ABSTRACT
Although they were not included in the original policy proposals of the Washington Consensus, opening domestic capital markets to foreign capital inflows and deregulation of domestic capital markets have been crucial elements of structural adjustment policies practiced by Latin American developing countries and as part of the conditionality attached to IMF and World Bank lending programs starting in the 1970s. Support for these measures comes from a straightforward application of the neoclassical approach to efficient distribution of economic resources on a global level. It notes that this position still dominates the thinking of multilateral institutions, despite the fact that it is based on a faulty theoretical justification, as demonstrated by the 1960s Cambridge controversies in the theory of capital.
