BPEA | Spring 2007

Foreign Capital and Economic Growth

Raghuram G. Rajan,
Raghuram G. Rajan University of Chicago
Eswar Prasad, and Arvind Subramanian
Arvind Subramanian
Arvind Subramanian Senior Fellow in International and Public Affairs - Watson Institute for International and Public Affairs, Brown University
discussants: Peter Blair Henry and
Peter Blair Henry Former Brookings Expert
Susan M. Collins
headshot of Susan Collins
Susan M. Collins President - Federal Reserve Bank of Boston, Former Nonresident Senior Fellow - Economic Studies

Spring 2007

IN ONE OF HIS most memorable and widely quoted passages, John Maynard
Keynes extolled the virtues not only of trade integration but also of financial
integration when he wrote, in 1920, of the fabled Englishman who could
“adventure his wealth in . . . new enterprises of any quarter of the world,
and share, without exertion or even trouble, in their prospective fruits and
advantages.”1 Consistency was, of course, not a Keynesian virtue, and in
1933, in one of his less quoted passages, Keynes’s musings on globalization
turned more melancholy, even skeptical: “I sympathize with those who
would minimize, rather than with those who would maximize, economic
entanglement among nations. Ideas, knowledge, science, hospitality,
travel—these are the things which should of their nature be international.
But let goods be homespun whenever it is reasonably and conveniently possible.
. . .” He reserved his deepest skepticism for financial globalization,
warning, “and, above all, let finance be primarily national.”