Air Force One

Now thats flying in style

Definition: The flow of assets or money out of country. This is often due to some event that causes investors to move from one investment to another in search of greater stability or increased returns.

This is an international barrier to develpment because when the foreign investment is taken away, the investment in the country decreases This hurts the country because investment is a very important part of development. The Country is less developed because of low investment and this leads to a feed back loop known as the poverty cycle, which is talked about more here. This can be especially crippling because the country often has its capital pulled out when it is at a bad place in stability and economy, further hurting the situation.

Examples: Today, Greece is a good example because of its recent problems with debt. According to this financial times article, Greece has suffered extra (in addition to the debt problems) because investors have pulled money out of Greece (the article states about 4.5 % of all Greek deposits). This is most likely because Greece has been fairly unstable as of late, and while Greece is a fairly developed country, the capital flight will certainly make recovery more difficult.

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