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Regionalization And Capital Movement Essay

2276 words - 10 pages

Regionalization and Capital MovementIt is a well-known fact and dominant theory that development, defined as a process of improvements in a population's standards of living with associated structural or institutional change, requires access to and the accumulation of capital. Of course, capital, as wealth begetting wealth, or the sum total of society's productive resources, takes diverse forms: financial, physical, natural, human, and social. At issue in the development process is the accumulated stock of capital in these diverse forms, as well as their cross-national flows-international resource flows, if you will. As for money or financial capital, the most mobile form of capital, the ...view middle of the document...

Another important factor in international resource transfers, or the flow of capital, is the composition of this flow. As indicated in the preceding table, some regions (e.g., sub-Saharan Africa) are more dependent on official financial resource transfers than private capital for their economic development. Elsewhere in the South, especially in Latin America, the dominant flow of capital is private and increasingly composed more of foreign direct investments and less of bank loans (debt financing) or official transfers. The reason for this, although not immediately evident from the data, has to do with the agenda of the World Bank and the International Monetary Fund in the 1980s: to push and pull Latin American governments into the "new world order" of globalized capital, deregulated markets, free trade, and private-sector-led development. The end result of these push and pull pressures was a deregulation of product, capital, and labor markets and a process of financial liberalization, as government after government in the region eliminated its restrictions on the operations of foreign direct investment. Much of this foreign direct investment was used not to induce a process of technological transformation, and thus increase productivity and economic growth, but to acquire the privatized public assets and forms put on the auction bloc in the 1990s.Conceptual OverviewThe 1980s gave rise to a counterrevolution, a movement to halt and backtrack on advances made all over the world on the basis of a state-led model of economic and social development. The counterrevolution included a call for a new world order in which global capital, the private sector, and trade would be allowed to operate free of restrictive government control in the search for profit, so as to usher in a new era of economic growth and general prosperity.Table 1 Capital Inflows: External Financing by Region in the Global South(U.S.$ billion)1995 1996 1997 1998 1999 2000 2001 2002 2003Latin America and the CaribbeanFDI 30.5 44.4 66.1 73.4 87.8 75.8 69.3 42.0 38.0Loans 61.3 36.0 24.3 37.9 12.3 -1.1 11.4 3.5 -Private 42.8 84.9 51.2 84.5 75.3 89.9 75.8 45.3 44.0Official 5.7 5.5 4.5 4.5 4.7 3.8 5.2 - -AsiaFDI 2.3 4.2 11.1 11.0 6.3 5.6 9.6 8.0 9.0Loans 5.2 0.1 -3.8 13.0 -1.7 -3.1 1.4 0.6 1.5Private 18.7 15.0 31.4 17.2 17.8 13.7 15.4 17.3 19.0Official 14.7 12.8 10.9 12.9 13.7 12.2 12.7 - -Sub-Saharan AfricaFDI 4.3 4.3 8.1 6.5 8.1 6.1 13.8 7.0 7.0Loans 7.6 3.2 4.5 -1.4 -0.9 -0.9 -1.0 0.2 -0.5Private 7.8 7.8 7.9 6.4 10.0 12.2 11.1 9.9 12.0Official 17.8 15.0 13.3 13.3 12.2 12.2 12.7 - -Source: World Bank, Global Development Finance (2004), pp. 181-186, 200. The tables combine the IMF's current account, foreign exchange, and net inward FDI data with the World Bank's portfolio equity/debtor reporting system (DRS) data to produce an overall tabulation of how regions finance themselves externally.Note: Private flows of capital recorded in this table occur in three basic forms and involve...

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