Financial crisis could turn the tide against unrestricted capital flows

By Heather Stewart – Away from Brussels, one element at least of the neoliberal canon – the idea that capital must be allowed to flow unchecked around the world – is coming under sustained attack.

The theory says that free capital flows allow savings to be directed – by the invisible hand of the financial markets – to wherever they will be most profitably employed. In this way, savers get a better return on their nest egg, while underdeveloped economies receive the financial leg-up they need. And as firms from one country take over those of another, they bring much-needed expertise as well as help new ideas to be adopted rapidly worldwide.

Except that isn’t what’s been happening: instead, for the past decade and more, savings have been pouring uphill from poor countries to rich. more>


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