The Global Gamble on Financial Liberalization: Reflections on Capital Mobility, National Autonomy, and Social Justice [Abstract]
Ethics & International Affairs, Volume 13 (1999)
December 4, 1999
| Barry Eichengreen |
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.
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