Financial crises and the balance of power in international finance, 1890–2010

Abstract

Has the centre of gravity of international finance irreversibly started to shift from the Atlantic to the Pacific since the financial debacle of 2007-2008? This article discusses this highly topical question in a historical perspective, by considering previous changes in the balance of power in international finance and the role played by global financial in these changes. Particular attention is paid to the Baring Crisis of 1890, the American Panic of 1907, the financial crisis of July -August 1914, the banking crises of the Great Depression of the 1930s, the financial instability of the early 1970s and the ensuing banking failures, the International Debt Crisis of 1982, and the Japanese Banking Crisis of 1997-8. The article concludes that financial crisis, perhaps surprisingly, did not lead to clear changes in the balance of power in international finance; and that the financial debacle of 2007-8 is unlikely, in the medium-term, to fundamentally alter the current order.