One of my respected readers, whose experience in the global
money game is phenomenal, responded to last weeks column
saying that what I neglected to touch upon was the aspect
of leadership in the context of structuring an economy and
a country, because that structuring can kill hope and douse
the flames of deep inspiration and motivation.
He continued by adding: That appears to be what is
happening in T&T. I am intrinsically motivated, but at
some point, I want to see some fruits and based on my desire
and capabilities, get some more.
This reader is no Oliver Twist, asking for more, but a brilliant
mind, who shifts todays column to a whole new level.
Today we will talk about capital flight.
Capital flight is the tendency for financial capital as
well as human capital, of the finest quality, to take flight
away from a developing country, in search of greater/higher
rates of return, more equitable intrinsic rewards, and higher
standards of living.
This is what happens when money accumulated through savings
and deep motivation is invested elsewhere, because of a lack
of adequate opportunity here.
It also encompasses the flight of quality human resources,
when the environment is stagnant and/or corrupt. One of our
local, capital market experts refers to this is phenomena
as a flight of quality.
You see, the globalisation model is fed by capital mobility.
In fact, free and open financial market mobility, and the
free trade agenda, imply just that. Capital will flow in the
direction of highest reward.
The reciprocal is also true, capital investments can flow
into the local economy, can be large, create employment, stimulate
investment, and lead to a value increase in local currency.
There is one significant experience of note in the free
movement of financial capital. It developed in Asia in the
years preceding 1997, and manifested in what was referred
to as a capital market overshoot.
The inflows had spurred employment and returns that resulted
in over investment. Then there was a rapid liquidation of
assets, by foreign investors, and stock markets crashed. The
Korean won, the Thai baht, and the Indonesian rupiah, lost
value rapidly, and major recession hit.
Which brings us to the question of structuring the economy.
The failure in the Asian crisis was a lack of monitoring,
and controls, which is in essence a failure of astute leadership,
that closely impacts upon financial /monetary affairs.
One of the recommendations in business literature is that
developing countries isolate themselves from international
This has not been adopted by any country; in fact, it is
not something that can be implemented since the typical leadership
in developing countries are so dependant on international
What is now known as the Washington Consensus dictates that
loan dependant states:
1) Implement tax reform to broaden the base, and lower the
2) Endorse a free trade policy for reduced tariffs;
3) Remain open to foreign investment;
4) Prioritise public expenditure in health and education;
5) Allow the currency to float freely.
Since all these measures are somehow meticulously demonstrated
in our recent budget, what can we expect about the future
value of our dollar, and our ability to form capital?
It seems my reader is right, we are pushed or pulled by
what our leadership dictates, and that brings us back to those
nagging thoughts about attribution, feelings of inequity,
One thing is for sure, we are all deeply loyal and committed
to building our country, but true quality just doesnt
breathe in crap!