The politics of capital flight: exit and exchange rates in Latin America

Abstract

The capacity to transfer wealth abroad had long served wealth-holders as a potent restraint on state encroachment. The creation of movable wealth, Montesqueau wrote in the eighteenth century, meant that ‘rulers have been compelled to govern with greater wisdom than they themselves might have intended’. In the years since then, new technology and increasing interdependence have greatly magnified this capability; one recent book argues that the increased mobility of capital and growing integration of economies means that all governments ‘have lost the vestiges of unchecked economic sovereignty’ and that they ‘must concede to the implied threats of quicksilver capital’ When enormous quantities of wealth travel across the world with a single tap of a computer key, a country risks paying heavy costs if it adopts the wrong policies. So if the nation-state is not yet dead, it appears to be severely weakened in its ability to pursue measures at odds with the wishes of mobile-asset holders