Global finance, risk and governance

Global Society

Volumn 21, Issue 1, 2007, Pages 71-93

  Germain, Randall D ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

CONCEPTUAL FRAMEWORK; FINANCIAL SERVICES; GLOBALIZATION; GOVERNANCE APPROACH;

EID: 34347246357     PISSN: 13600826     EISSN: 1469798X     Source Type: Journal    
DOI: 10.1080/13600820601116542     Document Type: Article

References (140)

1. The author would like to thank Katie Lavelle, Kevin Young and Bob Cox for valuable comments on an earlier draft. All errors, however, remain those of the author. Thanks are also due to Bart Paudyn for providing research assistance with the preparation of this article.
2. A representative sample of this growing literature would include David M. Andrews, C. Randall Henning and Louis W. Pauly (eds.), Governing the World's Money (Ithaca, NY: Cornell University Press, 2002)
3. Leslie Elliot Armijio (ed.), Debating the Global Financial Architecture (Albany, NY: State University of New York, 2002)
4. Jacqueline Best, "From the Top Down: The New Financial Architecture and the Reembedding of Global Finance", New Political Economy, Vol. 8, No. 3 (2003), pp. 363-384
5. Louis W. Pauly, "Good Governance and Bad Policy: The Perils of International Organization Overextension", Review of International Political Economy, Vol. 6, No. 4 (1999), pp. 401-424
6. Tony Porter, "Technical Collaboration and Political Conflict in the Emerging Regime for International Financial Regulation", Review of International Political Economy, Vol. 10, No. 3 (2003), pp. 520-551
7. Susan Strange, Mad Money (Manchester: Manchester University Press, 1998)
8. and Geoffrey Underhill and Xiaoke Zhang (eds.), International Financial Governance under Stress: Global Structures versus National Imperatives (Cambridge: Cambridge University Press, 2003).
9. Morris Goldstein, The Asian Financial Crisis: Causes, Cures and Systemic Implications (Washington, DC: Institute for International Economics, 1998)
10. Barry Eichengreen, Toward a New International Financial Architecture: A Practical Post-Asia Agenda (Washington, DC: Institute for International Economics, 1999)
11. Carla Hills and Peter Peterson, Safeguarding Prosperity in a Global Financial System: The Future International Financial Architecture (Washington, DC: Institute for International Economics for the Council on Foreign Relations, 1999).
12. Jacqueline Best, The Limits of Transparency: Ambiguity and the History of International Finance (Ithaca, NY: Cornell University Press, 2005).
13. James Rosenau, "Toward an Ontology for Global Governance", in Martin Hewson and Timothy Sinclair (eds.), Approaches to Global Governance Theory (Albany, NY: State University of New York Press, 1999).
14. Rodney Hall and Thomas Biersteker (eds.), The Emergence of Private Authority in Global Governance (Cambridge: Cambridge University Press, 2002) Ch. 1
15. Robert Keohane, Governance in a Partially Globalized World (London: Routledge, 2002), pp. 202-204.
16. See, for example, the collection of essays in Aseem Prakesh and Jeffrey A. Hart (eds.), Globalization and Governance (London: Routledge, 1999)
17. Hewson and Sinclair, op. cit.
18. John Eatwell and Lance Taylor, Global Finance at Risk: The Case for International Regulation (Cambridge: Polity Press, 2000).
19. As discussed, for example, in Robert W. Cox, Approaches to World Order (Cambridge: Cambridge University Press, 1996), pp. 144-148, 237-240
20. and Charles S. Maier, In Search of Stability: Explorations in Historical Political Economy (Cambridge: Cambridge University Press, 1987), pp. 2-8.
21. Charles P. Kindleberger, The Financial History of Western Europe, 2nd edn (Oxford: Oxford University Press, 1984/1994)
22. Barry Eichengreen, Elusive Stability: Essays in the History of International Finance, 1919-1939 (Cambridge: Cambridge University Press)
23. Randall D. Germain, The International Organization of Credit (Cambridge: Cambridge University Press, 1997)
24. Paul Langley, World Financial Orders (London: Routledge, 2002)
25. Louis W. Pauly, Who Elected the Bankers? (Ithaca, NY: Cornell University Press, 1997).
26. Herbert Feis, Europe the World's Banker: 1870-1914 (New York: Augustus M. Kelley, 1930/1964)
27. Germain, op. cit.
28. Langley, op. cit.
29. Susan Strange, States and Markets (London: Pinter, 1988), Ch. 5.
30. Philip G. Cerny, "Webs of Governance and the Privatization of Transnational Regulation", in Andrews et al. (eds.), op. cit. pp. 197-198.
31. Two exponents of this view are Barry Eichengreen, Globalizing Capital (Princeton, NJ: Princeton University Press, 1996)
32. and Benjamin J. Cohen, The Geography of Money (Ithaca, NY: Cornell University Press, 1998).
33. For a countervailing view see Eric Helleiner, The Making of National Money (Ithaca, NY: Cornell University Press, 2003).
34. Jonathan Perraton, "What are Global Markets? The Significance of Networks of Trade", in Randall D. Germain (ed.), Globalization and its Critics (London: Palgrave, 2000).
35. For an argument that contextualises financial governance within a global social formation, see Susanne Soederberg, "On the Contradictions of the New International Financial Architecture: Another Procrustean Bed for Emerging Markets?", Third World Quarterly, Vol. 23, No. 4 (2002), pp. 607-620.
36. See, for example, Geoffrey Ingham, Capitalism Divided? The City and Industry in British Social Development (London: Macmillan, 1984)
37. and his more recent "Capitalism, Money and Banking: A Critique of Recent Historical Sociology", British Journal of Sociology, Vol. 50, No. 1 (1999), esp. pp. 77-81.
38. Cerny, op. cit.
39. Representative examples within this debate include Judith Goldstein and Robert Keohane (eds.), Ideas and Foreign Policy: Beliefs, Institutions and Political Change (Ithaca, NY: Cornell University Press, 1993)
40. Mark Blyth, "Any More Bright Ideas? The Ideational Turn of Comparative Political Economy", Comparative Politics, Vol. 29, No. 2 (1997), pp. 229-250
41. and Kathleen R. McNamara, The Currency of Ideas (Ithaca, NY: Cornell University Press, 1998).
42. Ronnie D. Lipshutz, Regulation for the Rest of Us? Globalization, Governmentality and Global Politics (London: Routledge, 2005)
43. Marieke de Goede, Virtue, Fortune and Faith (Minneapolis: University of Minnesota Press, 2005)
44. cf. Peter Miller and Nikolas Rose, "Governing Economic Life", Economy and Society, Vol. 19, No. 1 (1990), pp. 1-31.
45. Nicholas G. Onuf, "Institutions, Intentions and International Relations", Review of International Studies, Vol. 28, No. 2 (2002), pp. 211-228.
46. Jonathan Kirshner, "The Inescapable Politics of Money", in Jonathan Kirshner (ed.), Monetary Orders: Ambiguous Economics, Ubiquitous Politics (Ithaca, NY: Cornell University Press, 2003)
47. de Goede, op. cit.;
48. Germain, op. cit.
49. Most importantly in Robert W. Cox, Production, Power and World Order (New York: Columbia University Press, 1987)
50. Cox, Approaches to World Order, op. cit.
51. and Robert W. Cox, The Political Economy of a Plural World (London: Routledge, 2002).
52. Cox here adopts Collingwood's understanding of the historical method, in which "the events of history are never mere phenomena, never mere spectacles for contemplation, but things which the historian looks, not at, but through, to discern the thought within". R.G. Collingwood, The Idea of History (Oxford: Clarendon Press, 1946), p. 214.
53. Helpful explications of Cox's work in IPE include Timothy Sinclair, "Beyond International Relations Theory: Robert W. Cox and Approaches to World Order", in Cox, Approaches to World Order, op. cit.
54. James Mittleman, "Coxian Historicism as an Alternative Perspective to International Studies", Alternatives, Vol. 23, No. 1 (1998), pp. 63-92
55. and Michael G. Schechter, "Critiques of Coxian Theory: Background to a Conversation", in Cox, Political Economy of a Plural World, op. cit.
56. Critical engagements with Cox's work can be found in Peter Burnham, "Neo-Gramscian Hegemony and the International Order", Capital and Class, Vol. 45, No. 1 (1991), pp. 73-93
57. André Drainville, "International Political Economy in the Age of Open Marxism", Review of International Political Economy, Vol. 1, No. 1 (1994), pp. 105-132
58. and Randall D. Germain and Michael Kenny, "Engaging Gramsci: International Relations Theory and the 'New' Gramscians", Review of International Studies, Vol. 24, No. 1 (1998), pp. 3-21.
59. This is Strange's implicit criticism of Cox's work. See his engaging rejoinder, Robert W. Cox, "Take Six Eggs: Theory, Finance and the Real Economy in the Work of Susan Strange", in Approaches to World Order op. cit.
60. For a representative sample of this literature, see David Andrews and Thomas Willett, "Financial Interdependence and the State: International Monetary Relations at Century's End", International Organization, Vol. 51, No. 3 (1997), pp. 479-511
61. Benjamin Cohen, "Phoenix Risen: The Resurrection of Global Finance", World Politics, Vol. 48, No. 1 (1996), pp. 268-96
62. Peter Dombrowski, "Haute Finance and High Theory: Recent Scholarship on Global Financial Relations", Mershon International Studies Review Vol. 42, No. 1 (1998), pp. 1-28
63. Jonathan Kirshner, "The Study of Money", World Politics, Vol. 52, No. 3 (2000), pp. 407-436. As will be made clear below, I do not necessarily emphasise all of the features which these authors use to characterise the new global finance.
64. Paul Hirst and Grahame Thompson, Globalization in Question, 2nd edn (Cambridge: Polity Press, 1999).
65. Niall Ferguson, The Cash Nexus: Money and Power in the Modern World, 1700-2000 (London: Penguin, 2001), p. 279
66. Bank for International Settlements, Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity (Basle: Bank for International Settlements, 2005).
67. Germain, International Organization of Credit, op. cit.
68. Langley, op. cit.
69. Technology requires an enabling political environment for much of its effectiveness, and the march of liberalisation across developed and emerging market economies has been an important aspect of the provision of this enabling environment. It is part of the argument of those advocating the "new global finance"; however, to a certain extent that technology now operates independently of political control (see, for example, Susan Strange, Mad Money, Ch. 2).
70. Ferguson, op. cit., Ch. 10.
71. Germain, International Organization of Credit, op. cit.
72. For treatments of the role of public authority - usually construed as state activity - in the emergence of the new global finance, see Eric Helleiner, States and the Reemergence of Global Finance (Ithaca, NY: Cornell University Press, 1994)
73. Ethan Kapstein, Governing the Global Economy (Cambridge, MA: Harvard University Press, 1994)
74. Germain, International Organization of Credit, op. cit.
75. Pauly, Who Elected the Bankers, op. cit.
76. Strange, Mad Money, op. cit.
77. Stephen L. Harris, "Regulating Finance: Who Rules, Whose Rules?", Review of Policy Research, Vol. 21, No. 6 (2004), pp. 743-766.
78. See Andrew Crockett, "The Theory and Practice of Financial Stability", Princeton Essays in International Finance, No. 203 (1997)
79. but see de Goede, op. cit., for a discussion of the problems associated with the kind of knowledge that underpins these models.
80. See, for example, Stephen Gill, Power and Resistance in the New World Order (London: Palgrave, 2003).
81. David Williams, "London and the 1931 Financial Crisis", Economic History Review, 2nd series, Vol. 15, No. 3 (1963), pp. 513-528
82. William A. Brown, The International Gold Standard Reinterpreted: 1914-34 (New York: AMS Press, 1940/1970), Ch. 21.
83. For example, Alan Greenspan has repeatedly questioned the sustainability of the US current account deficit and the propensity of foreigners to fund it, even though he has not yet labelled this unsustainable. See, for example, his remarks before the Council on Foreign Relations in New York on the subject of globalisation and the American current account deficit, available at: (accessed April 15, 2005).
84. On the role of private institutions in the construction of global norms, see Eleni Tsingou, Transnational Policy Communities and Financial Governance: The Role of Private Actors in Derivatives Regulation, Working Paper No. 111/03 (Warwick: Centre for the Study of Globalisation and Regionalisation, 2003);
85. Michael R. King and Timothy J. Sinclair, "Private Actors and Public Policy: A Requiem for the New Basel Capital Accord", International Political Science Review, Vol. 24, No. 3 (2003), pp. 345-362.
86. One may also cite the increasingly determined efforts of US law enforcement officials to extend the reach of American law to foreign nationals who stand accused of engaging in corporate malfeasance while previously working in the United States for foreign corporations. See, for example, "The Long Arm of American Law", The Economist (14 May 2005), p. 67.
87. Porter, op. cit.
88. Randall D. Germain, "Global Financial Governance and the Problem of Inclusion", Global Governance, Vol. 7, No. 4 (2001), pp. 411-426
89. but for counter-arguments see Soederberg, op. cit.
90. and Best, "From the Top Down", op. cit.
91. Barry Eichengreen, Financial Crises and What to Do About Them (Oxford: Oxford University Press, 2002).
92. W.I. Robinson and J. Harris, "Towards a Global Ruling Class? Globalization and the Transnational Ruling Class", Science and Society, Vol. 64, No. 1 (2000), pp. 11-54
93. Leslie Sklar, The Transnational Capitalist Class (Oxford: Blackwell, 2001).
94. Cox, Approaches to World Order, op. cit., p. 298.
95. Geoffrey R.D. Underhill, "The Public Good versus Private Interests in the Global Monetary and Financial System", International and Comparative Corporate Law Journal, Vol. 2, No. 3 (2000), pp. 335-359.
96. Kees van der Pijl, Transnational Classes and International Relations (London: Routledge, 1998)
97. see also his earlier work, The Making of an Atlantic Ruling Class (London: Verso, 1984).
98. Karl Polanyi, The Great Transformation (Boston: Beacon Press, 1944/1957), p. 141.
99. Cox and others have also noted how recent changes in the organisation of the world's financial system feed the growth of the covert or criminal worlds. See, for example, Cox, Political Economy of a Plural World, op. cit., Ch. 7
100. and Susan Strange, The Retreat of the State (Cambridge: Cambridge University Press, 1996), Ch. 8.
101. See Charles P. Kindleberger, Manias, Panics and Crashes, 3rd edn (London: Macmillan, 1996), pp. 100-101, on the Dutch tulip bulb mania
102. and Susan Strange, "Finance, Information and Power", Review of International Studies, Vol. 16, No. 3 (1990), pp. 259-274, on the structural role of information and innovation in global financial politics.
103. Timothy J. Sinclair, "Reinventing Authority: Embedded Knowledge Networks and the New Global Finance", Government and Policy, Vol. 18, No. 4 (2000), pp. 487-502
104. Adam Tickell, "Dangerous Derivatives: Controlling and Creating Risks in International Money", Geoforum, Vol. 31, No. 1 (2000), pp. 87-99.
105. One concrete indicator of a power shift towards institutions that manipulate information is the enhanced role of credit rating agencies as organs of governance. See Timothy J. Sinclair, The New Masters of Capital: American Bond Rating Agencies and the Politics of Creditworthiness (Ithaca, NY: Cornell University Press, 2005).
106. Of course it should be pointed out here that as a "non-financial" institution Enron was subject to a more lenient set of regulatory statutes governing its financial transactions. The unevenness of regulation covering "financial" versus "non-financial" firms - despite the fact that both types can be heavily involved in the same kinds of financial transactions - is an important problem that cannot be addressed here.
107. This claim was first raised by Peter Drucker, "The Changed World Economy", Foreign Affairs, Vol. 64, No. 4 (1986), pp. 768-791
108. and explored more recently by Anastasia Nesvetailova, "The Logic of Neoliberal Finance and Global Financial Fragility: Towards Another Great Depression?", Research in Political Economy, Vol. 21, No. 1 (2004), pp. 61-90.
109. Germain, "Global Financial Governance", op. cit.
110. Porter, op. cit.
111. Cox, Production, Power and World Order, op. cit., p. 267.
112. Cox himself outlines several different future scenarios of world order development, in line with his assessment of the possible contingencies contained within the structural conjuncture of the 1980s. I am here concerned primarily with the fulfilment of what he identified as the hyper-liberal state model, or what critical theorists now generally agree is a form of "disciplinary" neo-liberalism. This usage comes from Gill, op. cit., Ch. 7.
113. Gill, op. cit.
114. William I. Robinson, A Theory of Global Capitalism: Production, Class and State in a Transnational World (Baltimore, MD: Johns Hopkins University Press, 2004).
115. See, for example, Vincent Sica, "Cleaning the Laundry: States and the Monitoring of the Financial System", Millennium, Vol. 29, No. 1 (2000), pp. 47-72
116. Philip G. Cerny, "Restructuring the Political Arena: Globalization and the Paradoxes of the Competition State", in Germain (ed.), Globalization and its Critics, op. cit.
117. and Ralf J. Leiteritz, "Explaining Organizational Outcomes: The International Monetary Fund and Capita Account Liberalization", Journal of International Relations and Development, Vol. 8, No. 1 (2005), pp. 1-26.
118. These VAR (value-at-risk) models clearly have their limits, but they also enable institutions to monitor their overall risk profiles much more effectively than in the past. For a discussion of some of the limits of these models, see de Goede, op. cit., pp. 138-139
119. and Mark Blyth, "The Political Power of Financial Ideas: Transparency, Risk and Distribution in Global Finance", in Kirshner, Monetary Orders, op. cit.
120. "Survey of International Banking", The Economist (21 May 2005), pp. 9-10.
121. For discussions of this emerging policy-making framework see in addition to the sources quoted in footnote 2, Porter, op. cit.
122. Layna Mosley, "Attempting Global Standards: National Governments, International Finance, and the IMF's Data Regime", Review of International Political Economy, Vol. 10, No. 2 (2003), pp. 331-362.
123. Leiteritz, op. cit
124. and Eichengreen, Financial Crises and What to do About Them, op. cit.
125. See, for example, Harris, op. cit.
126. Germain, International Organization of Credit, op. cit.
127. See also Eric Helleiner, "Money and Influence: Japanese Power in the International Monetary and Financial System", Millennium, Vol. 18, No. 3 (1989), pp. 343-358.
128. Van der Pijl, op. cit., pp. 49-57.
129. John Zysman, Governments, Markets and Growth (Ithaca, NY: Cornell University Press, 1983).
130. One could also add here the growing participation in global financial developments of what Jan Aart Scholte and Albrecht Schnabel have called civil society, non-state groups and movements that are increasingly becoming a factor in global economic governance arrangements. Jan Aart Scholte and Albrecht Schnabel (eds.), Civil Society and Global Finance (London: Routledge, 2002). For slightly wider ranging discussions see also Robert O'Brien, Anna Marie Goetz, Jan Aart Scholte and Marc Williams, Contesting Global Governance: Multilateral Economic Institutions and Global Social Movements (Cambridge: Cambridge University Press, 2000)
131. and Randall D. Germain and Michael Kenny (eds.), The Idea of Global Civil Society: Politics and Ethics in a Globalizing World (London: Routledge, 2005).
132. Cox, Political Economy of a Plural World, preface; see also recently Robert W. Cox, "Beyond Empire and Terror: Critical Reflections on the Political Economy of World Order", New Political Economy, Vol. 9, No. 3 (2004), pp. 307-323.
133. C. Randall Henning, Currencies and Politics in the United States, Germany and Japan (Washington, DC: Institute for International Economics, 1994).
134. In many ways this applies also to the trajectory and evolution of national currencies, namely that they are overwhelmingly the product of the political and social history of individual nations. See Helleiner, The Making of National Money, op. cit.
135. The last concerted attempt to manage the dollar occurred in the mid-1980s, when finance ministers of the G5 countries tried to steer the dollar lower at meetings at New York's Plaza Hotel and the Louvre in Paris. See Eichengreen, Globalizing Capital, op. cit., Ch. 5
136. Yoichi Funabashi, Managing the Dollar: From the Plaza to the Louvre 2nd edn (Washington, DC: Institute for International Economics, 1989)
137. and Strange, Mad Money, op. cit.
138. Goldstein, op. cit.
139. Eichengreen, financial crises, op. cit.
140. Ngaire Woods, "Making the IMF and World Bank More Accountable", International Affairs, Vol. 77, No. 1 (2001), pp. 83-100.