Global finance 427 The relationship between international capital mobility and national policies is a prominent example of the much-discussed impact of external conditions on domestic politics.?Elucidating this specific relationship thus also serves the broader purpose of clarifying the domestic effects of international trends.The article,then,both develops an integrated approach to the politics of interna- tional capital movements and addresses more general conceptual issues about the interaction of the domestic and international political economies.In so doing,it presents a summary and empirical illustrations not only of the direct impact of international capital mobility on the effectiveness of national economic policy but also of the distributional effects of capital mobility on the social groups whose demands themselves affect national economic policy. Capital mobility and national economic policies It would be foolish to inquire about the effects of integrated international capital markets on interest group competition over national economic policy if such policy could not be implemiented in a financially integrated world or if contemporary international capital markets were not in fact highly integrated. The initial question therefore concerns the degree to which national economic policy autonomy is compromised by existing levels of international capital mobility. The events of the 1970s and the 1980s have led many to conclude that capital mobility severely limits or contravenes national policy.Between 1978 and 1982, for example,private financial inflows swamped Chile's conservative policies even as private financial outflows thwarted Mexico's free-spending policies.In mid-1981,the economic expansion attempted by the new French Socialist government rapidly confronted a large capital outflow and a run on the franc, leading to a reversal of the policies soon after their adoption.3 Parallel stories about government efforts hampered by capital and currency movements could be told about many other developing and developed countries in the past two decades.Some observers have drawn dire conclusions,such as that of John Freeman,who observed that in the context of the globalization of finance "the nation state has become at best immobilized and at worst obsolete."4 2.The two quintessential works on this subject are Peter Gourevitch's Politics in Hard Times: Comparative Responses to Intemational Economic Crises (Ithaca,N.Y.:Cornell University Press, 1986)and Ronald Rogowski's Commerce and Coalitions:How Trade Affects Domestic Political Alignments(Princeton,N.J.:Princeton University Press,1989). 3.Jeffrey Sachs and Charles Wyplosz,"The Economic Consequences of President Mitterand," Economic Policy 2(April 1986),pp.262-322. 4.See John Freeman,"Banking on Democracy?International Finance and the Possibilities for Popular Sovereignty,"mimeograph,University of Minnesota,1990.From a politically different quarter,former Citibank chief executive officer Walter Wriston has said similar things about the impact of financial internationalization-but approvingly:"It's a new world and the concept of sovereignty is going to change....The idea of fifteenth-century international law is gone.It hasn't laid down yet,but it's dead.It's like the three-mile limit in a world of Inter-Continental BallisticGlobal finance 427 The relationship between international capital mobility and national policies is a prominent example of the much-discussed impact of external conditions on domestic politic^.^ Elucidating this specific relationship thus also serves the broader purpose of clarifying the domestic effects of international trends. The article, then, both develops an integrated approach to the politics of interna￾tional capital movements and addresses more general conceptual issues about the interaction of the domestic and international political economies. In so doing, it presents a summary and empirical illustrations not only of the direct impact of international capital mobility on the effectiveness of national economic policy but also of the distributional effects of capital mobility on the social groups whose demands themselves affect national economic policy. Capital mobility and national economic policies It would be foolish to inquire about the effects of integrated international capital markets on interest group competition over national economic policy if such policy could not be implem'ented in a financially integrated world or if contemporary international capital markets were not in fact highly integrated. The initial question therefore concerns the degree to which national economic policy autonomy is compromised by existing levels of international capital mobility. The events of the 1970s and the 1980s have led many to conclude that capital mobility severely limits or contravenes national policy. Between 1978 and 1982, for example, private financial inflows swamped Chile's conservative policies even as private financial outflows thwarted Mexico's free-spending policies. In mid-1981, the economic expansion attempted by the new French Socialist government rapidly confronted a large capital outflow and a run on the franc, leading to a reversal of the policies soon after their adoptiom3 Parallel stories about government efforts hampered by capital and currency movements could be told about many other developing and developed countries in the past two decades. Some observers have drawn dire conclusions, such as that of John Freeman, who observed that in the context of the globalization of finance "the nation state has become at best immobilized and at worst ob~olete."~ 2. The two quintessential works on this subject are Peter Gourevitch's Politics in Hard Times: Comparative Responses to International Economic Crises (Ithaca, N.Y.: Cornell University Press, 1986) and Ronald Rogowski's Commerce and Coalitions: How Trade Affects Domestic Political Alignments (Princeton, N.J.: Princeton University Press, 1989). 3. Jeffrey Sachs and Charles Wyplosz, "The Economic Consequences of President Mitterand," Economic Policy 2 (April 1986), pp. 262-322. 4. See John Freeman, "Banking on Democracy? International Finance and the Possibilities for Popular Sovereignty," mimeograph, University of Minnesota, 1990. From a politically different quarter, former Citibank chief executive officer Walter Wriston has said similar things about the impact of financial internationalization-but approvingly: "It's a new world and the concept of sovereignty is going to change. . . . The idea of fifteenth-century international law is gone. It hasn't laid down yet, but it's dead. It's like the three-mile limit in a world of Inter-Continental Ballistic