The fact that it functions as an effective funnel for capital inflows is probably why the West keeps it legal.
If it was instead used to suck wealth out of the US it would be criminalized yesterday.
There was a mirrored double standard with tariffs. The US wanted them eliminated until China started reaching and surpassing technological parity at which point it couldn't put them up fast enough.
> suck wealth out of the US it would be criminalized yesterday.
until the USD is not the dominant reserve, USD themselves is considered wealth. You cannot suck wealth out of an infinite fountain.
So the time when the US gov't would institute such controls would be if China's dominance continues to grow, until chinese currency (whatever it may be - digital or fiat) is the new reserve. Because USD at that time would have become worthless.
I don't see the hypocrisy here? Were western countries ever against capital flight? This is more of a case of "x doesn't affect country, therefore it's not banned" which isn't really hypocrisy.
They actively use IMF as a tool and their own trade policies as avenues to force smaller countries to to remove or not implement capital controls although it's disadvantagious to those respective countries. US has policies in trade regulations that restricts/limits dollar clearing in countries that implement some capital restrictions. Ofcourse US has the right to their own trade policies but asking for countries to do this or that which are against their interests is called hypocrisy.
>but asking for countries to do this or that which are against their interests is called hypocrisy.
No it's not. The definition of "hypocrisy" from wiktionary:
> 1. The contrivance of a false appearance of virtue or goodness, while concealing real character or inclinations, especially with respect to religious and moral beliefs; hence in general sense, dissimulation, pretence, sham.
> 2. The claim or pretense of having beliefs, standards, qualities, behaviours, virtues, motivations, etc. which one does not really have. [from early 13th c.]
> 3. The practice of engaging in the same behaviour or activity for which one criticises another; moral self-contradiction whereby the behavior of one or more people belies their own claimed or implied possession of certain beliefs, standards or virtues.
hypocrisy requires some sort of contradiction between the actions of the entity, and the belief that it espouses. The US urging countries to have free trade, while also having free trade policies isn't hypocritical, even if free trade is against the other countries' interests. On the other hand, the US urging countries to have free trade, while simultaneously implementing anti-free trade policies themselves (eg. tariffs) would be hypocritical.
If it was instead used to suck wealth out of the US it would be criminalized yesterday.
There was a mirrored double standard with tariffs. The US wanted them eliminated until China started reaching and surpassing technological parity at which point it couldn't put them up fast enough.