Last month I was invited to join the ‘Labour Party Policy Review: Making growth work for the poor and generating resources for development’. The overall group was led by Harriet Harman, and the development section was chaired by Rushnara Ali MP.

Below is my short background note on mobility of capital flows, financial crises & implications for poor countries:

Capital Mobility: what others are saying

“Experience shows that when policies falter in managing capital flows, there is no limit to the damage that international finance can inflict on an economy.”

Yilmaz Akyüz, “Capital Flows to Developing Countries in a Historical Perspective: Will the current Boom End with a Bust?”  South Centre:Research Paper 37, March 2011

“..capital flows, it’s like with fire. Fire can be used to turn raw meat into a wonderful steak. But it can also burn your house down.”

Jagdish Bagwhati, Professor of Economics, Columbia University, on Big Think, 17 November, 2007.

“Looking back on the crisis, the US, like some emerging-market nations during the 1990s, has learned that the interaction of strong capital inflows and weaknesses in the domestic financial system can produce unintended and devastating results. The appropriate response is…to improve private sector financial practices and strengthen financial regulation, including macroprudential oversight.”

Ben Bernanke, governor of the US’s Federal Reserve in speech to Banque de France February, 2011.

“So we have to make some choices. Let me be clear about mine: democracy and national determination should trump hyper-globalization. Democracies have the right to protect their social arrangements, and when this right clashes with the requirements of the global economy, it is the latter that should give way.” (Author’s emphasis)

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