The first era was not an unqualified success. Looking at the capital flow reversal into the US, I cannot argue that the second era has been an unqualified success either. It is nice that Mexican workers and entrepreneurs are gaining experience in export manufactures, and that they are successful enough to run a trade surplus vis-a-vis the US. But the flip side of the trade surplus is the capital outflow. Should capital-poor Mexico really be financing a further jump in the capital intensity of the US economy?
It is not possible for a card-carrying neo-liberal like me to wish for anything but the most minor of controls to curb speculative capital flows. Capital markets can get the allocation of investment badly wrong, but governments are likely to get it wrong even worse, and the incentives to corrupt bureaucrats do need to be kept as low as possible.
But the hope for a repetition of the late 19th-century experience has -- so far -- proved vain. Unlike in the heyday of liberalism, money from the world's rich countries simply is not going to give peripheral economies the priceless gift of rapid, successful development.
Bradford DeLong is professor of economics at the University of California at Berkeley and was assistant US Treasury secretary during the Clinton presidency.
Copyright: Project Syndicate
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