Flow Of Capital Essay

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In investigating the flow of goods and services across borders and the international economy as a whole it’s necessary to not only observe the economic factors that drives such flows but also the political aspects as well. Despite the relatively free flow of capital, goods, and services that benefit the global economy today, this has only been a recent development. Prior to the late twentieth century high tariffs and low quotas were prevalent throughout the developed world. Though such policies have changed throughout the centuries the notion that governments are in control of their states economic policies persists to this day. Because governments have the final word on how private entities that are registered within their borders can…show more content…
A reduction in financial regulations across the globe in the 1970s and 80s caused the total flow of capital to increase by a factor of five in less than two decades. Despite such neoliberal policy implementations some forms of capital remain regionally controlled and are significantly more difficulty to transfer between sovereign states. With regards to state autonomy, the author supports the Mundell-Fleming approach which states can have only two of the following three conditions: a fixed exchange rate, monetary policy autonomy, and capital mobility. Most states opt to have control over monetary policy and exert their will by manipulating exchange rates rather than interest rates. Having full control of a states’ domestic interest rates generally bears no relationship to its international monetary ties with other states. States are more than willing to concede their autonomy on interest rates in order to be more financially integrated in the world market. Despite the general preference of states to have a free flow of capital across borders, with such policies being implemented there are groups who fare better and those who are worse off as a result. Frieden rejects the Hecksher-Ohlin model as being to static only focusing on long term factor mobility and ignoring the variety of sectors that constitute a states’ economy. Under the specific-factors approach factor or
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