Abstract
Money and finance are an essential part of power. Financial markets had become subject to government management well before Keynes’ famous statement in the ‘End of Laissez-Faire’:
My second example relates to savings and investment. I believe that some coordinated act of intelligent judgement is required as to the scale on which it is desirable that the community as a whole should save, the scale on which these savings should go abroad in the form of foreign investments and whether the present organisation of the investment market distributes savings along the most nationally productive channels. I do not think that these matters should be left entirely to the chances of private judgement and private profits, as they are at present.
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Notes
R. W. Goldsmith, Financial Structure and Development (New Haven: Yale University Press, 1969), p. 401.
OECD, Capital Markets Study (Paris: 1965 and 1966).
EEC, The Establishment of a European Capital Market (Brussels: 1966).
D. E. Logue, M. A. Salant and R. J. Sweeney, ‘International Integration of Financial Markets: Survey, Synthesis and Results’, pp. 91–137, in Eurocurrencies and the International Monetary System (Washington DC: American Enterprise Institute, 1976).
Thus Kindleberger and Krause. Krause for instance, compared spreads in a number of countries and concludes ‘that there is no time trend toward a reduction of spreads, which would indicate that domestic banking is not becoming more competitive’. (Lawrence B. Krause, ‘Implications for Private Capital Markets’ in European Monetary Unification and its Meaning for the United States, Washington: Brookings Institution, 1973, p. 126).
T. Scitovsky, Money and the Balance of Payments (New Haven: Yale University Press, 1969).
P. R. Allen, Organization and Adminstration of a Monetary Union, Princeton Studies No. 38 (Princeton: 1976).
Thus Marina Whitman states that ‘the efficiency gains from market integration are maximized by ignoring the boundaries of the nation-state; for private transactions in goods and factors of production, the optimum size of the integrated area is the world. By implication, the economic justification for the nation-state must lie in the existence of public or collective goods — including stabilization targets, the distribution of income, and the regulatory climate -and of differences in national consumption preferences for such goods’. (Marina V.N. Whitman, Sustaining the International Economic System, Essays in International Finance No. 121, Princeton, N.J.: Princeton University, International Finance Section, 1977, p. 3).
Cooper also puts the case for regional policy in terms of public goods (Richard N. Cooper, Economic Mobility and National Economic Policy, Wicksell Lectures, Stockholm: Almquist and Wicksell, 1974).
Examining insulation and capital flows, Tower and Willett state: ‘This conclusion of greater insulation under flexible rates is rather widely accepted and we believe it to be generally correct.’ (Edward Tower and Thomas D. Willett, The Theory of Optimum Currency Areas and Exchange Rate Flexibility, Special Papers in International Economics, No. 11, Princeton University, International Finance Section, 1976, p. 52).
R. G. Hawkings, ‘Intra-EEC Capital Movements and Domestic Financial Markets’, in F. Machlup (ed.), Economic Integration, Worldwide, Regional, Sectoral (London: Macmillan, 1976).
Charles P. Kindleberger, Comments on ‘European Monetary Unification: Implications for Private Capital Markets’, by Lawrence B. Krause, in European Monetary Unification and Its Meaning for the United States, L. B. Krause and W. S. Salant (ed.), The Brookings Institution, Washington, 1973, p. 151.
Harry G. Johnson in Richard N. Cooper (ed.), International Finance (Baltimore: Penguin Books, 1969) .Johnson rightly argues that when interest rates are fixed according to balances of payments criteria: ‘The resulting pattern of international capital movements obviously need not be anything like an efficient one, since there is no reason to expect that the real return on investment in countries with current account deficits is higher than that on investments in countries with current account surpluses; it may on the contrary involve a serious distortion of the allocation of new investment resources, and a consequent welfare loss for the countries concerned and the world economy.’
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© 1980 Battelle Geneva Research Center
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Krul, N. (1980). Financial Markets and Economic Nationalism. In: Hieronymi, O. (eds) The New Economic Nationalism. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-04527-3_7
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