Abstract
International political economy (IPE) has explained financial globalization as the result of states deciding to open up and liberalize domestic financial systems. Complementing this ‘negative integration’ view, we present a theory of financial globalization during the 1970s that emphasizes the importance of ‘positive integration.’ Credit money systems are characterized by public-private infrastructural entanglements, the management of which require substantial institutional work by monetary technocrats, both at the domestic and at the international level. To illustrate our theory, we trace the expansion of the Eurodollar market during the 1970s. Drawing on archival records from the ‘Standing Committee on the Euro-currency Market’ at the Bank for International Settlements, we show how this group of G-10 central bankers sought to elevate the management of infrastructural entanglements from the domestic to the international level. By ensuring that the Eurodollar market did not interfere with domestic monetary governability, while seeking to provide protection for issuers of Eurodollars, monetary technocrats helped establish the institutional infrastructure for the expansion and globalization of the offshore US dollar system.
Highlights
Today, more than ever, we live in a “dollar world” (Gourinchas, 2019)
Revisiting the expansion of the Eurodollar market during that pivotal period, we argue that foreign-currency lending by private banks on a global scale required a substantial degree of positive integration
We trace how the Standing Committee on the exporting countries’ savings in the form of (Euro)-currency Market at the Bank for International Settlements (BIS) in Basel managed the infrastructural entanglements between the public and the private elements of the inherently hybrid Eurodollar system
Summary
While acting by transacting in private financial markets, their state-granted privileges make them dominant actors in those markets, allowing them to “govern through financial markets” (Braun et al, 2018) They manage public-private infrastructural entanglement through two types of institutional work – they regulate private banking activities to maintain domestic monetary governability, while at the same time providing backstops and other forms of protection to domestic banks in their international operations. Section two outlines our positive integration theory of financial globalization, based on three conceptual building blocks – the hybridity of money, the unique institutional position of monetary technocrats, and their management of infrastructural entanglement with a view towards governability and protection Section three applies this framework to reconstruct the expansion of the Eurodollar market during the 1970s, drawing on original archival material from the BIS.
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