Capital and Control: Lessons from Malaysia

摘要

Governments around the world have embraced the thirty-year-old trend toward the free movement of capital. International capital markets have grown to be enormous―$1.2 trillion change hands in global markets every day. The promise of liberalization is an efficient global allocation of savings, with markets channeling financial resources to their most productive uses and increasing economic growth and welfare around the world. Many developing countries jumped on the bandwagon, opening their capital accounts in the hope of borrowing to finance domestic investment and encouraging foreigners to invest directly in their emerging markets. The gains have not come without pain, however, as it has become clear that massive, mobile international capital markets bring risks. The devastating financial crises of the past few years―in Asia, Russia, Brazil, Argentina―have prompted a reappraisal of the costs of liberalization. There are more crises to come. And so a debate about the future of the international financial architecture has emerged. Members of the international financial community are formulating their positions on the appropriate balance to strike between the benefits and risks of global capital markets, as well as the balance between financial market, freedom and a government's ability to manage its own economy.