William F. Mabe, Jr.
Capital Mobility and Insider Trading Laws
August 2003
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Globalization pundits are confident of the answers to two key questions in the
globalization debate. When asked, “what are the policy preferences of the capital class?”,
they reply, “anything neoliberal.” In response to the question of how a global economy
affects the ability of capital to persuade governments to adopt its preferred public
policies, conventional wisdom asserts that globalization makes capital significantly more
powerful and much better able to translate its preferences into policy.
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Of course, these
popular writings on globalization neither derive capital’s preferences deductively nor
attempt to verify the accuracy of their answers by testing them empirically.
In contrast to the less rigorous approach of popular authors, much of the academic
literature on globalization, indeed some of the most fruitful research on globalization,
derives capital’s preferences deductively (by issue area) and examines the circumstances
and institutional settings under which globalization empowers capital. Whereas popular
accounts of globalization would expect capital to always exit states with higher rates of
taxation and spending, Garrett (1998) questions whether this argument accurately
characterizes capital’s preferences. He notes that large public economies supported by
taxation and spending may provide the types of collective goods that facilitate business
productivity and competitiveness. Identifying the positive effects of taxation and
spending for firms, Garrett observes that capital’s preference for taxation and spending
are more complex than simple opposition; in some circumstances capital may benefit
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A couple of examples. Alan Tonelson: “As precious investment capital becomes free to roam the world
in search of the lowest costs, the greatest efficiencies, and the highest rates of return, governments
everywhere will feel powerful pressure to lure that capital by offering the cheapest workers and the weakest
regulations protecting health, safety, and the environment.” Thomas Friedman: “global markets are made
up of millions of investors moving money around the world with the click of a mouse. I call them ‘the
Electronic Herd’ and this herd gathers in key global financial centers, such as Wall Street, Hong Kong,
London and Frankfurt, which I call ‘the Supermarkets.’ The attitudes and actions of the Electronic Herd
and the Supermarkets can have a huge impact on nation-states today, even to the point of triggering the
downfall of governments.
Convention