The Case For Capital Controls

The standard economic view used to be that capital controls were a damaging relic from the past. Almost all economists opposed them as they believed they discouraged foreign investment, created barriers to trade and lead to an inefficient allocation of resources. The notion that the government could restrict how people used their money was found abhorrent by many. However, since the Financial Crisis, there has been a shift in opinions. Many economists support some capital controls to reduce instability in the economy, particularly in the financial sector. 250 economists from around the world signed a petition calling on the US government to reconsider its opposition to capital controls. Even major institutions like the IMF, the World Bank, the Federal Reserve and the European Union have admitted that there may be some cases in which capital controls are beneficial. Continue reading “The Case For Capital Controls”