ABSTRACT

Introduction The degree of international capital mobility is an expression of the power of capital over labor and society. Mechanisms to control the degree of capital mobility are therefore weapons in the political struggle for a more humane and sustainable economic and social life. The heterodoxy has long been critical of capital mobility and has considered capital controls, but a tension has existed between different analyzes. At one level, Marx tended to argue that capital mobility, as a reflection of the power of capital, was a juggernaut that would wash over the globe, bringing capital to every corner of the world, eventually increasing both the forces of production and the class struggle that would ultimately bring about its own demise. Barriers against capital mobility might be able to dam its advance temporarily, but eventually, capital would break them down, and continue to roam the globe, unfettered (Marx and Engels, 1998).2 Keynes, on the other hand, believed that capital controls and government control over important aspects of social investment, could tame capitalism, even bringing about the euthanasia of the rentier. As we discuss in more detail below, Keynes believed national capitalism, protected by capital controls, was possible, at least in the UK and other large countries. After the 1970s, with the rise of neoliberalism and the decline of the social democratic movement following World War II – when capital controls were widespread and the power of capital was subdued by social forces in many parts of the world – we once again face this tension. Marx’s prediction of the juggernaut of capital with its expression in the hyper-mobility of capital seems to have trumped Keynes’ hope for controlled capital, and more progressive national capitalisms. In this world of neoliberalism, financialization and globalization, are capital controls simply passe? Or, even in this situation, is there still a case that can be made for capital controls? And, what do the answers to these questions tell us about the relevance of the work of Marx and Keynes to contemporary debates about international capital mobility and economic dynamics? These are the questions this chapter addresses. In making my argument I distinguish between the technical or policy aspects

of capital controls on the one hand, and the transformative aspects of capital controls on the other. By “technical” I mean the ability of capital controls to facilitate one or another economic policy that might have more or less important impacts on economic growth, employment generation and income distribution. These impacts can be very important for the quality of life of workers and citizens and therefore are of major significance. Still, those hoping for a more profound change in the structure of society and economy may be more interested in the transformative aspects of capital controls: the degree to which capital controls are able to help shift political and social power away from capital and toward society, thereby making feasible a more dramatic change in the overall structure of the political economy which leads to a more egalitarian and sustainable – and, possibly, socialist order. Below, I argue that, in contrast to the claims of much mainstream analysis, capital controls have been very successful and, indeed, can continue to be very successful in the technical sense. Moreover, looking over the last century, we see that capital controls have been crucial to virtually all transformative economic change. Nonetheless, more recently, left-leaning governments who have presumably wanted to undertake major transformative policies, have not tended to adopt capital controls. I briefly explore the reasons for this choice in recent years and attempt to understand the implications of this change for the prospects of fundamental political and economic change in contemporary capitalism. The rest of the chapter is structured as follows. In the next section, I discuss in somewhat more detail Keynes’ views of the importance of capital controls and Marx’s views on the possibility of economic reform. Here I also develop further the distinction between the technical and the transformative aspects of capital controls. The third section briefly discusses the technical case for capital controls and the fourth section discusses in more detail the transformative aspects of capital controls, exploring the difficulties involved in transformative projects, focusing on the role that capital controls can and have in fact played. The final section briefly concludes.