ABSTRACT
The previous chapters showed how international trade has grown rapidly over the past 60 years, at least until the worldwide recession in 2007 and 2008 caused trade to decline for the first time since the close of World War II. International investment and financial flows have grown, on average, even more rapidly than trade, but their growth has been inconsistent. International investment and financial flows have fluctuated widely from year to year within all countries, and they have varied greatly among countries. Many countries, especially developing countries, often have suered not just ups and downs in financial flows, but frequent reversals in the direction of such flows. Because such reversals cause very real reversals in economic growth and human welfare, one of the most ardent advocates of free trade, Jagdish Bhagwati, has suggested restricting international capital flows. In the same article from which the quote above is taken, Bhagwati (1998, p. 7) notes that “[e]ach time a crisis related to capital inflows hits a country, it typically goes through the wringer.”
