Hostname: page-component-cd9895bd7-gvvz8 Total loading time: 0 Render date: 2024-12-31T16:07:34.330Z Has data issue: false hasContentIssue false
  • English
  • Français

The Global Gamble on Financial Liberalization: Reflections on Capital Mobility, National Autonomy, and Social Justice*

Published online by Cambridge University Press:  28 September 2012

Barry Eichengreen
Get access Rights & Permissions [Opens in a new window]

Abstract

This essay provides an overview of the connections between financial globalization, domestic autonomy, and social justice. It starts by identifying reasons why capital mobility and social justice may be at odds. It then distinguishes four arguments: that capital mobility is incompatible with the maintenance of distinctive national social systems and, specifically, social safety nets; that capital mobility undermines the ability of governments to use Keynesian monetary and fiscal policies to stabilize their economies; that capital mobility is in fact a hindrance to economic growth and development; and that the negative effects of capital mobility are felt disproportionately by developing countries. Review of the evidence shows that these arguments must in fact be more strongly qualified than at least some critics of capital mobility suggest. The essay then turns to the Asian crisis, which has encouraged a more skeptical view of the benefits of international financial liberalization, and asks what lessons the crisis contains for this debate. The Asian crisis, while confirming that high capital mobility creates pressure for institutional convergence, does not suggest that convergence must be instantaneous and complete. In addition, the crisis raises pressing questions about the advice given developing countries by the IMF and the advanced-industrial countries about the management of international capital flows, which are considered as well. Finally, the essay examines reforms designed to better reconcile the globalization of finance with social justice, distinguishing reform at the national level from reform of the IMF and reform of the broader international system.

Type
Articles
Information
Ethics & International Affairs , Volume 13 , March 1999 , pp. 205 - 226
Copyright
Copyright © Carnegie Council for Ethics in International Affairs 1999

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1 Cowell, Alan, “Annan Fears Backlash over Global Crisis,” New York Times, February 1, 1999, p. A10Google Scholar.

2 Krugman, Paul, “Heresy Time,” http://www.web.mit.edu/krugman/www/beresy.html (1998), p. 2Google Scholar.

3 Rodrik, Dani, “The Global Fix,” The New Republic, November 2, 1998, pp. 17–18Google Scholar.

4 A point that is elaborated by Soskice, David, “German Technology Policy, Innovation, and National Institutional Frameworks,” WZB Discussion Paper 96–319 (1996Google Scholar).

5 Krugman, , “Heresy Time,” p. 2Google Scholar.

6 Sachs, Jeffrey, “Creditor Panics: Causes and Remedies” (Harvard University, 1998Google Scholar, unpublished).

7 As argued in Eichengreen, Barry, Hausmann, Ricardo, and vonHagen, Juergen, “Reforming Budgetary Institutions in Latin America: The Case for a National Fiscal Council” (University of California, Berkeley, Inter-American Development Bank, and University of Mannheim 1996Google Scholar, unpublished).

8 See Alesina, Alberto and Perotti, Roberto, “Budget Deficits and Budget Institutions” (Harvard University and Columbia University, 1994Google Scholar, unpublished), and vonHagen, Juergen and Harden, Ian, “National Budget Processes and Fiscal Performance,” European Economy, Reports and Studies, 1994Google Scholar.

9 Eichengreen, Barry and Mussa, Michael, “Capital Account Liberalization: Theoretical and Practical Aspects,” IMF Occasional Paper, no. 172 (December 1998Google Scholar).

10 Rodrik, Dani, “who Needs Capital Account Convertibility?” in Kenen, Peter B., ed., should the IMF Pursue Capital Account Convertibility? Essays in International Finance No. 207, International Finance Section, Department of Economics, Princeton UniversityGoogle Scholar.

11 As quoted in Krugman, Paul, “Are Currency Crises Self-Fulfilling?” NBER Macroeconomics Annual (Cambridge: MIT Press, 1996), p. 406Google Scholar.

12 King, Robert and Levine, Ross, “Finance and Growth: Schumpeter Might Be Right,” Quarterly Journal of Economics 108 (1993), pp. 717–37CrossRefGoogle Scholar. Levine, Ross, “Financial Development and Economic Growth: Views and Agenda,” Journal of Economic Literature 35, pp. 688–726Google Scholar.; and Jayarante, Jith and Strahan, Philip, “The Finance-Growth Nexus: Evidence from Bank Branch Deregulation,” Quarterly Journal of Economics 111 (August 1996), pp. 639–71Google Scholar.

13 Caprio, Gerald Jr., and Klingebiel, Daniela, “Bank Insolvency: Bad Luck, Bad Policy or Bad Banking?” Annual World Bank Conference on Development Economics 1996 (Washington, D. C.: The World Bank, 1997), pp. 79–104Google Scholar.

14 Cooper, Richard, “Capital Account Liberalization: What's the Best Stance?” IMF Economic Forum, October 2, 1998. http://www.imf.org/external/up/tr/1998/TR981002A.htmGoogle Scholar.

15 Eichengreen, Barry, “The Asian Financial Crisis: The IMF and Its Critics,” Great Decisions (1999), pp. 19–23Google Scholar.

16 Feldstein, Martin, “Refocusing the IMF,” Foreign Affairs 77 (1998), pp. 20–33Google Scholar.

17 Dewatripont, Mathias and Roland, Gerard, “The Design of Reform Packages Under Uncertainty,” CEPR Discussion Paper no. 860 (November 1993Google Scholar).

18 Fernandez, Raquel and Rodrik, Dani, “Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty,” American Economic Review 81 (1991), pp. 1146–54Google Scholar.

19 This is the point made by Obstfeld, Maurice, “Models of Currency Crises with Self-Fulfilling Features,” European Economic Review 4(1996), pp. 1037–47CrossRefGoogle Scholar.

20 See “Code of Good Practices for Fiscal Transparency,”http://www.imf.org/external/np/fad/trans/index.htm (IMF 1998).

21 Ethan Kapstein, “Distributive Justice and International Trade,” this volumeGoogle Scholar.

22 Eichengreen, Barry, “The Only Game in Town,” The World Today 54 (December 1999), pp. 317–20Google Scholar.

23 Group of Seven, “Declaration of G7 Finance Ministers and Central Bank Governors,”http://www.imf.org/external/np/g103098dc.htm (1998).