The exact consequences for the U.S. outlook are not clear, but they would certainly be negative. The Goldman economists see a threat to the profits of U.S. multinational corporations, particularly financial institutions, that have benefited from an increased openness to foreign direct investment. Just before Malaysia's move, the governor of the Philippines' central bank, Gabriel Singson, cited his country's bad experiences with capital controls earlier in this decade. At a conference of about 30 financial heavyweights convened in Washington this week by the Institute for International Economics, a private think tank, the costs and benefits of capital controls were much discussed. Wall Streeters knocked them as counterproductive and unworkable.
Controls come in various forms.
Chile and Colombia have taxed short-term borrowing from abroad. The Czech Republic levied a fee on all foreign-exchange transactions with banks. And Malaysia now limits the amount of cash its citizens can carry out of the country. Fear of Flying In the war of metaphors that often encapsulates academic debates, Deputy Treasury Secretary Lawrence Summers has likened the emergence of global financial markets to the invention of the jet airplane. We can go where we want to go much more quickly.