When you build a dam without an outlet for the reservoir to pass through, the water will find a way to break it eventually. As its flow is driven by the forces of nature, water must be allowed to flow freely from the river to the sea. It’s one of many natural processes that benefit mankind by providing more water to other areas.
In a way, international capital also works the same way; it needs to be free. Over the years, a lot of business experts endorse liberalization of the capital international fund. It means making funds flow for equal distribution. Hogging the money all to yourself is never a good idea, especially if a potential for investment has your name written all over it. The flow of money from the rich to the poor means liberalization is making sure everyone gets a fair share.
It’s not very difficult to understand liberalization of capital flow; the simple act of buying a can of Pepsi from the convenience store is a basic example. The dollar you paid to buy a can of soda breaks into several portions and goes to the groups involved in its production. Part of it goes to the salary of the workers, operation costs, and the Pepsi CEO’s profit bank.
You should also know that Pepsi operates on the world stage, so it has to invest where it has a market. Part of the capital gains will have to flow into the brand’s branches around the world to help sustain operations and meet constant demand. The branches get their fair share from the main body, a way of saying they’re benefitting from the success of the product as a whole.
With liberalization, the flow of capital helps companies gain access to resources and additional capital; it’s a cycle. Should that cycle be interrupted by restricting the release of funds, even the biggest conglomerate cannot hope to keep producing its goods and services for a long period. Management of international capital must treat liberalization as a top priority manner. Liberalization has its own set of risks, but the world economy is at stake.
Visit IMF.org for more information about liberalization of capital fund flow. Likewise, you can ask a financial expert in your area.
Liberalization of Capital International Fund Explained