Page 114 - Global Political Economy_Understanding The International Economic Order

INT ERNAT IONAL POLIT ICAL E CONOM Y
the late nineteenth century was truly global and was generally charac-
terized by nondiscrimination in trade, unrestricted capital move-
ments, and a stable monetary system based on the gold standard. For
decades the American system was composed only of the Free World;
during the Cold War it was characterized by trade discrimination, by
capital controls until the 1970s, and by monetary instability after
1971. Whereas the British promoted and inspired free trade by exam-
ple and through a series of bilateral agreements, the United States
has championed trade liberalization through multilateral negotiations
within the GATT. Although there is disagreement on this subject,
according to Joanne Gowa, security concerns did influence British
53
trade policy. Certainly, international security considerations—forg-
ing the Western alliance against the Soviet Union—played an ex-
54
tremely important role in America’s promotion of free trade. In the
monetary realm, the Bank of England played a central role in man-
agement of the gold standard in the nineteenth-century system. How-
ever, even though the post–World War II international monetary sys-
tem has been based on the dollar and subject to American influence,
the Federal Reserve has had to share pride of place with the German
Bundesbank and other powerful central banks.
British economic decline began in the late nineteenth century as
other countries, especially Germany and the United States, industrial-
ized; Britain responded with a gradual retrenchment of its global posi-
tion and initiation of numerous measures to strengthen its security. 55
Although Great Britain modified a number of its economic policies,
its huge dependence on trade forestalled a retreat into protectionism.
Nevertheless, British leadership in trade liberalization did slacken,
ity of a weakened Great Britain to re-create a liberal international economy after the
war, Carr demonstrated that a liberal world economy must rest on a dominant liberal
power. Under the Pax Britannica, Great Britain used its power and influence to create
an open world economy in which markets largely determined trade flows and economic
outcomes. As the power of Great Britain waned in the latter decades of the century
and finally collapsed in the interwar years, the fortunes of an open, liberal international
economy suffered. In the absence of British leadership, the 1930s were characterized
by economic conflicts among the great powers and the fragmentation of the world
economy into spheres of influence dominated by one or another of these great powers.
53
Gowa, Allies, Adversaries, and International Trade.
54
From a strictly economic perspective, the United States after the war could have
exploited its dominant economic position by imposing an optimum tariff on imports
into its economy. Instead, it chose multilateralism, mainly for political reasons. One
could say that the collective good provided by the American hegemon was the security
of its allies.
55
Robert Gilpin, War and Change in World Politics (New York: Cambridge Univer-
sity Press, 1981).
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