Page 112 - Global Political Economy_Understanding The International Economic Order

INT ERNAT IONAL POLIT ICAL E CONOM Y
crisis. Lacking a leading country able and willing to discharge these
functions, financial crises can be followed by prolonged depressions
as happened in the 1930s. In short, the functions of the leader are
capital lending, creation of a foreign-exchange regime, macroeco-
nomic coordination, maintaining open markets, and being the ‘lender
of last resort.’” 50
Stephen Krasner and I each appropriated Kindleberger’s basic idea
that a political leader was needed to create and manage an interna-
tional liberal economy. However, each of us made several modifica-
tions that placed Kindleberger’s insight within a state-centric intellec-
tual framework of political analysis and thus fashioned a state-centric
version of the theory of hegemonic stability. Both of us used the
Greek word “hegemon” rather than “leader” to indicate that at times
the leader had to exercise power to achieve its objective of establish-
ing and managing a liberal world economy. A hegemon is defined as
the leader of an alliance like that organized by Sparta to defeat the
Persian invaders in ancient Greece or by the United States to defeat
the Soviets. Whereas Kindleberger argued that the leader created a
liberal international economy for both its own and cosmopolitan eco-
nomic reasons, Krasner and I have both argued that the hegemon
created a liberal international economy primarily to promote its own
interests and its political/security interests in particular. Both of us
have acknowledged that these security interests could also include the
economic and military interests of allies.
When the United States played a central role in promoting an open
and interdependent international economy (composed mainly of the
United States and its allies)in order to strengthen the anti-Soviet alli-
ance, America’s motives were hardly altruistic. Nevertheless, despite
the differences between Kindleberger’s liberal version of the hege-
monic stability theory and the Krasner/Gilpin state-centric version,
both approaches maintain that provision of such international public
goods as free trade and monetary stability requires a dominant power
with an interest in a liberal world economy and a willingness to ex-
pend economic and political resources to achieve and maintain that
goal.
The theory of hegemonic stability maintains that there can be no
liberal international economy unless there is a leader that uses its
resources and influence to establish and manage an international
economy based on free trade, monetary stability, and freedom of cap-

50
Charles P. Kindleberger, The World Economy and National Finance in Historical
Perspective (Ann Arbor: University of Michigan Press, 1995), 62.
99