Control That Capital

It is time for the IMF and the United States to fully support capital controls, an easy way to help ease crises in developing economies.

In a new study, staff members of the International Monetary Fund (IMF) endorse an idea to help mitigate the impact of economic crises in developing countries: capital controls. Before the 1997 Asian economic crisis, IMF staff thought controls -- really a macroeconomic policy to smooth the amount of money coming into and leaving an economy -- should be banned. Now, and particularly since the Great Recession, the IMF has changed its tune. Capital controls are a good idea -- and now is the time for the IMF and the United States to back them.

Capital flows -- basically, investment from one country into another -- can help developing countries grow. Many developing economies lack the savings and financial institutions to help finance and kick-start business activity. Money and investment from abroad can help fill that gap.

The more capital coming in, the more the developing country benefits, one would think. But it is a bit more complicated than that. Cross-border capital flows tend to be "pro-cyclical": too much money comes in when times are good, and too much money evaporates during a downturn. In the run-up to the 2007-2008 crisis, for instance, wealthy countries poured too much money, too fast, into developing economies. This led to asset bubbles in real estate and stock prices, as well as currency appreciation. When the crisis hit, investors yanked their funds and retreated to the "safe" haven of the United States.

Capital controls help smooth the inflows and outflows of capital and protect developing economies. Most controls target highly short-term capital flows, usually conducted for speculation rather than longer-term investment. For instance, before the crisis hit, Colombia required that a certain percentage of short-term capital be parked in the central bank for a year. And last November, Brazil put a 2 percent tax on speculative inflows.

The new IMF study finds that such capital controls helped buffer against some of the worst effects of the financial crisis in some developing countries, such as Colombia, Brazil, India, Thailand, and China. It thus endorses capital controls as part of the macroeconomic policy tool kit.

This is a sea change. For decades, the IMF (and the U.S. Treasury) had advocated for the free flow of money and capital to and from countries, regardless of their level of development, without restriction. But now, many economists view the premature lifting of regulations on capital flows in Asia as one of the problems that triggered the Asian financial crisis in 1997, as well as why much of Central and Eastern Europe have been so hurt by the current crisis. These events have led to a slow but diligent rethinking of the role of capital controls within the economics profession in general and the IMF in particular. The IMF study is a result of that rethinking.

This new consensus has come just in time. As higher-income countries have maintained low interest rates, capital is rapidly leaving for developing countries offering better rates of return. Countries like Brazil and China are now concerned about bubbles. Capital controls can play a role in helping them maintain financial stability.

But getting the economics right is only half the battle. Two things must happen to fully take advantage of the new consensus. First, the IMF has to practice what it preaches. It is one thing to have research staff discover that capital controls work. It is another to have IMF country programs advocate for capital controls. The IMF should also play a role in designing effective controls, which investors often figure out how to evade. Bolstering regulators and watchdogs is necessary.

Second, the United States must follow suit. Since 2003, U.S. trade and investment treaties have outlawed capital controls by developing-country trading partners by mandating the free flow of capital to and from a country, regardless of its level of development -- for instance, in trade deals with Chile, Peru, and Singapore. (In Singapore's and Chile's cases, the countries protested the capital-control bans, but ultimately agreed to the treaties.) Pending deals with Colombia and South Korea would also ban capital controls. Other higher-income countries and trade partners -- such as Canada, Japan, and the European Union -- grant countries the right to use the macroeconomic tool, or at least grant exemptions to prevent or mitigate crises.

The good news is that the United States is renegotiating a number of trade agreements in the process of passing them through Congress and as part of a new Trans-Pacific Partnership trade agreement. Washington should correct these agreements and allow for at least the temporary use of capital controls to prevent and mitigate financial crises.

The world has just learned the hard way that a crisis, no matter where it starts, can hurt everyone across the globe. To prevent another crisis, the United States and the IMF should ensure capital controls are part of every developing economy's tool kit.



The Top Chef for India's Real Housewives

The man behind India's proposed new 24-hour food channel isn't quite the Westernized culinary rebel some might think. 

Every Sunday morning, tens of millions of Indian housewives sit down with their notebooks in front of the TV for an hour with India's first and most famous celebrity chef, Sanjeev Kapoor. Like America's version, Rachael Ray, Kapoor has a baby face and an easy presence in front of the camera (he has been called the "Rachael Ray of India" and has made a guest appearance on her show). Also like her, he has built himself into a veritable brand empire by making food accessible and family-oriented. Kapoor's show, Khana Khazana ("Food Treasure"), has been on the air for 12 years, making it the longest-running TV program in any category on any Indian channel ever. His website gets 5 million pageviews a month and his first book, published in the 1990s, sold 5 million copies in more than half a dozen Indian languages. Later this spring, Kapoor is set to usher India into the realm of 24-hour lifestyle programming when he launches his own food channel on Indian cable.

Many see Kapoor as a symbol of India's move to a more globalized style of cuisine: Along with chapatis and daal, Kapoor ladles up American-style healthy meals like whole wheat pasta with burned garlic. But the truth isn't quite that simple. Kapoor may represent a revolution in Indian food, but in some crucial ways, the transformation is actually quite traditional.

There's no doubt that Kapoor is heralding some major changes in the way India cooks and eats. In India, cuisine has long been defined by regional, religious, and caste specificity. Although the country is dramatically heterogeneous, most families tend to stick to their own regional specialties. Recipes have been passed down through generations of women and rarely transcribed into books. Kapoor's upbringing was different, though, giving him a more diverse food exposure than most Indians get. His father was a banker who was frequently transferred around the country, and though his mother is Punjabi and cooked North Indian food, they had a South Indian cook who often made her own cuisine for the family. Today, many more Indians are interested in approximating Kapoor's experience of cuisine.

"The new India is changing so fast that I have trouble keeping up with what today's audiences want to eat," Kapoor says. "I know that they want to cook much more than what their families cooked. They want to try international cuisines, at restaurants and also at home. They want to spend less time on it, make foods in a microwave." features sections like "World recipes," "Cuisine of the month," and "Healthy recipes." On the show, Kapoor makes non-Indian food like muffins and chocolate mousse look easy, as he whips them up in his flashy TV kitchen that features the kind of stainless steel electronics that few Indians actually have access to.

He was also India's first visible male chef in a country where women almost always do the cooking at home, and he started a trend that other professional cooks have followed. By becoming the most famous face of cooking in India, Kapoor has helped improve its reputation as undervalued woman's work. Kapoor says that back in 1992 and 1993, advertisers were skeptical about the notion that a male chef could succeed. By now, Kapoor has amply demonstrated that his gender needn't work against him when it comes to attaining credibility in the kitchen. These days he even brings male guests onto the show to demonstrate to them the finer art of rolling chapatis. In fact, some 45 percent of visitors to Kapoor's website are male -- though that says less about how India is changing than it appears to. Many of them are Indian men living overseas, who are more likely to be socially progressive about domestic matters than Indians in India. Women remain solely responsible for the bulk of the housework in the vast majority of families.


Kapoor isn't trying to rock the boat. When it comes down to it, his show is pretty conventional -- even a bit retrograde. The flip side of India's move toward cuisine modernization is, as has happened in the United States, a move out of kitchens and into fast-food restaurants. As luxuries like air conditioners and computers become accessible to increasing numbers of people in India's fast-growing economy, and as more Indians upgrade from scooters to cars, many seek to expand their horizons in the culinary realm too. Globalization is washing out regional and religious traditions to a paler color. To India's aspirational classes, eating at American chains like McDonald's or Domino's feels like evidence of economic mobility. Kapoor's approach, by contrast, is straightforward low-brow cookery, targeted directly at his Sunday morning "saas-bahu audiences," the mother- and daughter-in-law viewers who do the cooking for the traditional extended family households.

"Kapoor is small-town India's domestic god," says Sourish Bhattacharyya, a food columnist and executive editor of India's Mail Today newspaper. "He's adored because he's more Betty Crocker than Nigella Lawson. He has none of the foul-mouthed rakishness of a Gordon Ramsay, for instance. Ramsay would never be popular here. Indian women love Kapoor because he comes across as a good boy." 

Unlike more highfalutin counterparts in the West, Kapoor doesn't bring his viewers along with him to high-end restaurants, travel the world in search of exotic foods, or hold reality TV cooking contests; what he does is walk his audiences step by step through the home-cooked meals that most Indian women make two to three times a day for large extended families. It goes without saying that all his dishes are budget-conscious and made with ingredients easily found in stores outside big cities like New Delhi and Mumbai; that's what he's built his brand on. Kapoor broadcasts not in English -- the language of the courts, the stock exchange, and the upwardly mobile -- but in Hindi, India's most commonly spoken tongue.

The pasta recipes are Western window-dressing on what is, for the most part, a very thoroughly Indian menu. In a culture as ancient and conservative as India's, many things are immutable, and one of them is the belief among many Indians that a meal is not complete if it doesn't involve either rice or chapatis. The top 10 recipes on Kapoor's site are for traditional dishes like Punjabi butter chicken, which is as high in cholesterol and fat as it sounds like it would be. Kapoor's signature dish is a spicy Indian one, shaam savera (spinach and cottage cheese dumplings in tomato gravy). He delights in teaching his audience how to cook Indian street food like pav bhaji, a famous dish sold by Mumbai street vendors that is sort of like a spicy sloppy joe and not exactly low calorie.

Kapoor says that his new food channel will represent a greater overhaul of Kapoor's traditionalist approach. The venture is meant to feature not just his time-tested cooking show, but also travel, restaurants, and yes, reality shows, which are huge in India these days. He plans to run some international programming, too. But Bhattacharyya, like many, is skeptical about the project's feasibility. America's Food Network, he says, was trying to work out a way to come to India, but hasn't yet jumped -- which might be because the network isn't yet convinced that 24-hour food-related programming can succeed in a country where the average per capita income is still only $1,000. It doesn't help that ad revenue for Indian TV programming fell sharply last year with the recession. Kapoor's channel will also have to go up against more than 300 other options available on Indian TV.

It may be that an American-style lifestyle channel, whether the Food Network or Kapoor's approximation of it, just isn't what India wants right now. There seems little doubt, though, that India does want Sanjeev Kapoor's show. Perhaps this is the recipe for the India of today: comfortably conservative with a veneer of modernism. Kapoor manages to be exactly of his time.

Courtesy Sanjeev Kapoor