An Introduction to International Relations

Introduction

This chapter presents a fleeting history of key changes in global trade and finance in the post-war period, organised around the themes of crisis and cooperation. The first section of the chapter discusses the key themes; the second section considers the emergence of the post-World War II Bretton Woods regime; the third section outlines the rise of private capital in the 1970s; the fourth section traces the impact of the Debt Crisis of the 1980s; the fifth section considers discussions of global financial architecture in the 1990s and the early 2000s; and the sixth section discusses changes from 2004 to 2016, focusing on how the trade regime has stalled and the financial regime has partly been rolled back. Finally, the concluding section reflects on what changes in the US administration and the reassertion of economic nationalism might mean for global trade and finance. Key terms relating to global trade and finance are explained in Box 26.1.

Who is afraid of the global economic system?

Calls for the study of global trade and finance were initially based on fears that the collapse of the Bretton Woods system (discussed below) gave market actors the upper hand over states, and that the states needed to cooperate to avoid tariffs and encourage economic growth. Without cooperation on trade and finance, the world economy would be prone to frequent and severe economic crises, reinforcing trade wars, agitating actual military conflicts and creating a drain on the established welfare systems in advanced industrial economies. Such a failure would also hinder economic growth and statebuilding in developing economies, deepening their structural economic dependence on the West.

Within International Relations (IR), the study of global trade and finance in international relations has developed a broad range of research questions and analytical perspectives. The sub-field of International Political Economy typically considers two key themes: (1) crisis – why the contemporary world economy is prone to international economic crises; and (2) cooperation – how to combat crises and enhance cooperation through the creation of a better designed regimes, especially through international organisations. The most common aspect of both themes is the role of the United States as the ‘hegemon’ within global trade and financial regimes, as it respectively propagates crises in trade and finance in reaction to domestic pressures, and seeks to dominate formal decision-making in trade and finance regimes.