Argument against Capital Flow Liberalization

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Amidst the post-Cold War neoliberal bonanza the rapid advocation for capital flow liberalization is an utter failure and even worse is its coercion by international banking institutions upon developing nations.

Amidst the post-Cold War, the defeat of communism has led to a fanatic capitalist support for liberalization of capital flow. With the liberalization of capital flow theorem the majority of the world has been left to gape at the increasing gap between the affluent and poor with dreadful consequences. The theory of liberalization of capital flow, advocates the principles of flight capital, any increase in G.D.P growth, extensive loans, multitudinous investments, and ridiculously extravagant laissez-faire.
This exuberant theorem became entrenched in international fiscal policy at the end of the Cold War. The scholarly avocation of this theorem became the official norm with the ratification of NAFTA and the increased importance of IMF ruling on the stage of a capitalist world. The belief has also enjoyed support from the majority of western scholars on international monetary policy. The basic logic behind this zealous adoration is that the economies of the nations that adopted the rule of capital flow liberalization have increased in scope dramatically. The major problem with this justification is that the measuring devices of economic growth are inherently bias. By measuring devices, such as G.D.P, balanced budgets, and foreign investments, the countries that have liberalized capital flow have grown dramatically in fiscal terms. As Eduardo Galeno writes “in the world of statistics a man who earns $1000 and a man who earns nothing both earn $500). Yet the economies of the world aren’t measured with the fiscal devices that actually matter such as standard of living, average wage earning (different from per capita income), literacy rates, and health matters (mortality rate). If these measuring devices were used as the criteria to judge nations economies and their well-being the countries that liberalize capital flow would have proven to be far worse off then they in 1980 when the bonanza first stated.
An obvious case being the extravagant use of liberalization of capital flow is Indonesia. Indonesia, in 1998, had a debt of $80 billion, 95% of which was owed by 50 individuals most of them linked to the cruel Stalinist-like dictator of Indonesia, Suharto. Yet with the transition of power to a “democratic” Indonesia the weight of the debt was passed to Indonesia’s population not those few 50 individuals. Quite a lofty burden on Indonesia’s population of over 200 million, mainly because “CFL” (Capital Flow Liberalization) theorists believe with free flow of capital, means everyone “shares” in payments and the benefits of lucrative investments (a rarity). Yet if everyone shares the flow of capital it seems that those 50 individuals responsible for Indonesia’s debt crisis should compensate with agrarian reforms for peasant descendants severely damaged by Suhartos genocide against them in 1966. As one notices this shall not occur and in fact is a major problem with “CFL” because the downtrodden pay for, the affluent’s problems and misjudgments, not the other way around.
Another similar case is Mexico which in 1980 was an autocratic developing nation to now when it is an autocratic developed nation (at least for the top 3%). Mexico became the major example of progressive capitalist reform. Mexico took many loans that is was obviously not in the state of economic affairs, to accept. The IMF and Department of Treasury hailed it as a free market victory. Then in 1982 its economy collapsed. A series of neo-liberal reforms were put in place and then came NAFTA. The NAFTA agreement opened the Mexican economy more, it was once against held as triumph by the U.S Department of Treasury and IMF. Then in 1994 the Mexican economy collapsed again.
Even through this concrete evidence how does the developed world still show admiration for this wholly dangerous philosophy. Well the main raison d’être for such a lofty and venal system is that the people who impose this idea are by far the ones who gain the most. It’s no surprise that one of the aspects of CFL is that controls over market prices should be restrained if not totally revoked. One remembers that this was the exact reason behind the French Revolution, people with stable incomes that had zero growth (and in our age for the poor of the world, declining growth) had to deal but skyrocketing prices, mainly with bread. The revocation of price control is automatic plus for the Industrialized world which sells their heavily subsidized agribusiness products to the South. Another reason is the moronic inaptitude of the people judging and analyzing third world poverty, remember the present economic imperialism (globalization) was mainly invented in the frigid Ivy Towers of the University of Chicago Economics department. Few Western scholar have actually confronted the problem, and balanced budgets is not one of the solutions.

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