Is there a good account of the history and effects of different
types of Capital Controls and their effects since Bretton Woods.
Just listened to an interesting discussion by Chomsky online
at the Z magazine Website. It was his claim that when Nixon and
associates worked to dismantle the Bretton Woods treaty and its
fixed exchange rates, it was asserted at the time that the results
would be increased market volatility, a slowing of world wide
growth rates, and extended concentrations of wealth. Do all you
economists out there know a where there is a good empirical discussion
of the historical record.
Well, you could wait for my history of the global economy
in the twentieth century, but completion date for the ms. appears
to recede two days for each day that passes... :-)
Increased volatility yes--especially once everyone got straight
Rudi Dornbusch's argument in his "Expectations and Exchange
Rate Dynamics." But a whole spectrum of people--from Milton
Friedman all the way through to John Kenneth Galbraith, if I
recall correctly--thought that the result would be faster growth:
that the need to defend one's exchange rate parity would no longer
lead central banks to choke off economic growth in the so-called
stop-go cycle, and that countries could then exercise their freedom
to set their monetary policy as they wished. (Yes, it was mistaken,
but that was the belief.)
Extended concentrations of wealth... not seen as an issue.
Nothing like the enormous upsurge in income and wealth inequality
inside the industrial core was forecast in the early 1970s. And
in the early 1970s people were much more optimistic about the
ability of third-world governments to establish social democracy
and rapid economic growth than they are today. Back in the 1970s
people still believed that real political democracy would become
the most common form of government in the third world, and that
a combination of public investments, social insurance and welfare-state
redistributions, and aggressive stimulative macroeconomic policy
could repeat throughout the third world the same kind of economic
miracle that southern Europe had experienced in the generation
after World War II. So people expected the world distribution
of income to become more equal.
Of course, it hasn't happened: the lost decade of the 1980s
in Latin America, the collapse of economic development in Africa
(see, for example, Wole Soyinka's _The Open Sore of a Continent_;
or Robert Bates's _Markets and States in Tropical Africa_). One
way (in fact, my favorite way) to view neoliberalism is as a
counsel of near-despair. It is an admission that state structures
and political controls in developing countries are such that
governments cannot perform the kinds of growth-promoting and
income-redistributing missions that we take for granted in the
social democracies of Europe, that attempts at social democracy
tend to collapse into corruption and kleptocracy, and that the
best shot at development is to try to cut the interface between
government and economy--privatize businesses, diminish regulation,
abandon independent monetary policy for currency boards, bet
that the most rapid road to increasing incomes and productivity
is to make one's economy hostage to the good opinion of foreign
investors...
(I *do* happen to believe that "global neoliberalism"
is the best live political option today; but I also believe that
that isn't saying much--like saying that it's better to be tarred,
feathered, and ridden out of town on a rail than to be hanged,
drowned, or shot.)
Brad DeLong
Professor
of Economics J. Bradford DeLong, 601 Evans Hall, #3880