Capital strike

From Wikipedia, the free encyclopedia
Jump to navigation Jump to search

Capital strike refers to the withholding of new investment in an economy. It arises from the determination that return on investment may be low or nonexistent.

A capital strike can occur when banks decide to raise lending standards or minimum loan requirements to individuals and business entities, and decide to sit on cash reserves, rather than take many loan risks, until a later point in time. Capital strikes may sometimes result when governments pursue policies that investors consider "unfriendly" or "inflexible," such as rent control or nationalization. The term can refer to a capital strike by a single investor[1] or a large group such as those who refused to invest in the United States in 1937.[2][dead link] A capital strike is the premise of Ayn Rand's novel Atlas Shrugged.

In response, governments sometimes act to appease investors; however, governments committed to endogenous development (recently, in Latin America) occasionally refuse to capitulate and instead pursue economic development plans which utilize other resources.


External links[edit]