¹ This estimate comes from the Bank for International Settlements, Financial Times, 14 February 1990.

² Frieden, J., Banking on the World: The Politics of American International Finance (London, 1987), p. 1Google Scholar.

³ On the interwar period, see especially Kindleberger, C., The World in Depression. 1929–39 (Berkeley, 1973)Google Scholar. For other accounts of the hegemonic stability theory, see Krasner, S., ‘State Power and the Structure of International Trade’, World Politics, 28 (1975), pp. 317–347CrossRefGoogle Scholar; Gilpin, R., The Political Economy of International Relations (Princeton, 1987)CrossRefGoogle Scholar; Kindleberger, C., ‘Dominance and Leadership in the International Economy: Exploitation, Free Rides and Public Goods’ International Studies Quarterly, 27 (1981), pp. 5–10CrossRefGoogle Scholar; Kindleberger, C., ‘International Public Goods Without International Government’, American Economic Review, 76 (1986), pp. 1–11Google Scholar. Following Krasner and Gilpin, I have cited the ‘dependent’ variable in hegemonic stability theory as the maintenance of open, liberal economic relations. This differs slightly from Kindleberger's stress on international economic stability, although as we shall see, in the financial case they are closely related. Moreover, the terms ‘leader’ and ‘hegemon’ are used interchangeably in this paper to refer to a state which has overwhelming power capabilities to maintain open and liberal economic relations.

⁴ See, for example, Gilpin, Political Economy, Krasner, ‘State Power’.

⁵ See Hawley, J., Dollars and Borders: US Government Attempts to Restrain Capital Flows 1960–80 (London, 1987)Google Scholar; Conybeare, J., US Foreign Economic Policy and the International Capital Markets: The Case of Capital Export Controls 1963–74 (New York, 1988)Google Scholar.

⁶ See, for example, Hewson, J. and Sakakibara, E., The Eurocurrency Markets and their Implications (Lexington, 1975)Google Scholar; Williamson, J., The Failure of International Monetary Reform 1971–4 (Sunbury-on-Thames, 1977)Google Scholar.

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⁸ Hamilton, A., The Financial Revolution (New York, 1986), p. 204Google Scholar.

⁹ Bryant, R., International Financial Intermediation (Washington, 1987), p. 156Google Scholar.

¹⁰ See, for example, the proposal of Glyn, A., ‘Capital Flight and Exchange Controls’, New Left Review, 155 (1986), pp. 37–49Google Scholar.

¹¹ For the UK episode, see especially Fay, S. and Young, H., The Day the Pound Nearly Died (London, 1978)Google Scholar. For the French episode, see Bauchard, P., La Guerre es Deux Roses (Paris, 1986)Google Scholar.

¹² Callaghan, J., Time and Change (London, 1987), p. 441Google Scholar.

¹³ Benn, T., Against the Tide: Diaries 1973–6 (London, 1989), p. 632Google Scholar; Bauchard, La Guerre, p. 148.

¹⁴ Horsefield, J., The International Monetary Fund 1945–65: Volume 3 (Washington, 1969), pp. 13, 31–2, 66Google Scholar. This proposal was considerably watered down in the final drafts because of opposition from the New York banking community. See Helleiner, E., ‘American Hegemony and Global Economic Structure: From Closed to Open Financial Relations in the Postwar World’, PhD thesis, London School of Economics, 1991, p. 43–53Google Scholar.

¹⁵ For the European and Japanese initiatives, see Vries, M. De, The International Monetary Fund 1972–8, Vol. 1–2 (Washington, 1985), pp. 77, 192–3, 215, 930–1Google Scholar. For the US attitude, see IMF, International Monetary Reform: Documents of the Committee of Twenty (Washington, 1974), pp. 82, 85; Williamson, Failure of World Monetary Reform, pp. 82–3. This episode is recounted in depth in Helleiner, ‘American Hegemony’, ch. 5.

¹⁶ See Dale, R., The Regulation of International Banking (Cambridge, 1984), pp. 25–28Google Scholar; J. Hawley, Dollars and Borders.

¹⁷ Koury, S. and Ghosh, A. (eds.), Recent Developments in International Banking and Finance (Lexington, 1987), p. 1Google Scholar.

¹⁸ Spero, J., The Failure of the Franklin National Bank (New York, 1980), pp. 112–16Google Scholar.

¹⁹ See E. P. Davis, Instability in the Euromarkets and the Economic Theory of Financial Crisis (Bank of England Discussion Paper no. 43, 1989), Appendix 1; B. Riley, ‘Home Looked Safest’, Financial Times, 14 October 1988.

²⁰ Spero, J., ‘Guiding Global Finance’, Foreign Policy, 73 (1989), p. 129Google Scholar.

²¹ See, for example, Kane, E., ‘Competitive Financial Regulation: An International Perspective’, in Portes, R. and Swodoba, A. (eds.), Threats to International Financial Stability (Cambridge, 1987), pp. 141–142Google Scholar. The US, for example, was reported in 1985 to have a proposal to nationalize the top ten banks in the event of crisis (J. Anderson, ‘Fear Not for the Big Banks’, Washington Post, 31 May 1987).

²² See Bryant, International Financial Intermediation, p. 153 for similar view.

²³ E. Baltenberger and J. Dermine, ‘The Role of Public Policy in Ensuring Financial Stability: A Cross Country Comparative Perspective’, in Portes and Swodoba (eds.), Threats, pp. 70–1; Guttentag, J. and Herring, R., The Lender-of-Last-Resort Function in an International Context (Princeton, 1983), pp. 5–6Google Scholar; Goodhart, C., The Evolution of Central Banks (London, 1985)Google Scholar. For a more elaborate thesis concerning why financial systems are prone to crisis, see Minsky, H., The Financial Instability Hypothesis’, in Kindleberger, C. and Laffargue, J. P. (eds.), Financial Crises: Theory, History, Policy (London, 1982)Google Scholar.

²⁴ See, for example, Dale, Regulation; B. Eichengreen and R. Portes, ‘The Anatomy of Financial Crises’, in Portes and Swodoba (eds.), Threats; Guttentag and Herring, The Lender-of-Last-Resort; Kindleberger, C., Manias, Panics and Crashes: A History of Financial Crises (New York, 1978)CrossRefGoogle Scholar; Minsky, ‘The Financial Instability Hypothesis'.

²⁵ Kindleberger, Manias. Panics, p. 4. See also Walter, A., ‘The Role of Hegemony and International Monetary Order,’ PhD thesis, Oxford University, 1988Google Scholar, ch. 1, on this difference between Kindleberger and international relations scholars.

²⁶ For various discussions concerning collective action problems in maintaining global financial stability, see Kindleberger references in fn. 3; Dale, Regulation; Guttentag and Herring, The Lender-of-Last-Resort, pp. 11–16; Kapstein, E., ‘Resolving the Regulator's Dilemma: International Coordination of Banking Regulations’, International Organization, 43 (1989), pp. 323–47; Bryant, International Financial Intermediation, ch. 8; Spero, The Failure of the Franklin, p. 185CrossRefGoogle Scholar; Padoan, P. C., The Political Economy of International Financial Instability (London, 1986)Google Scholar.

²⁷ See especially Gilpin, Political Economy, pp. 307, 329–40; Gilpin, R., ‘Where Does Japan Fit In?’, Millennium: Journal of International Studies, 18 (1989), pp. 329–342CrossRefGoogle Scholar.

²⁸ Strange, S., ‘Finance, Information and Power’, Review of International Studies, 16 (1990), pp. 259–274CrossRefGoogle Scholar.

²⁹ On this point, see also Spindler, A., The Politics of International Credit: Private Finance and Foreign Policy in Germany and Japan (Washington, 1984)Google Scholar.

³⁰ Pauly, L., Regulatory Politics in Japan: The Case of Foreign Banking (Ithaca, 1987), pp. 6–7Google Scholar.

³¹ Helleiner, E., ‘Money and Influence: Japanese Power in the International Monetary and Financial System’, Millennium: Journal of International Studies, 18 (1989), pp. 348–349CrossRefGoogle Scholar.

³² See Helleiner, ‘Money and Influence’, pp. 346–50 for a more in depth discussion.

³³ Strange Casino Capitalism (Oxford, 1986); Strange, ‘Finance, Information and Power'. See also, Frieden, Banking on the World, pp. 194–5 and Padoan, Political Economy, pp. 64–5.

³⁴ Henning, C. R., Macroeconomic Diplomacy in the 1980s (Beckenham, Kent, 1987), p. 3Google Scholar. This macroeconomic power is similar to that which the UK held before WW1 as a result of the prominence of sterling and its financial markets. See, for instance, Eichengreen, B., Hegemonic-Stability Theories of the International Monetary System (London, 1987), pp. 29–33CrossRefGoogle Scholar.

³⁵ Strange, Casino Capitalism, pp. 158, 181.

³⁶ Padoan, Political Economy, p. 57.

³⁷ Strange, Casino Capitalism, pp. 165–6, 171, 176, 179.

³⁸ See, for example, Time, 18 December 1989, p. 50.

³⁹ Padoan, Political Economy.

⁴⁰ For an overview, see Feldman, R., Japanese Financial Markets: Deficits, Dilemmas and Deregulation (Cambridge, 1986)Google Scholar; Home, J., Japan's Financial Markets: Conflict and Consensus in Policymaking (London, 1985)Google Scholar; Rosenbluth, F., Financial Politics in Contemporary Japan (Ithaca, 1989)Google Scholar, Shinkai, Y., ‘The Internationalization of Finance in Japan’, in Inoguchi, T. and Okimoto, D. (eds.), The Political Economy of Japan: Vol. 2. The Changing International Context (Stanford, 1988)Google Scholar.

⁴¹ Financial Times, 25 April 1989.

⁴² Annual bond market turnover in Tokyo market was $37,000 billion in 1987 compared to $27,700 billion for the New York market (Far Eastern Economic Review, 15 December 1988). Although figures released in April 1989 show daily foreign exchange trading volume slightly below that of New York (and both significantly behind London-Financial Times, 14 September 1989), many observers predict that Tokyo will soon surpass New York in this area if it has not already.

⁴³ The Economist, 16 December 1989.

⁴⁴ By 1988, Japanese banks had come to control 35 per cent of international bank assets, for example (BIS, Annual Report 1989). The four large Japanese securities houses occupied the top six places in eurobond underwriting rankings for much of the late 1980s (including the top four places in 1989), but slipped to first, fourth, seventh and tenth in 1990 (Financial Times, 19 March 1991, p. iv).

⁴⁵ See Euromoney, February 1989, p. 95. The measure is market capitalization.

⁴⁶ Quoted in S. Wagstyl, ‘Full steam ahead, keen lookout aloft’, Financial Times, 6 November 1989. See also S. Wagstyl, ‘Japanese banks lose their passion for LBOs’, Financial Times, 16 October 1989. One Japanese magazine even suggested ‘that Japan really was rapping the US over the knuckles for over-indulging in financial engineering when it would be better off making widgets competitive with Japan‘s’, Martin, J., ‘Rapping the US Over the Knuckles’, Financial Times, 17 October 1989Google Scholar.

⁴⁷ The Economist, 21 October 1989, p. 13.

⁴⁸ R. Murphy, ‘Power Without Purpose: The Crisis of Japan's Global Financial Dominance’, Harvard Business Review, March/April 1989, p. 73.

⁴⁹ Murphy, ‘Power Without Purpose’, p. 76.

⁵⁰ See, for example, recent statistics in Financial Times, 13 March 1989.

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⁵³ Kindleberger, Manias, Panics, p. 201.

⁵⁴ In July 1961, Article 6(1) of the IM F Articles of Agreement was reinterpreted to allow the IMF funds t o be used to finance deficits stemming from capital movements. Likewise, the General Arrangements t o Borrow (GAB) in 1962 was formed with the expressed intention of providing resources for offsetting short-term speculative financial capital movements.

⁵⁵ For an early history, see Costigiola, F., ‘The Other Side of Isolationism: The Establishment of the First World Bank 1929–30’, Journal of American History, 59 (1972), pp. 602–620CrossRefGoogle Scholar; Papi, G., The First Twenty Years of the BIS (Rome, 1951)Google Scholar.

⁵⁶ Eckes, A., A Searchfor Solvency (London, 1975), p. 152Google Scholar notes that the resolution was seen by figures such as US Treasury Secretary Morgenthau as ‘a matter of international propaganda’ to undercut the power of international bankers.

⁵⁷ See for example, Hirsch, F., Money International (London, 1967), pp. 246–248Google Scholar.

⁵⁸ Russell, R., ‘Transgovernmental Interaction in the International Monetary System 1960–72’, International Organization, 31 (1973), pp. 431–464CrossRefGoogle Scholar.

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⁶⁰ See discussion in Guttentag and Herring, Lender-of-Last-Resort, pp. 18–20; Dale, Regulation, pp. 178–9.

⁶¹ Kapstein, ‘Resolving the Regulator's Dilemma'.

⁶² See Financial Times, 19 April 1988.

⁶³ Funabashi, Y., Managing the Dollar: From the Plaza to the Louvre (Washington, 1988), p. 60Google Scholar; Henning, Macroeconomic Diplomacy, p. 40.

⁶⁴ See, for example, Clarke, S., Central Bank Cooperation 1924–31 (New York, 1967Google Scholar; Kunz, D., The Battle for Britain's Gold Standard in 1931 (London, 1987)Google Scholar.

⁶⁵ See Krasner, ‘Structural Causes’, for discussion of ‘strong’ and ‘weak’ regimes.

⁶⁶ See, for example, Spero, ‘Guiding Global Finance’, pp. 124–9; Group of Thirty, Clearance and Settlement Systems in the World's Securities Markets (New York, 1989).

⁶⁷ Krasner, ‘State Power’, pp. 341–3.

⁶⁸ With respect to this last point, see the role of the US Securities Exchange Commission: Financial Times, 8 February 1988, 16 November 1988; The Economist, 6 January 1990.

⁶⁹ Eichengreen and Portes, ‘Anatomy of Financial Crises’, p. 49.

⁷⁰ This general point is made by Funabashi, Managing the Dollar, p. 241, and Padoan, Political Economy, p. 206. See also Destler, I. and Henning, C., Dollar Politics: Exchange Rate Policymaking in the US (Washington, 1989), pp. 28–29Google Scholar. Also note the Treasury's strong opposition to a Congressional proposal in June 1988 to put on a 5 per cent withholding tax on foreign bond issues in the US (Financial Times, 21 June 1988).

⁷¹ For a recent example of US bank pressure, see The Economist, 1 April 1989, pp. 75–6. David Hale argues that US efforts to press for Japanese deregulation works against US long-term interests not because it will enhance the yen's position, but because it will make it harder for the Japanese state to direct private financial intermediaries to support the US financial position, ‘Global Finance and the Retreat to Managed Trade’, Harvard Business Review, 90 (1990), p. 160.

⁷² Home, J., ‘Politics and the Japanese Financial System’, in Stockwin, J., Rix, A., George, A., Home, J., Ito, D., Collick, M. (eds.) Dynamic andImmobilist Politics in Japan (London, 1988)Google Scholar; Home, Japan's Financial Markets. Within the important intra-Ministry of Finance power struggles, those who favoured more internationalist approaches to financial affairs, such as the International Finance Bureau, began to acquire more influence in this period. Home, ‘Polities’, p. 177; Hollerman, L., Japan Disincorporated: The Economic Liberalization Process (Stanford, 1988), p. 57Google Scholar.

⁷³ This point is made in The Economist, 23 December 1989, pp. 12–3. J. Plender, ‘The Limits of Power’, Financial Times, 20 April 1989.

⁷⁴ See, for example, the Japanese initiative in late 1988 to launch an international council of the world's leading associations of securities dealers to facilitate information exchange. Financial Times, 30 November 1988.

⁷⁵ See discussion as to why creditors tend to favour financial stability and openness in Frieden, J., ‘Capital Politics: Creditors and the International Political Economy’, Journal of Public Policy, 8 (1989), pp. 265–286CrossRefGoogle Scholar.

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