Topic > Free Capital Mobility and Capital Control - 3022

Economists, however, support free trade, but when it comes to the idea of ​​unhindered capital flow, it doesn't seem to get unanimous support. It is a natural phenomenon that almost everything we see in nature (e.g. fluids, air, etc.) travels along the concentration gradient. Likewise, it was thought that freeing up the international flow of capital would help countries that are struggling economically since capital should flow down the concentration gradient; but in reality this is not really the case. During the 1980s, the prevailing view among global economic policy makers was that “money should circulate freely throughout the world, allowing capital to find the most profitable and productive investments, regardless of the country in which it is located.” . [Wessel, Davis, 1998] Although politicians want to make the world a safer place for the free exchange of goods, services and capital, according to Rodrik “….. the idea of ​​global capitalism is inherently unworkable. Capitalism is, and will remain, a national phenomenon." (Rodrik)Capital is the most important ingredient of a country's economic existence. It's really important to understand what we really mean by the word "capital". According to the Merriam-Webster dictionary, the etymology of the word capital says that in medieval Latin this word came to mean head of cattle or other livestock. De Soto in his book "The Mystery of Capital" suggests that cattle and livestock are low-maintenance assets; they are mobile and can be moved away from danger; can be counted etc. Furthermore, they can generate future value by reproducing us or giving us milk, meat, skin, etc. Thus the word "capital" begins to perform two tasks simultaneously: capturing the physical dimension of assets (livestock) and its potential to generate future surplus (Paraphrased, De Soto, 2000; pg.40-41). Hence, a country's capital is a very important component for its stable economy. All countries, rich and poor, have capital in place. But some countries know how to breathe life into their capital while the rest of the other countries don't, and that's what makes the difference. Economists have supported the free exchange of goods and services for hundreds of years, but the free mobility of capital is a fairly new phenomenon. We have learned that the free exchange of goods is beneficial to the consumer; it also improves people's living standards.