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CAPITAL CONTROLS?
Any country implementing capital controls (and not only in the sense of a
Tobin tax on flows, but also administrative regulation of capital
exports, as in Norway before 1990) will in a modern world be "experimenting"
in the sense that today's elite consensus is that everything but
laissez-faire policy is unfeasible.
I emphasize "unfeasible": Some admit that
"even if capital controls do have some merit, they are simply not possible
in a modern computer-connected world where you may move cash across the
borders in a microsecond", or something like that.
Thus their theory is that the world being "modern" makes capital controls
impossible: "Today's conditions are so radically different from earlier", etc.
That is the consensus. It includes nearly all mainstream and even many
non-mainstream economists.
But it is incorrect!
SO THEN, HOW MAY CAPITAL FLOWS BE CONTROLLED IN A
MODERN WORLD??
Assuming a fairly modern country (communication-wise), Capital Controls are
technically feasible, it is only a question of political will. It will be
possible for the Central Bank to effectively control the transactions of
banks and other institutions which are licensed to trade money.
This control may be done electronically, since any transaction where
domestic currency (DC) are traded for foreign currency (FC) or vice versa -
regardless of the nationality and location of the buyer or seller - must
neccessarily, sooner or later, involve a movement from one account to
another inside or between licensed and *domestic* banks.
Therefore, and because of the tools made available in a modern electronic
world, Central Bank logging and control of all trading may be implemented,
as an on-line automated process, so transgressions from banks/traders would
very likely be discovered, under penalty of the license to trade being
withdrawn.
Now, is that a credible threat?
Yes, because any trader that wants to be in business has to have a license,
since your presence in the market must be published to attract customers.
So far so good: Traditional DC/FC exchange may be very effectively
monitored, in fact more effectively than ever before, and therefore also
effectively taxed, which of course should be done to curb speculation (as
proposed by f.inst. Tobin).
One cross-border flow, however, that will to some unavoidable degree be
exempt from control, is loading your Mercedes with bills and driving over
the national border. Such attempts, however, can never amount to a large
share of total cross-border cash flows for a nation.
A more serious circumvention problem for the above proposed control scheme,
is capital flows camouflaged through intra-firm trade with fictitious
prices. Therefore effective C.C. in a modern world also depends on this
being controlled.
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(Beklager at dette ikke er oversatt, men har ikke tid til det)
Trond Andresen
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