From the days of the Bretton Woods Agreements to the beginning of the subprime crisis, the world witnessed an impressive resurrection of global finance and with it the re-emergence of international capital mobility (ICM).
But the phenomenon of
ICM is a contested issue among commentators. While some almost go as far as denying its existence, the most widespread discourse portrays ICM as a powerful external force, putting pressure on the state to adopt capital-friendly policies and reduce welfare expenditures. This notion of forced competition among states is manifested in the “capital mobility hypothesis”, which draws a parallel between the
rise of ICM and its structural power to constrain the state. The following essay argues that this functional connection is not necessarily given, as the mobility of capital is derived from technical, financial and regulatory sources, while its power originates from discursive mechanisms.
By looking at historical developments, it is shown that ICM did indeed re-emerge. But a close examination of the constraints it poses on the different categories of the state reveals that the latter retains significant “room to move”. To understand where the premise of the “capital mobility hypothesis” comes from, ICM is analyzed through discursive institutionalism. A number of relevant
discourses are examined and it is concluded that the state itself plays a substantial role in creating and maintaining the idea of ICM’s power.
Table of Contents
1. Introduction
2. The re-emergence of international capital mobility
3. State autonomy in the “world after capital mobility”
4. State-led discourses and international capital mobility
5. Conclusion
Research Objectives & Themes
This essay aims to critically analyze the re-emergence of international capital mobility (ICM) and challenge the prevailing "capital mobility hypothesis," which suggests that mobile capital inherently constrains state policy and autonomy. By utilizing a discursive institutionalist framework, the work demonstrates that the state remains a significant independent actor that actively creates and maintains the very discourses that support the power of international capital.
- The historical development and re-emergence of international capital mobility since the Bretton Woods era.
- A critical evaluation of the "capital mobility hypothesis" and its claims regarding state structural constraint.
- Application of Schmidt’s state categorization to assess actual policy autonomy and the "room to move" for states.
- Analysis of discursive institutionalism as a mechanism for the creation and legitimization of global financial institutions.
- The state’s role in embedding society within financial markets and promoting market-friendly discourses.
Excerpt from the Book
The re-emergence of international capital mobility
ICM is most suitably described as the capacity of capital to move within a given country and across jurisdictional boundaries without significant frictions (Andrews 2001). While the sum of all actual capital flows at any given time does reflect the capacity utilization, it is not a limit for ICM. Distinguishing the capacity from actual occurring flows of capital is essential, as it is the potential to move that indicates the integration of capital markets (Sinclair 2001). Since capital markets are a defining feature of capitalism (Gill and Law 1989), the degree of ICM is a central element of the world economy. The main sources of ICM, according to Andrews, are communication and information technology, financial innovation and the liberalization of domestic capital markets (1994). ICM is therefore also a political issue.
Summary of Chapters
1. Introduction: Introduces the re-emergence of international capital mobility and posits the central argument that the state’s apparent loss of power to mobile capital is a construct of discursive mechanisms rather than an inherent structural constraint.
2. The re-emergence of international capital mobility: Details the historical trajectory of capital mobility from the gold standard through the Bretton Woods era to the liberalization of the late 20th century, establishing capital mobility as a political condition.
3. State autonomy in the “world after capital mobility”: Critically evaluates the "capital mobility hypothesis" by applying a four-category framework of the state to demonstrate that states retain significant policy autonomy despite international pressure.
4. State-led discourses and international capital mobility: Explains how states utilize coordinative and communicative discourses to create institutional facts that legitimize financial liberalization and embed society into market structures.
5. Conclusion: Synthesizes the findings, reiterating that while ICM has increased, the state remains a purposeful actor that actively shapes the global financial order, even during crises.
Keywords
International Capital Mobility, Capital Mobility Hypothesis, State Autonomy, Discursive Institutionalism, Global Finance, Bretton Woods, Neoliberalism, Policy Convergence, Embedded Liberalism, Financial Markets, Structural Power, Washington Consensus.
Frequently Asked Questions
What is the core focus of this academic work?
The essay critically investigates the phenomenon of international capital mobility (ICM) and its purported impact on state autonomy, challenging the dominant belief that capital mobility automatically strips states of their ability to govern effectively.
What are the primary themes discussed in the paper?
Key themes include the historical rise of ICM, the critique of the "capital mobility hypothesis," the evaluation of state policy autonomy, and the use of discursive institutionalism to understand how states actively shape financial norms.
What is the primary research goal of this essay?
The goal is to move beyond the deterministic view that global capital markets force a "race to the bottom," arguing instead that the state is an active participant in creating the institutional environment that facilitates capital mobility.
Which scientific method or theoretical framework is employed?
The author employs a discursive institutionalist framework to analyze how political, economic, and regulatory discourses create the "institutional facts" that give ICM its perceived structural power.
What is covered in the main body of the paper?
The main body examines the historical emergence of ICM, categorizes the state’s role within political and economic structures to assess constraints, and explores how state-led discourses regarding liberalization and market participation are constructed and maintained.
Which keywords best characterize this work?
International Capital Mobility, Discursive Institutionalism, State Autonomy, Global Finance, and Structural Power are among the most significant concepts characterizing the analysis.
How does the author define the "capital mobility hypothesis"?
It is defined as a discourse which claims that the rise of international capital mobility creates an inherent structural power that forces states to pursue capital-friendly policies and abandon domestic welfare priorities.
What role does the state play in the modern financial order according to the author?
The author argues that the state is not a passive victim of global markets, but rather a purposeful actor that utilizes specific discourses to legitimize financial integration and protect its own political and economic objectives.
- Quote paper
- Matthias Baumgarten (Author), 2011, A critical analysis of the re-emergence of international capital mobility, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/182620
