The Divide: A Brief Guide to Global Inequality and its Solutions

by Jason Hickel

states could decide the terms by which foreign investors were allowed to send capital in to set up businesses or buy up shares of local companies. And if those investors wanted to pull their money out, they had to go through a rigorous application process. This was considered crucial to protecting economic stability. When an economy takes a downturn for some reason, an investor’s first impulse is to pull their money out and send it somewhere safer. When this happens on a large scale, it drains the economy of much-needed capital, and only makes the problem worse. Slight downturns can become full-blown crises when investors flee en masse. Keynes’s system allowed countries to impose ‘capital controls’ that prevented this from happening.