The Long Battle for Global Governance

Stephen Buzdugan, Anthony Payne

• Publisher: Routledge
• Year: 2016
• eBook ISBN: 9781317276876
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Political Economy
• Index: Politics & International Relations

The Long Battle for Global Governance charts the manner in which largely excluded countries, variously described as 'ex-colonial', 'underdeveloped', 'developing', 'Third World' and lately 'emerging', have challenged their relationship with the dominant centres of power and major institutions of global governance across each decade from the 1940s to the present.

The book offers a fresh perspective on global governance by focusing in particular on the ways in which these countries have organised themselves politically, the demands they have articulated and the responses that have been offered to them through all the key periods in the history of modern global governance. It re-tells this story in a different way and, in so doing, describes and analyses the current rise to a new prominence within several key global institutions, notably the G20, of countries such as Brazil, China, India and South Africa. It sets this important political shift against the wider history of longstanding tensions in global politics and political economy between so-called 'Northern' and 'Southern' countries.

Providing a comprehensive account of the key moments of change and contestation within leading international organisations and in global governance generally since the end of the Second World War, this book will be of great interest to scholars, students and policymakers interested in politics and international relations, international political economy, development and international organisations.

1 Bretton Woods and the foundations of modern global governance

DOI: 10.4324/9781315640396-2

The foundations of modern global governance go back further than is sometimes acknowledged, even by those who focus on the post-1945 era. Within a year of the start of the Second World War, a series of agreements was being made regarding the nature of post-war Allied cooperation, broadly defining the context of the Bretton Woods arrangements that would eventually act as the cornerstone of the new global system of governance. These agreements were at first bilateral, beginning with a plan for post-war cooperation between Britain and France, signed in March 1940, that looked toward the creation of ‘a community of action in all spheres for so long as may be necessary to safeguard their security and to effect the reconstruction, with the assistance of other nations, of an international order which will ensure the liberty of peoples, respect for law and the maintenance of peace in Europe’ (Woolsey 1942: 622). More importantly, in the following year the ‘Atlantic Charter’ was signed. This was a joint declaration of the United States and Britain, made up of eight broad goals agreed by US President Franklin Roosevelt and British Prime Minister Winston Churchill after meeting on board a ship moored off the coast of Newfoundland on 14 August 1941. The Charter in effect set out the general principles that would form the basis of a new multilateral world order, particularly with regard to the shape of the post-war global economy. In particular, and at the insistence of the US, its fourth and fifth points expressed the determination of the two leading Allied countries that the post-war economic order would be fundamentally liberal in orientation:

Fourth, they will endeavour, with due respect to existing obligations, to further the enjoyment by all States, great or small, victor or vanquished, of access, on equal terms, to the trade and to the raw materials of the world which are needed for their economic prosperity;

Fifth, they desire to bring about the fullest collaboration between all nations in the economic field with the object of securing, for all, improved labor standards, economic advancement and social security.

(US Department of State 1942)

These commitments derived from the view that there would be a ‘need, when the time came for world reconstruction to be undertaken, of the freest possible economic interchange without discriminations, without exchange controls, without economic preferences utilized for political purposes and without all of the manifold economic barriers which had … been so clearly responsible for the present world collapse’ (Welles 1941). The words were those of Sumner Welles, Roosevelt’s adviser from the State Department, who accompanied him to Newfoundland, but they could just as easily have been spoken by Roosevelt himself.

By 1 January 1942 the Atlantic Charter had become more than a mutual understanding between the US and Britain: it constituted the framework for the actions and policies of a further 24 Allied countries – and later four others – by virtue of their signing of the ‘Declaration by United Nations’, a short document pledging adherence to the principles of the Atlantic Charter (United Nations 1942). The original additional signatories included the Soviet Union and China, along with Australia, Belgium, Canada, Costa Rica, Cuba, Czechoslovakia, the Dominican Republic, El Salvador, Greece, Guatemala, Haiti, Honduras, India, Luxembourg, the Netherlands, New Zealand, Nicaragua, Norway, Panama, Poland, South Africa and Yugoslavia – followed by Brazil, Mexico, Ethiopia and the Philippines later in 1942 (United Nations 1942; Woolsey 1942: 626). All of these countries subsequently became participants at the Bretton Woods conference. As may be noted from the list of signatory countries, the ‘United Nations’ of 1942 included Allied countries beyond the obvious candidates, namely, the US, Britain, countries from western Europe, China (represented by the Nationalist (Kuomintang) government) and the Soviet Union; in fact, economically and militarily less powerful states comprised half the number of countries that signed the Declaration. Together, the 30 signatories represented nearly two-thirds of the world’s population and more than two-thirds of its economic and military power (Woolsey 1942: 626). The fact that the Soviet Union signed up to the liberal, global economic objectives of the Charter through the Declaration was also of real importance. It was considered at the time that its signature and participation in the negotiation of a post-war order of global economic governance represented a significant ‘break in her 25 years of more or less closed economy’ that potentially could lead to ‘unpredictable effects internally as well as externally’ (Woolsey 1942: 627).

Preliminary negotiations before Bretton Woods

With the basic principles of a multilateral order established by the Atlantic Charter, negotiations began – mainly, though not exclusively, between the US and British governments – on the details of the rules and institutions that would form the system of global economic governance after the Second World War was over. The dominant plans were those devised mainly by two ‘market pessimists’ (Skidelsky 2005: 15), each foreseeing a role for government intervention in the global economic system – Harry Dexter White of the US Treasury and John Maynard Keynes, the dominant economist of his time, of the British Treasury. The plans devised by White and Keynes were the only ones that carried any serious weight with senior policymakers in the US, although other plans were circulated, such as one by Harvard University professor John H. Williams (Mikesell 2000a: 25), as well as others from Canada, China, France and the Soviet Union (Gardner 1969: 110; Helleiner 2014a: 193–6). In the years prior to Bretton Woods, US and British officials held a series of negotiations with the aim of arriving at a set of points that would form the basis of the talks and agreements at the Conference. Raymond Mikesell, a US Treasury economist who worked closely with White and Henry Morgenthau (the US Treasury Secretary) on the Bretton Woods proposals, recounts that, for the US, ‘by far the most important meetings were those with Keynes and other British officials’. However, he also states that there took place ‘international discussions between the [US government] and representatives of 46 countries that Morgenthau invited to meetings in Washington during the summer of 1943’, noting that ‘some of the meetings were bilateral, while others were attended by representatives from several countries’ (Mikesell 2000a: 25).

The role of US–Latin American relations prior to Bretton Woods

One of the more important sets of bilateral negotiations (apart from those between the Americans and the British) occurred between officials from the US and a number of Latin American countries, most importantly Mexico. Indeed, Eric Helleiner (2006, 2009, 2014a) has recently and persuasively shown how discussions between the US and Latin American countries about a form of regional economic governance in the Americas in the late 1930s and early 1940s influenced the US position in the years preceding the Bretton Woods conference, introducing, in particular, a degree of attention to development into the plans for a post-war order. As he argued:

Many New Dealers saw Latin American experiments in state-regulated capitalism as similar to their own initiatives with the United States, and thus deserving of support. During his 1936 visit to Brazil, Roosevelt described the Vargas regime [Getúlio Vargas was President of Brazil between 1930 and 1945] as having introduced a ‘South American New Deal’. He also saw Mexican President Cárdenas as a kindred spirit.

(Helleiner 2014a: 32)

These discussions revolved around a number of agreements and proposals for US financial and technical assistance to the Latin American region, notably a series of US loans and currency stabilisation measures to support Latin American development, as well as proposals for a new structure of economic relations between the US and Latin American countries that included the creation of a number of governance institutions designed to strengthen the US position in the region.

The most significant of these was a proposal put forward in 1940 by Adolf Berle (a close adviser to Roosevelt and an Assistant Secretary of State) and Harry Dexter White for the creation of an Inter-American Bank (IAB). Both Berle and White supported state intervention and economic planning in Latin America, particularly White. By the mid-1930s he had ‘already outlined his commitment to a new kind of multilateral economic order that would endorse freer trade and stable currencies, but also exchange rate adjustments and the regulation of cross-border capital movements’, and had moved on to argue as well for infant-industry protection and a rise in public lending in Latin America (Helleiner 2006: 948). As Helleiner points out, White’s experience with Latin America allowed him to put these ideas into practice. The thinking behind the proposed IAB was thus large in scope: it was designed to make investments, act as a clearing-house for international payments, guarantee credits, make loans and perform other typical banking duties (Bittermann 1971: 61). The shares of the IAB were to be held by its member governments and voting power was to be proportional to the number of shares held by each, with the US expected to provide the main financing. As a result, the proposed Inter-American Bank could be said to combine ‘the functions of an inter-governmental bank, an international stabilization fund, and an ordinary commercial bank’ (Mason & Asher 1973: 16).

Although it was not approved by the US Congress (out of a concern that it would compete with private US banks in the region and end up refinancing defaulted Latin American bonds), the ideas on which the IAB was based and the experience of attempting to progress the idea through the US Congress influenced White’s approach to designing the wider plan to establish an International Bank for Reconstruction and Development (IBRD) and an International Monetary Fund (Mason & Asher 1973: 16). Indeed, even whilst the proposal for the IAB was being worked out, Berle argued that it would, in effect, act as a template for a more far-reaching international economic order: the IAB would be ‘a nucleus around which things will grow’, as well as ‘a “laboratory study” in how the world-wide economic relations would need to be rebuilt after the war’ (cited in Helleiner 2006: 956). What is more, the importance of relations between the US and Latin America carried over into the early negotiations between the US and Britain. As again Helleiner shows:

US officials also made clear from the very start of the Bretton Woods negotiations that the design of the post-war international economic order had to give priority to the kinds of issues that had already arisen in the context of US–Latin American financial relations … Similarly, when Keynes and White first met in the summer of 1942 to discuss the details of post-war planning, White rejected Keynes’ preference for bilateral British–American negotiations on the grounds that ‘he favored broader negotiations, particularly including the Latin American nations’.

(Helleiner 2006: 956–7)

The Latin American countries were, therefore, very much a part of the new political map of global governance that was being designed. As was noted by Victor Urquidi (1996: 33, 50), a Mexican government economist who participated in the negotiations at Bretton Woods, White had been confidentially sharing early drafts of his proposal with the Mexican government since early 1942, and then officially asked the Mexican government (the head of its National Development Bank had been a classmate of White’s during the period he was studying for his PhD at Harvard) to consider the official 1943 draft prior to the conference. In addition, Mexican officials became intricately involved in the negotiation process leading up to Bretton Woods:

A Bank of Mexico official, Rodrigo Gómez – who attended Bretton Woods and in 1947 became the first Mexican executive director of the IMF – was soon involved in frequent consultations in Washington, and later attended the meetings leading up to the joint statement of 1944, the Atlantic City meeting, and finally Bretton Woods. … By then [1943] articles began to appear in the daily press and the weekly journals in Mexico, seminars were held, and, among other things, we benefited from visits of economists in the U.S. Treasury, the Federal Reserve Boards, and the New York Fed, and occasionally from some of the Latin American central banks.

(Urquidi 1996: 34)

In short, it is apparent that Latin American countries played a meaningful role in helping to shape US planning for the post-war global economic order. The dominant plans upon which the negotiations at Bretton Woods were based were still distinctly US and British at heart, with the other countries in attendance mainly to agree, seek to modify, or object to what was being proposed. For all that, the earlier, wider Latin American influence upon the shaping of the US position remains worthy of note.

The American and British plans

White’s early proposal – the ‘Suggested Plan for a United Nations Stabilization Fund and a Bank for Reconstruction and Development of the United and Associated Nations’ (these being the 43 other countries that attended Bretton Woods) – was circulated confidentially as an official draft in 1942. According to Helleiner (2014a: 104), and contrary to an earlier account (Kapur et al. 1997: 57) of the draft documents prepared by White, development was always a key focus of White’s thinking. Within his proposal were a number of explicit references to the promotion of development, to be achieved inter alia through promoting the movement of capital from ‘capital-rich to capital-poor countries’ in the world. For example, the text stated at one point:

It is true that rich and powerful countries can for long periods safely and easily ignore the interests of poorer or weaker neighbors or competitors, but by doing so they only imperil the future and reduce the potential of their own level of prosperity. The lesson that must be learned is that prosperous neighbors are the best neighbors; that a higher standard of living in one country begets higher standards in others; and that a high level of trade and business is most easily attained when generously and widely shared.

(cited in Helleiner 2014a: 105)

White’s proposal for an ‘International Stabilization Fund’ (ISF) consisted of several basic elements: currency convertibility, exchange rate stability, the elimination of exchange controls on current international transactions (such as protectionist measures to preserve foreign exchange reserves with a country) and support for countries experiencing balance-of-payments deficits likely to impair their ability to convert currencies or maintain their exchange rates (Mikesell 2000a: 21). On the other hand, according to White’s draft, the Bank was designed:

Chiefly to supply the huge volume of capital to the United and Associated Nations that will be needed for reconstruction, for relief, and for economic recovery … also to eliminate world-wide fluctuations of a financial origin and reduce the likelihood, intensity, and duration of world-wide depressions; t...

Table of contents

• Cover Page
• Dedication
• Half-Title Page
• Title Page
• Copyright
• Table Of Contents
• List of tables
• Preface
• List of abbreviations
• Introduction: The contested governance of a globalising political economy
• 1 Bretton Woods and the foundations of modern global governance
• 2 The United Nations and the emergence of the ‘Third World’
• 3 The ‘Third World’ challenge
• 4 The neoliberal turn
• 5 The proclaimed new world order
• 6 Towards global crisis
• Conclusion: Global governance amidst great uncertainty
• References
• Index