This chapter presents a fleeting history of key changes in global trade and finance in the post-war period, organised around the themes of crisis and cooperation. The first section of the chapter discusses the key themes. The second section considers the emergence of the post-World War II Bretton Woods regime. The third section outlines the rise of private capital in the 1970s through to the debt crisis of the 1980s. The fourth section considers discussions of global financial architecture in the 1990s to the 2000s. The fifth section discusses changes in the last fifteen years, focusing on how the trade regime has stalled and the financial regime has been partially rolled back. Finally, the concluding section reflects on the ever-present need to foster cooperation in the global financial and trade architecture.

This chapter explores the evolution of the governance of so-called “fragile states” as a case of change in the architecture of global governance. Reduced funding from states and broader ideational trends about managerialism and effectiveness have rendered international organizations (IOs) less important in defining policy responses and assigning roles to other actors. This change in the governance architecture has engendered more networked and market-based forms of governance, with different stripes of professional networks becoming more important. The chapter argues that this transformation helps explain substantive changes in how fragile states are governed: in the 1990s and into the early 2000s, the treatment of fragile states was dominated by a “peacebuilding” approach focused on building institutions to support the rule of law and democracy, and with IOs such as the UN and the World Bank in authoritative roles. Gradually, over the course of the 2000s and 2010s, this approach became bifurcated, which reflects the prominence of professional networks and the reduced authority of IOs to define an overarching framework: military professionals in states advanced “stabilization” and counterterrorism – focused on fighting insurgents and conducting anti-terrorism operations – while networks consisting of humanitarian and human rights professionals advanced a focus on protection of civilians.

Continuing European integration, and more broadly global economic integration, has exposed the increasing discrepancy between nationally grounded tax policy and transnational economic affairs. Economic, political and cultural integration creates competitive pressures that challenge the fiscal and political sustainability of national policies, creating winners and losers (Genschel and Schwarz, 2011). National tax policy, in a transnational context, has significant distributional implications, both intranationally and internationally. Inside the EU, the highly uneven fiscal and political effects of integration in areas such as budget policy (see Chapter 6), monetary policy (see Chapter 9) and trade policy (see Chapter 14) are clearly visible.

Introduction

This chapter presents a fleeting history of key changes in global trade and finance in the post-war period, organised around the themes of crisis and cooperation. The first section of the chapter discusses the key themes; the second section considers the emergence of the post-World War II Bretton Woods regime; the third section outlines the rise of private capital in the 1970s; the fourth section traces the impact of the Debt Crisis of the 1980s; the fifth section considers discussions of global financial architecture in the 1990s and the early 2000s; and the sixth section discusses changes from 2004 to 2016, focusing on how the trade regime has stalled and the financial regime has partly been rolled back. Finally, the concluding section reflects on what changes in the US administration and the reassertion of economic nationalism might mean for global trade and finance. Key terms relating to global trade and finance are explained in Box 26.1.

Who is afraid of the global economic system?

Calls for the study of global trade and finance were initially based on fears that the collapse of the Bretton Woods system (discussed below) gave market actors the upper hand over states, and that the states needed to cooperate to avoid tariffs and encourage economic growth. Without cooperation on trade and finance, the world economy would be prone to frequent and severe economic crises, reinforcing trade wars, agitating actual military conflicts and creating a drain on the established welfare systems in advanced industrial economies. Such a failure would also hinder economic growth and statebuilding in developing economies, deepening their structural economic dependence on the West.

Within International Relations (IR), the study of global trade and finance in international relations has developed a broad range of research questions and analytical perspectives. The sub-field of International Political Economy typically considers two key themes: (1) crisis – why the contemporary world economy is prone to international economic crises; and (2) cooperation – how to combat crises and enhance cooperation through the creation of a better designed regimes, especially through international organisations. The most common aspect of both themes is the role of the United States as the ‘hegemon’ within global trade and financial regimes, as it respectively propagates crises in trade and finance in reaction to domestic pressures, and seeks to dominate formal decision-making in trade and finance regimes.