Equilibrium and growth in the world economy / by Ragnar Nurkse : edited by and Robert M. Stern

The theory of capital movements has not been treated sys tematically, so far, in the literature of economics. The reason for this neglect may well be found largely in the fact that the classical doctrine of international trade, the theory of compara tive costs, rests on the fundamental assumption that while the factors of production, labor and capital, are freely mobile inside a given country, they are lacking external freedom of mobility.¹ This basic premise of the international immobility of capital seems to have prevented the possibility of a theoretical approach to capital movements, at least from the standpoint of inter national trade theory. It is significant that whenever the so called problem of transfers comes up in the orthodox theory of international trade, the discussion is always concerned with indemnity payments between governments and matters of this kind, never with spontaneous, economic money transfers, i.e., with capital movements in the strict sense.