Exchange Control Leads to State Socialism Because the Authorities Must Agree to Every Single Foreign Transaction

In the present context I want to emphasize not so much the administrative complexity of the system, its obvious interference with economic internationalism, and the more or less considerable degree of expropriation to which it gives rise, as the degree of government control that it involves. In the end, every single foreign transaction made by the nationals of the country, and every single transaction, whether foreign or domestic, made by a foreigner must be agreed to by the authorities. And, since the system can only be worked if no "leakages" are allowed to happen, the policing must be excellently organized and penalties must be severe enough to act as an efficient deterrent. One may find that capital punishment is a rather exaggerated penalty for an offence in the field of foreign exchange dealings; fierce though it is, it is quite in keeping with the internal logic of the system. It is difficult to escape the impression that exchange control, if allowed to develop indefinitely in the direction in which its "logic" carries it, must involve a transition from a liberal to an authoritarian form of political organization within the country which practises that system. Ultimately, exchange control leads to State Socialism.

--Michael A. Heilperin, International Monetary Economics (London: Longmans, Green and Co., 1939), 242.