Post-Crisis Capital Controls in Developing and Emerging Countries: Regaining Policy Space? A Historical Materialist Engagement

Abstract

Recent political economy scholarship has interpreted the recent resurgence of capital controls across the Global South as attempts by some developing countries to preserve their policy space to pursue heterodox economic policies. This article critically engages with this literature and argues for the need to study capital controls in light of the social constitution and the class character of the capitalist state, money, and private capital flows. This argument is substantiated through a class analysis of the deployment of capital controls in Brazil from 1945 to 2014, which emphasizes the crucial role that capital controls have historically played in the reproduction of capitalist social relations and particular forms of class rule in Brazil. JEL Classification: F30, F32, F38, F54

Taming Foreign Exchange Derivatives Markets? Speculative Finance and Class Relations in Brazil

“…The point was ‘not to curb inflows or to collect money [by imposing a tax] but to manage financial systemic risk (by reducing gains on speculative positions) and collect information on market operations’ (Interview 1; similar points were made in Interviews 2 and 4). The first set of policy tools and forms of intervention implemented by the Finance Ministry and the BCB between late 2009 and mid‐2011 were very similar to those repeatedly used throughout the 1990s (Alami, ) — although, as discussed below, despite multiple rounds of fine‐tuning, tightening and extending the scope of the measures, they seemed to have little effect.…”

“…This contrasts sharply with the level of attention that closely associated policy tools have received in the critical political economy literature, such as capital controls (e.g. Alami, , ; Chwieroth, ; Gallagher, ; Grabel, ), macroprudential regulations (Baker, ; Bakir and Öniş, ), reserve accumulation (Gallagher and Shrestha, ; Painceira, ), state‐owned banks (Marois, , ), and inflation‐targeting frameworks (Kaltenbrunner and Painceira, ). The lack of interest in the recent Brazilian attempt at regulating foreign exchange derivatives markets is also surprising given the burgeoning literature on both the role of derivatives in contemporary capitalism and the challenges that they pose for financial regulation and macroeconomic management (e.g.…”

“…Both types of approaches highlight how the state actually plays an essential role — whether deliberately or not — in mediating financialization processes, either through directly becoming an actor in financial markets, or by lifting a series of regulations in the realm of money and finance that facilitate financialization . There is no doubt that both aspects have played a key role in the financialization of the Brazilian economy (Alami, ; Araújo et al., ; Kaltenbrunner and Painceira, ). But the policy tool examined in this article suggests another aspect: the Brazilian tax on FX derivatives was neither implemented to tame the constraint exerted by financialization processes, nor to seize the opportunity that they offered.…”

Capital Account Regulation and National Autonomy: The Political Economy of the New Welfare Economics

“…For one, Brazil has removed most of administrative controls, narrowing down the restrictions to cyclically adjusted tax-based regulations over more volatile transactions such as portfolio flows, debt and derivatives (Fritz and Prates 2018). As these controls target short-term flows, Alami (2019) and Kaltenbrunner and Painceira (2018) argue that Brazilian authorities have mostly aimed to safeguard financial stability rather than restricting capital mobility. China, in turn, despite having gradually loosened capital controls, has kept a variety of regulatory instruments, including taxes, quota schemes and administrative prohibitions (Gallagher et al 2014;Prasad and Wei 2007).…”

Capital, the State, and Economic Policy

“…Unfortunately, these perspectives—in spite of the aforementioned work of scholars such as Campbell and his coauthors, and the heretical economics of Bellofiore (1989) and Alami (2019) recent Open Marxist publication in RRPE —are now largely marginalized or nonexistent in heterodox economics. Instead, a predominant heterodox discourse has developed that eschews Marx’s critique of capitalist society, his critique of classical political economy, and Marxian critiques of Keynesianism.…”