Ritchie asks us a question today. An important question too.
Why do we allow the free movement of capital?
We do not allow the free movement of people.
So why do we choose to let capital roam as it wishes? Why is it acceptable to let capital minimise its tax? Why can capital use artifice, from the limited liability entity to the tax haven, and yet we impose the cost of supporting its errors on people?
What is the reason for condemning 5 billion of the 6 billion or so people in the world to poverty to make sure capital can make money?
Why have we made this choice?
The answer is here:
Because it works.
As the good little liberals that we all are we desire that the poorest and most destitute of our fellow human beings rise up out of the child killing poverty, the miserable hand to mouth existence, which is the Third World peasant lifestyle.
Depending upon where are roots are, our forefathers managed this some several centuries ago (for, say, England, other parts of the UK following hard behind), Sweden managed it starting at the turn of the last century, Hong Kong starting in the 1950s perhaps, and so on, to China and India in the late 70s, early 90s, and as you can see, Africa in the mid 90s. Do, just for a moment, note what rising “Sen Welfare” means. It means that both inequality is falling and that average incomes are rising.
We can all also note that, while we can happily argue about how much government was needed to prepare for these various lift offs, each and every one of those lift offs was correlated with a move to a more liberal economic policy. Freer trade, fewer restrictions upon what people could do with their lives, more capital movement.
And this more liberal set of policies is what is known today as “neoliberalism”. If you wish, the rediscovery of the classical liberals: Smith’s leaving the money to fructify in the pockets of the populace.
All of which is why all us good little liberals might sign up for things like the Washington Consensus. Yes, including the free movement of capital.
Because these last 30, 40 years of the triumph of neoliberalism has led to the greatest reduction in poverty in the history of our whole species. The poor are getting richer, global inequality is falling.
Which means that we can answer Ritchie’s question: why do we allow the free movement of capital?