Re: Imprisoned Capital

[Bart Croughs <bart.croughs@tip.nl>]

James A. Donald wrote:

>[In response the argument that attempts to imprison capital will cause 
>capital flight]

>At 10:50 PM 8/16/96 +-200, Bart  Croughs wrote:
>> This is a good point when you talk about governments that will 
>> prevent *all* capital from flowing out. But a government could 
>> prevent the outflow of capital of it's own citizens, and still 
>> allow capital of foreigners to leave the country. As long as 
>> foreign capital isn't imprisoned, foreign capital could be 
>> attracted.

>Been tried.  Does not work.

>1.  If foreign capital is allowed to freely enter and leave, internal
>players find ways to sneak their capital out.  This forces the
>government to start regulating and supervising foreign businessmen
>in ways that at best terrify them (such controls look very much
>like creeping confiscation), and at worst cause them huge harm
>with no real benefits to anyone.

I think you are probably right that *in practice* it will not work when the government tries to prevent domestic capital from flowing out and at the same time will allow capital of foreigners to freely flow in and out. After all, government doesn't work. But this doesn't prove the theoretical case that an outflow of capital wouldn't hurt the standard of living of workers in a country. As long as this isn't proven, governments have an excuse to try again and impose controls on capital (and this time of course, they will do it better...)

Bart Croughs