THE LIMITS TO GLOBAL MARKETS
When we think about international financial markets, it is commonplace to take the notion of ‘globalization’ very much for granted. But what do we mean by this concept?
It is not entirely true, for example, that globalization of the international financial markets is something that has happened only over the past ten years or so. If we go back to the era of the Gold Standard, which lasted from approximately 1870 to 1914, the scale of total capital flows as measured by the average of the absolute values of current account deficits relative to GDP for the major capital-exporting and capital-importing countries was higher during 1870-1914 than in subsequent decades. The main capital exporter over that period, the United Kingdom, saw annual capital outflows averaging almost 5 per cent of GDP, and reaching 9 per cent at its peak.