If borders were closed to the flow of capital, interest rates would adjust to equilibrate domestic saving and investment, but some investment opportunities, which might be attractive by international standards, might go unfunded while less attractive domestic opportunities would be funded.
With the free flow of capital, countries that have a greater pool of highly productive investment opportunities will benefit from the inflow of capital and those that export capital can put their savings to better, more rewarding use. This presumes the institutional underpinnings outlined above. Protectionist impulses for measures that impede the flow of goods, services and managerial knowhow must also be avoided.