=
THE
POLITICAL ECONOMY OF GLOBAL FINANCIAL LIBERALISATION IN HISTORICAL PERSPECT=
IVE
Rui P. Esteves
Department of Economics=
and
Brasenose College, University of Oxford
Abstract
This
paper is a first attempt to garner the theory and evidence on the political=
economy
of the first wave of financial liberalisation during the nineteenth and ear=
ly
twentieth century, and of its demise after World War I. Not everyone gained
from the process of globalisation (of trade, labour, and finance), which
brought about important changes in the structure of the economy and the
distribution of income in nations across the world. This paper explores how=
the
economic incentives generated by these dislocations translated, through the
political system, into choices about openness to foreign capital and financ=
ial
integration. The period before World War I is remarkable by the almost abse=
nce of
restrictions on cross-border capital flows, which may explain the little at=
tention
it has received in the historical literature, compared to the extensive stu=
dy
of trade protectionism in this period. After the War, many countries
experimented with capital controls which varied in nature and intensity and
were intensified during the Depression. Despite the attempt made here to
reconcile these stylized facts to models of political economy, the analysis=
requires
a better empirical foundation and some suggestions for further research are
also proposed.
JEL keywords: political economy, financial liberalisation, cap=
ital
controls, pre-war
JEL codes: F4, G18, N20