The assumption that money can disturb economic activity has gained consensus across different schools of economic thought, but there remain differences in terms of the channels through which this occurs. Many economists consider that central banks can only set their rate of interest and are unable to control the money supply, thereby debt originates money, which has become structurally endogenous. This chapter analyses different heterodox approaches, highlighting the discussion on money creation and destruction, and explaining how this applies to developing economies, where demand for investment expenditure is limited and exchange rates have become increasingly important. The analysis focuses on the Mexican economy in the 1980–2007 period, just before the global financial crisis burst.
Noemi Levy-Orlik and Jorge Alonso Bustamante-Torres
This chapter discuss the impact of international capital movements on non-financial corporations, analysing the volume and composition of Foreign Direct Investment (FDI) and highlighting its effects on Latin American and Caribbean (LAC) economies and the organisation of non-financial corporations originated in the region (termed multilatinas), in order to compare overcapitalisation practices with those of multinationals based in developed countries. We show that multilatinas’ overcapitalisation practices rely on variety of forms that have transformed their growth and indebtedness strategy in such way, producing a falling tendency on fixed investment, and a mix up between falling profits and deterioration of solvency indicators, this situation bounds the continuity of this particular trend of multilatinas´ overcapitalisation process.
Noemi Levy-Orlik, Jorge Alonso Bustamante-Torres and Louis-Philippe Rochon
In this chapter, we briefly discuss both the assumptions of conventional theory that establish the positive relationship between capital movements, economic growth, and welfare; and those derived from heterodox approaches that relate the movement of capital to indebtedness and financial fragility, which in the end generates economic and social stagnation and instability.We also analyse the effects of cross-border capital movements, manifested in foreign direct investment and portfolio capital, on the productive structure of emerging and developing economies. Highlighting the fact that the export model, imposed by large transnational and trans-Latin corporations, has favoured the reduction of costs through wages and generated a reprimarisation of Latin American countries, increasing income concentration and financial fragility, whose limitations have been exposed with the Covid-19 health crisis.