Page 56 - Global Political Economy_Understanding The International Economic Order

THE NATUR E OF PO LITIC AL ECO NOMY
powers of Western Europe fought on land and sea to create empires
that would support their political rivalries. Although companies of
merchant-adventurers such as the British and Dutch East India Com-
panies benefited from these commercial conflicts, the primary concern
of states was to acquire a favorable balance of trade/payments to
finance their external military and political ambitions. Great Britain’s
victory in the Napoleonic Wars resulted in a new and differently or-
dered international economy. Formal imperialism and possession of
colonies were deemphasized and what historians called “the imperial-
ism of free trade” emerged. Or, in the words of Stanley Jevons, one
of England’s foremost economists in the late nineteenth century, “Un-
fettered commerce...has made the several quarters of the globe our
willing tributaries.” 26 The Pax Britannica and Britain’s dominant
global position were thus built on economic foundations.
Following World War II, the United States launched a concerted
effort to create an open world economy. The origins of this effort can
be traced to the Reciprocal Trade Act of 1934 and the Tripartite
Monetary Agreement a few years later. In addition, American post-
war planners working mainly with their British counterparts began
to lay the foundations for an open world economy following the war;
this cooperative effort culminated in the Bretton Woods Conference
(1944) that created the institutional framework for the postwar inter-
national economy. However, strong assertion of American postwar
economic leadership occurred only after the emergence of a clear So-
viet threat. With the outbreak of the Cold War, the United States
undertook a number of important initiatives to strengthen the war-
torn economies of its allies, to forge a powerful anti-Soviet alliance,
and subsequently, to fasten these allied economies firmly to the
United States. The most important American action was, of course,
the Marshall Plan that transferred billions of dollars to Western Eu-
rope; this extraordinary transfer of wealth would not have taken
place if not for the Cold War. In effect, the United States used its
political, economic, and other resources to create an open world
economy embracing its political allies and much of the Third World.
This analysis suggests that the creation and maintenance of an open
and unified world economy requires a powerful leader or “hegemon”
that possesses both the political interest and the resources to pay the
high costs associated with such a task. It is highly unlikely that an
open and unified world market economy could be created and main-
tained unless there were a dominant power able and willing to use its

26
Stanley Jevons, The Coal Question (London: Macmillan, 1906), 411.
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