Capital Ideas: The IMF and the Rise of Financial Liberalization

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Capital Ideas: The IMF and the Rise of Financial Liberalization
By Jeffrey M. Chwieroth
Princeton University Press, 2009
352 pp. $29.95
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Should governments be permitted, or even encouraged, to try to control the movement of financial capital into and out of their countries? Unlike in the area of foreign trade, in which the presumption that more freedom is good is generally acknowledged, this issue has never been definitively resolved by either academic economists or the policy community. The original Bretton Woods monetary system, established after World War II, permitted such controls; some would say that its fixed exchange rates even required them. But sentiment gradually shifted away from controls in the following decades, and resistance to controls perhaps reached its apogee when the European Economic Community abolished them in Europe in the late 1980s. A move soon developed to formally amend the international rules to make the free movement of capital an international objective. The effort received a setback with the Asian financial crisis of the late 1990s and again with the global financial crisis of 2008. This book, the outgrowth of a Ph.D. dissertation, usefully traces the evolution of the thinking about this issue at the International Monetary Fund, the international body most directly concerned with it.