Austerity Breeds Financial Protectionism: How Welfare Shapes Capital Controls
Our research reveals that a country's financial openness depends on who its welfare state protects. Nations investing in workers maintain open borders, while those focusing on pensions enforce strict capital controls. Broad social coverage acts as a buffer against global finance shocks, whereas narrow protection forces governments to restrict money flows to ensure stability.
Where redistribution runs vertically and broadly, the welfare state absorbs global finance shocks. Where it runs horizontally, governments buy stability at the financial border.
- bebe839494
Saying country like Norway has open economy without capital controls is just not true.
Try to leave that welfare paradise, you are still on hook as tax resident for extra three years after leaving!
- alephnerd
> Where redistribution runs vertically and broadly, the welfare state absorbs global finance shocks...
If this was true, then the Eurozone crisis would not have been as severe as it was in Portugal, Spain, Italy, Greece, and France - all countries with broad and large social assistance programs.
---
Also, the HN title is editorialized, the correct title is "Who the welfare state protects shapes a country’s financial openness"
- baggy_trough
Where is the supposed austerity?
- ck2
in the US it protects the corporations so they don't have to pay a living wage
* https://www.washingtonpost.com/business/2026/07/22/amazon-gi...
- johnvanommen
> “The pattern invites us to read welfare as macroprudential policy, part of the toolkit that keeps financial openness politically survivable. Where redistribution runs vertically and broadly, the welfare state itself absorbs the shocks of global finance. Where it runs horizontally, protecting established insiders while the rest carry the risk, governments buy stability at the financial border instead. Capital controls work as a cheap, imperfect substitute for redistribution. They calm an exposed society without asking anyone at the top to pay.”
Their analysis will yield false conclusions because they’re completely ignoring a number of variables.
For instance, the USSR had capital controls for financial and political reasons. The article assumes that politics plays no role, only finance.
Wall Street influences US financial policy, but so does politics.
The laziness of this research is shocking, so I looked up the author. He’s an author for the Communist blog “Jacobin.”
Why is this on Hacker News?
This paper is flimsy propaganda.