Wednesday's events in Brazil seem to be an illustration of the situation Chomsky described in an interview last spring; it's published in the current *Le Monde diplomatique* <http://www.monde- diplomatique.fr/inside/1999/01/12chomsky.html>:
`Liberalizing the movements of capital worldwide has proved a powerful weapon against democracy and the social contract, much as was anticipated by the framers of the (Bretton Woods) international economic order in the 1940s. Unregulated capital flow can be used very effectively to undermine attempts by individual governments to introduce progressive measures. For instance, any country trying to stimulate its economy or increase its health spending is likely to find this deviant behavior instantly punished by a flight of capital.
`This capital mobility since the Bretton Woods system was essentially dismantled from the early 1970s has led to what some economists have called a "Virtual Senate" of financial capital that is able to decide social and economic policy just because they can shift funds around. The volume of transactions on world finance markets has grown to the point where it is now estimated in the range of $1,500 billion a day. It has also changed in character: whereas 30 years ago about 90% of foreign exchange transactions was related to the real economy (trade and long term investment), by now well over 90% of a vastly greater sum consists of short-term flows, about 80% less than a week in duration, often much shorter, speculating against currencies or exchange rate fluctuations. Markets have become increasingly volatile and less and less predictable and financial crises are occurring with increasing regularity.
`... It was not until the 1970s and 1980s that major economies abandoned capital controls. South Korea was compelled to drop them in the early 1990s, widely regarded as a factor in the current crisis. Some countries Chile, for example - still impose controls to penalize short-term investment.
`The Tobin tax has been on the agenda for nearly a quarter of a century now, but the world's major financial institutions simply don't want the Tobin tax and other such ideas to be considered. They have profited enormously from the recent arrangements - even if it means a slowdown in the real economy and major crises. Though they are potential beneficiaries of such a measure, manufacturers and industrialists have also generally opposed it. Presumably they are not unhappy about the way in which financial liberalization counteracts social policies and exercises a downward pressure on labor costs....'
--C. G. Estabrook