A Post-Keynesian Approach
New Directions in Modern Economics series
Edited by Claude Gnos, Louis-Philippe Rochon and Domenica Tropeano
Chapter 13: International Capital Flows and Latin America: Making Sense of Disappointing Results
Wesley C. Marshall INTRODUCTION To a large degree, the history of international relations of economic power can be described and analyzed through the lens of capital flows. While the reception of consistent inflows of capital is a fairly reliable guarantee of a country’s increased accumulation of wealth and international presence, consistent outflows of capital equally often condemn countries to poverty and economic irrelevance. As a historical net exporter of capital, Latin America has not escaped this tendency. Apart from few exceptional periods, the region has been unable to retain and utilize its capital to a sufficient degree to achieve local economic development or international economic and political sovereignty. With the ushering in of the neoliberal economic ideology that became dominant in the region during the 1970s and 1980s, this problem was reinterpreted and presented through a simplistic viewpoint that offered an equally simplistic solution. Whereas enormous amounts of accumulated capital exist in developed countries, but investment opportunities are limited, in underdeveloped countries capital is scarce, but opportunities for investment abound. Therefore the financial opening of previously hermetic Latin American countries would offer mutual benefits. Capital from developed countries would have new opportunities for investment, and countries of the region would receive steady inflows of capital. However, now a full three decades since the first neoliberal-inspired policies of financial opening were implemented, this result has clearly not materialized. This chapter will assert that financial opening and related reforms have failed to produce their explicit objectives because they were never true objectives....
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