Global Power and Financial Stability

Abstract

Debating the Global Financial Architecture Edited by Leslie Elliot Armijo. Albany: State University of New York Press, 2002. 320 pp., $78.50 cloth (ISBN: 0-7914-5449-5), $26.95 paper (ISBN: 0-7914-5450-9). Debating the Global Financial Architecture is an important collection of articles on global financial stability and the power relations underpinning it. The volume's strengths include a critical historical perspective on alternative monetary regimes, an organic synthesis of political and economic views of the fragility of the global financial system, and geographically representative positions on the existing international financial architecture. Originally drafted in 1999–2000, these papers address core issues that continue to be debated in essentially the same way today. Indeed, the book's focus on basic questions and principles remains timely given the lingering debates over capital controls, exchange rate regimes, and the prevention and orderly resolution of sovereign financial crises. (The literature on each of these topics is voluminous. Solid summaries can be found in Eichengreen 2002, on resolving financial crises, Eichengreen 2003, for capital controls, and Fischer 2001, for exchange controls.) A clear contribution of the volume, which represents a collaboration between economists and political scientists from developed and emerging markets, is to embed the debate over the technical properties of financial adjustment within an assessment of the global distribution of power. According to hegemonic stability theory, largely discredited (Lake 1993) but experiencing a renaissance of sorts (see, for example, Mark Browley's chapter), the history of the international monetary system demonstrates how economic dominance and associated political leadership can support systemic stability. (The classic text on hegemonic stability theory is Keohane 1984. See, more recently, Gilpin 2000.) For example, Britain's supremacy during the pre-World War I era explains why the gold standard succeeded in satisfying the liquidity, adjustment, and stability requirements of international monetary order. Significantly, that system's durability also reflected the lack of stiff popular resistance to the …