Capital Flight

Paul A. Swanson

The phenomenon of capital flight refers to the movement of money—as capital—across national boundaries. This can be money leaving one country to be invested in financial assets in another country, or it can be foreign direct investment, whereby a company invests directly into a foreign country's domestic structures, equipment, and organizations (nonfinancial assets). What makes capital movement “flight” is either the magnitude of the movement or the reason for the movement; that is, that the capital is “fleeing” something. However, no consensus exists on either what this magnitude or these reasons must be for capital movements to constitute flight. Thus, in general, any cross-national movement of capital may be considered capital flight. When capital moves between countries, opposite economic impacts occur in the two affected countries. There are primarily positive effects for the country that is receiving the invested capital. For them, money is pouring into their economy, pumping it ...

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