The crisis in East Asia has tempered the loud enthusiasm of many economists, magazines and multilateral institutions for unbridled international flows of capital. Since its start some prominent economists and financiers have expressed doubts that market mechanisms, left to themselves, necessarily end with a desirable outcome. Perhaps this is the first step to questioning whether free flows of capital between countries are desirable at all. Oddly enough, despite all that has been written in textbooks and journals extolling international capital flows and all the romanticisation of ‘globalisation’ in television advertisements, there appears to be no systematic examination of the gains and losses to be expected from them. One reason may be that economic theory, as it stands now, is ill suited to carrying out such an examination. International economic theory has two strands, the one to explain how trade in finished products and raw materials is determined by comparative advantages and the other, using quite separate assumptions, to explain the balance of payments. In the former it is assumed that capital flows are negligible, in the latter they do little more than accommodate trade imbalances. Neither address the question of what determines capital movements or what their effects might be.