed in international action or
global governance, governance which could have a variety of different
aims and mechanisms depending on what people (ideas of cosmopolitan
democracy a la David Held) want.

Hope that was simplistic enough to be provocative!

best wishes,
Alan

*****************************************************************************
Alan C. Hudson,

Department of Geography,		and		Fitzwilliam College,
University of Cambridge,				Cambridge,
CB2 3EN,						CB3 0DG,
United Kingdom.						United Kingdom.

Tel: 	+ 44 (0) 1223 333349 (Department - Direct line)
Tel:	+44  (0) 1223 333399 (Department - General Office)
Fax: 	+ 44 (0) 1223 333392 (Department)
E-Mail: ach1005@xxxxxxxxx
*****************************************************************************