The IMF’s recognition of the importance of capital controls is a vital step in the tackling of tax havens

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The idea that capital has free movement to roam where it will has been at the heart of the neoliberal project. It did not have that right until 1979 in the UK and 1980 in the UYSA. We had capital controls until Thatcher and Reagan removed them in those years.

The rise of tax havens can be dated from that moment. Those two politicians liberated the owners of capital to hide their wealth from tax authorities the world over. The aim was deliberate. It was to let that capital accumulate tax free so that the wealth disparity between those who owned capital and the rest of the population would increase. Controls on migration, both legal and social, ensured labour could never move in the way capital could. The result was inevitable. Inequality increased. That was not by chance. It was by design.

There was a second consequence. Global economic instability increased. You’re living through that consequence now. You hear of it every day. Every time it is suggested we should tackle the wealthy or large corporations the question is raised “what if they leave?”. That blackmail was also created, deliberately, by the abolition of capital controls. The tax havens were created (and let’s be clear, they are a creation, not a natural phenomenon) to facilitate that bribe.

Now this is changing (according to the FT):

The International Monetary Fund has cemented a substantial ideological shift by accepting the use of direct controls to calm volatile cross-border capital flows, as employed by emerging market countries in recent years.

Although the fund continued to warn that such controls should be “targeted, transparent, and generally temporary”, the policy, announced in a staff paper released on Monday, is a sharp change from the fund’s enthusiasm for liberalising capital accounts during the 1990s.

 I warmly welcome this move. It is vital. It gives countries back control of their economies and currency. It reasserts democratic control. It ensures the rights of capital are constrained vis a vis labour. It ensures that real attempts to reduce inequality can be undertaken. It means sanctions can be imposed on tax havens.
I do not suggest the IMF is solving all problems overnight: it is not. But this is a welcome step in the right direction. The ideology of neoliberalism has brought us to our knees. Tackling it is vital if we are to create a new and sustainable prosperity. Permitting capital controls is one small step on the way.