It is important to be clear about the precise source of the pressure upon countries like India to "globalise". The most remarkable aspect of the contemporary international economic scene is the great fluidity of finance capital. This does not mean that investors are simply pushing funds around, different groups in different directions, without any systematic implications. No doubt there is considerable flow of "hot money" by private speculators, including nationals of the Third World countries. But the shifting of funds by private speculators too is triggered off by the behaviour of multinational banks, whose estimates of the creditworthiness of particular countries acts as an important signal to the private speculators. There is in other words a method in the speculative madness: the attitudes of the multinational banks, at least as far as the Third World countries are concerned, have a sort of "multiplier" effect upon those of private speculators including their own nationals. The upshot of the fluidity of finance capital therefore is that a few multinational banks in effect decide, not of course by any design, the pattern of distribution of international finance across countries. In short an implicit international mechanism has been created which can potentially suck out, and often actually does suck out, finance from particular countries for investment elsewhere if certain circumstances obtain in those countries.
 
These circumstances which as a rule do obtain in most Third World countries are: balance of payments difficulties, domestic social or political turmoil, incurring the displeasure of powerful capitalist countries etc. The potential damage inflicted by the emergence of such circumstances in other words cannot be "contained"; the State cannot undertake particular countermeasures of a "trouble shooting" kind within an overall economic regime of an interventionist variety. It is forced to tailor the economic regime in a bid to prevent the sucking out of finance capital, including by its own nationals. As a matter of fact, the complete collapse of State interventionism of any kind in the former Soviet Union (and hence by implication the complete collapse of the Soviet economy), i.e. the fact that while dismantling the structures of the old "command economy" the Soviet Union could not stabilise itself with some sort of a social democratic regime as many early reformers (including perhaps Gorbachev) had hoped is a reflection precisely of this phenomenon: the Soviet nationals themselves, including those in charge of State enterprises siphoned funds out of the Soviet Union (through for instance large-scale non-repatriation of exchange earnings) which subverted any autonomy in the choice of the economic regime.
 
It is obvious that any autonomy in the choice of economic policies or of the overall economic regime is threatened by this fluidity of finance capital. The basic presumption underlying the activities of an interventionist State is that there are certain socio-economic goals whose fulfilment requires purposive action. This presupposes that there is a "controlled area", i.e. that the domain over which such action is undertaken is to an extent insulated from the effects of simultaneous actions by other powerful agencies. The fluidity of capital, and its proneness to being sucked out of the economy in accordance with the mood in international financial markets tends to destroy the possibility of having such a "controlled area" and hence subvert any meaningful State intervention. There can scarcely be much scope for autonomous State action if finance is being sucked out of the country; and if this sucking out is a response to the very existence of an interventionist regime whose exercise of controls irks international finance, then the untenability of such a regime is even greater. It is unrealistic to believe that State controls, especially exchange controls, can entirely prevent the outflow of capital; as long as the ex-ante tendency for such an outflow exists, there would be an actual outflow despite controls (except in very special kinds of command regimes), not as large of course as would occur without controls, but large enough to make the regime untenable over time.
 
We have here indeed a curious example of self-fulfilling desire. Control regimes interfere with the freedom of financial flows, and hence are not to the liking of international finance. This very fact by encouraging surreptitious outflows of finance undermines as we have seen the tenability of control regimes. And then this is used to mount pressures against such regimes that they "do not work" and should be scrapped, pressures that have been quite successful of late. The theme of the conflict between multinational capital and the nation-State is an old one; in the sixties however in the writings of many authors like Dumont and others the preoccupation was with the conflict between multinational corporations and the nation-State. Today the far more significant aspect of this conflict has to be located in the sphere of finance, where the inability of the nation-State to act in defence of its autonomy derives in large measure from the fact that the antagonist is an intangible entity and includes many of the country's own nationals who are not motivated by any malevolence but are merely responding to the dictates of capitalist decision making.
 
Now, two broad kinds of strategy have been adopted by the Third World countries in the face of this tremendous international fluidity of capital. The first is the strategy favoured by, and imposed by, the Fund and the Bank upon a host of them. The basic presumption behind this strategy is that if these countries removed the control regime, dismantled State ownership wherever possible, gave full freedom to capital, including in particular international capital, to operate in the domestic economy, and undertook sufficient devaluation-cum-deflationary measures, then they would be able to attract international finance in adequate quantities to overcome foreign exchange worries, become internationally competitive, through the entry inter alia of direct foreign investment, in several spheres to be able to achieve high rates of export growth, and attain a greater degree of overall economic dynamism through more efficient resource use. In short, the way to prevent finance being sucked out of the economy, and to encourage the inflow of finance is to move towards a free-trade, free-market regime with minimal State intervention.
 
The problems with this strategy have been discussed above The basic balance of payments problems persist, and get accentuated as the debt-service obligations on the loans incurred in the initial phase of import liberalisation begin to pile up. This sets up expectations of exchange rate depreciation, as a result of which the sucking out of finance continues, with no amount of actual depreciation succeeding in curbing "bullish" expectations regarding foreign exchange price. At the same time the actual depreciation keeps imparting inflationary impulses into the economy which necessarily affect the living conditions of the poor who are already hit by the deflationary measures (causing unemployment) and the withdrawal of whatever fiscal subsidies used to come their way. Unemployment and economic hardships result in large-scale "criminalisation" in society, a tendency towards authoritarian forms of government, and an atmosphere of civil strife in which the much-hoped-for inflow of direct foreign investment, which could conceivably have promoted exports and turned the economy around, does not take place. The country in other words gets caught in a vicious circle of economic and social retrogression.
 
The case of Latin America, and, of late, Eastern Europe so clearly illustrates the above denouement that one would have thought any further argument on this score to be unnecessary. But the proponents of this strategy invariably attribute its failure either to the viciousness of the pre-liberalisation regime, or to the insufficiency of liberalisation, or to the brevity of time over which the strategy has been in place, all of which makes the belief in its efficacy a matter of "faith" (almost of a religious kind) rather than a testable proposition. But even those who have this faith would be hard put to argue that in the current situation of recession into which the advanced capitalist world is rapidly sinking, a strategy of integration with the global economy can hold out much hope for the Third World, no matter how good this strategy might have been under other circumstances.