Dani Rodrik and Arvind Subramanian writing here eloquently for the free movement of global capital..
In the wake of the sub-prime financial crisis, the claims that recent financial engineering has generated large gains are sounding less plausible, and it is becoming clear that domestic finance will come under closer scrutiny. On the international front, even leaving financial crises aside, it seems increasingly clear that the benefits of financial globalization are hard to find. Financial globalization has not generated increased investment or higher growth in emerging markets. Countries that have grown most rapidly have been those that rely less on capital inflows. Financial globalization has not led to better smoothing of consumption or reduced volatility. If you want to make an evidence-based case for financial globalization today, you are forced to resort to fairly indirect, speculative, and, in our view, ultimately unpersuasive, arguments.
It is time for a new paradigm on financial globalization, and one that recognizes that more is not necessarily better. As long as the world economy remains politically divided among different sovereign and regulatory authorities, global finance is condemned to suffer from deformations far worse than those of domestic finance. Depending on context and country, the appropriate role of policy will be as often to stem the tide of capital flows as to encourage them. Policymakers who view their challenges exclusively from the latter perspective will get it badly wrong.