Wealth inequality and the balance of payments constraint in the Global South

This chapter builds on Robert Blecker's pathbreaking, decades-long contributions (Blecker 1989, 1998, 2013; Blecker and Razmi, 2008) which incorporate, among many other contributions, capital flows to the balance of payments constrained growth literature. We link this to the literature on wealth inequality, which is so far deficient with regard to foreign asset ownership by the Global South. Using empirical evidence from wealth surveys in selected Global South countries as well as macroeconomic data, we argue that the wealthiest groups in the Global South are likely the primary holders of international financial and investment assets, and capital flight by elites will be predominant in these countries. This tightens the balance of payments constraint both directly and through differential returns of the Global South and North. This supports Robert Blecker's argument that we need to consider how Global South economies' subordinate monetary and financial integration interacts with its balance of payments constraint stemming from current account dynamics.