Modification de A brief history of international capitalism

{{Infobox Lecture
 | image = 
 | image_caption = 
 | cours = [[International Political Economy]]
 | faculté = [[Global Studies Institute]]
 | département = 
 | professeurs = [[Christakis Georgiou]]<ref>[https://www.unige.ch/gsi/fr/presentation/enseignants/cer/christakis-georgiou/ Profil de Christakis Georgiou sur le site de l'Université de Genève]</ref><ref>[https://blogs.mediapart.fr/christakis-georgiou Profil de Christakis Georgiou sur le site de Mediapart]</ref><ref>[https://www.cairn.info/publications-de-Christakis-Georgiou--657762.htm# Publications de Christakis Georgiou sur Cairn.info]</ref><ref>[https://affective-sciences.academia.edu/ChristakisGeorgiou Publications de Christakis Georgiou sur Academia.edu]</ref>
 | enregistrement = 
 | lectures = 
* [[What is International Political Economy?]]
* [[A brief history of international capitalism]]
* [[Theories of International Political Economy]]
* [[International trade cooperation]]
* [[Domestic trade politics]]
* [[Politics of preferential trade agrreements]]
* [[Multinational corporations and global value chains]]
* [[Political of multinational corporations]]
* [[International monetary cooperation]]
* [[Monetary and exchange rate politics]]
* [[Politics of international financial crises]]
* [[Democracies in globalized economies]]
}}

This lecture is going to provide the reader with a brief history of global capitalism. What is meant by global capitalism or international political economy is the structure and dynamics of the international economic relations.

This is not a typical history of the international economy in that we are not going to be looking at things like productivity developments within individual countries, or output levels within individual countries. That is purely economic and referred to the dynamics of national economies.

So, this is not a typical history of the international economy. It is an attempt to provide a history of the evolution of the way internationally economic relations developed during the 19th century.

We are going to be looking at four separate periods. Within each one, we will look at trade, international commercial relations, investment and the structure of production, money and finance, and at some considerations on geopolitical dynamics and ideological development. This is an attempt to periodise the political history of the last 200 years, with distinct phases of developments of global capitalism over the last 200 years.<ref>Rennen, W., & Martens, P. (2003). [http://journals.sfu.ca/int_assess/index.php/iaj/article/viewFile/136/91 The Globalisation Timeline]. Integrated Assessment, 4(3), 137–144. https://doi.org/10.1076/iaij.4.3.137.23768</ref>

The first one is called the First Globalization what some others call the ''years of classical liberalism'', the ''golden era'' which is the period from the mid-19th century to the First World war. Then we will look at the inter-war integration of global capitalism. The third period is called embedded liberalism and refers to the first post-war stage in the late 1940s to some time in the mid-1970s and then the last stage that is the current stage of the Second Globalization which begins in the mid-1970s and it is still going up.

{{Translations
| fr = Une brève histoire du capitalisme international
| es = Una breve historia del capitalismo internacional
}}

=The First Globalization=

==Origins of the First Globalization==

When did globalisation start?<ref>C.R. “When Did Globalisation Start?” The Economist, The Economist Newspaper, 23 Sept. 2013, https://www.economist.com/free-exchange/2013/09/23/when-did-globalisation-start.</ref>

Some authors say there has always been a global economy, and there has always been economic interactions, exchanges among entities that are far away from each other. Some others say it starts with the triangular trade related to the discovery of the Americas. Some other say that actually, global capitalism emerged in the first third of the 19th century and because of the Transport Revolution of the late 18th century that led to a much greater extent of market integration, price convergence among distinct economies, that gradually come into contact with each other and gradually became integrated.<ref>Bagwell, Philip S. [https://books.google.fr/books?hl=en&lr=&id=LnOKAgAAQBAJ&oi=fnd&pg=PP1&dq=Transport+Revolution&ots=HWVLVAu-2-&sig=M5nKG8Rui9oix6__UHTN_DumMV0#v=onepage&q=Transport%20Revolution&f=false The transport revolution]. London: Routledge, 1988. Print.</ref><ref>Jacks, D. S., & Pendakur, K. (2010). Global Trade and the Maritime Transport Revolution. Review of Economics and Statistics, 92(4), 745–755. https://doi.org/10.1162/rest_a_00026</ref>

For [https://en.wikipedia.org/wiki/Kevin_O%27Rourke Kevin O’Rourke] and [https://en.wikipedia.org/wiki/John_Williamson_(economist) John Williamson], global capitalism emerges in the 1820s. In ''Globalization and history: the evolution of a nineteenth-century Atlantic economy'' they document the fact that from the 1820s onwards there is a secular process of price convergence which means that there is an international division of labour that comes into being and that characterizes the distinctive feature of over global integrated economy.<ref>Rourke, Kevin H., and Jeffrey G. Williamson. [https://books.google.fr/books?id=ouiSFSFh_N4C&printsec=frontcover&dq=Globalization+and+History:+The+Evolution+of+a+Nineteenth-century+Atlantic&hl=en&sa=X&ved=0ahUKEwidzJbny53oAhXw0eAKHXd0DIwQ6AEIKTAA#v=onepage&q=Globalization%20and%20History%3A%20The%20Evolution%20of%20a%20Nineteenth-century%20Atlantic&f=false Globalization and history : the evolution of a nineteenth-century Atlantic economy]. Cambridge, Mass: MIT Press, 1999. Print.</ref> That is a key enabling factor without which we could not be talking about global capitalism.

In ideological terms, the "Transport Revolution" and "Market integration" in the 18th century come along with the decline of Mercantilism and the rise of liberalism which is the rise of free trade ideology.<ref>Semmel, Bernard. [https://books.google.fr/books?id=WVT8J1YFRqgC&lpg=PP1&dq=The%20Rise%20of%20Free%20Trade%20Imperialism%3A%20Classical%20Political%20Economy%20the%20Empire&pg=PP1#v=onepage&q=The%20Rise%20of%20Free%20Trade%20Imperialism:%20Classical%20Political%20Economy%20the%20Empire&f=false The rise of free trade imperialism: Classical political economy the empire of free trade and imperialism 1750-1850]. Cambridge University Press, 2004.</ref><ref>Kindleberger, C. P. (1975). The Rise of Free Trade in Western Europe, 1820–1875. The Journal of Economic History, 35(1), 20–55. https://doi.org/10.1017/s0022050700094298</ref>

<gallery mode="packed" widths="200px" heights="200px">
Fichier:Adam Smith The Muir portrait.jpg|A sketch of Adam Smith facing to the right.
Fichier:Portrait of David Ricardo by Thomas Phillips.jpg|Portrait of David Ricardo by [https://en.wikipedia.org/wiki/Thomas_Phillips Thomas Phillips], circa 1821. This painting shows Ricardo, aged 49, two years before his death.
</gallery>

Between the late 18th century and the 1820s, many people in England and most importantly, [https://en.wikipedia.org/wiki/Adam_Smith Adam Smith] and [https://en.wikipedia.org/wiki/David_Ricardo David Ricardo] developed the theory of [[Ricardo's model: productivity differences as a determinant of trade|comparative advantage theory]] which became a foundational principle in the theory of international trade. It refers to an economy's ability to produce goods and services at a lower opportunity cost than that of trade partners. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins.<ref>Hayes, Adam. “Why Comparative Advantage Matters.” Investopedia, Investopedia, 5 Feb. 2020, https://www.investopedia.com/terms/c/comparativeadvantage.asp.</ref>

The idea of the theory devlopped by Ricardo in ''[https://en.wikipedia.org/wiki/On_the_Principles_of_Political_Economy_and_Taxation On the Principles of Political Economy and Taxation]'' published in 1817 is that states should stop caring about the trade balance, they should stop caring about states exporting more than importing more, and they should stop caring about producing everything that they consume within their economy.<ref>Ricardo, David (1817), [https://books.google.fr/books?id=cUBKAAAAYAAJ&dq=editions:y8vXR4oK9R8C&pg=PR1&redir_esc=y#v=onepage&q&f=true On the Principles of Political Economy and Taxation] (1 ed.), London: John Murray</ref> If something is produced more efficiently and it is cheaper to import, states should be importing it, so that it frees the purchasing power of consumer. The surplus can therefore be reinvested into the domestic economy and develop productive capacities. According to the theory of comparative advantage, all actors, at all times, can mutually benefit from cooperation and voluntary trade.

What follows is the [https://en.wikipedia.org/wiki/Manchester_Liberalism Manchester School of Liberalism] that developed around Manchester, which is the site of the first industrial revolution, and notably the hub of the world's textile manufacturing industry, in the late 18th century and early 19th century.<ref>Bresiger, Gregory. "[https://cdn.mises.org/13_1_3_0.pdf Laissez Faire and Little Englanderism: The Rise, Fall, Rise, and Fall of the Manchester School]." Journal of Libertarian Studies 13 (1997): 45-80.</ref><ref>William Dyer Grampp, The Manchester School of Economics (Stanford: Stanford University Press, 1960). 3/16/2020. <https://oll.libertyfund.org/titles/2128></ref><ref>Wallace, E. (1960). The Political Ideas of the Manchester School. University of Toronto Quarterly, 29(2), 122–138. https://doi.org/10.3138/utq.29.2.122</ref> That school of thought came to dominate ideologically in England first, and then it diffused through different channels, first in France and then to the rest of Europe with some exceptions. The Manchester School also refers to a group of men who were responsible for the abolition of [[Between Free Trade and Protectionism: 1846 - 1914|Corn Laws]] and the adoption of free trade by Great Britain after 1846, such as [https://en.wikipedia.org/wiki/Richard_Cobden Richard Cobden] and [https://en.wikipedia.org/wiki/Herbert_Spencer Herbert Spencer]. The [https://en.wikipedia.org/wiki/Corn_Laws Corn Laws] blocked the import of cheap grain, initially by simply forbidding importation below a set price, and later by imposing steep import duties, making it too expensive to import grain from abroad, even when food supplies were short. The aboltion of the Corn Laws the United Kingdom's workers to consume cheaper foodstuffs and ensuring more regular employment initiating symbolically the great era of free trade that lasts until the First World War.

[[File:Imperial Federation, Map of the World Showing the Extent of the British Empire in 1886 (levelled).jpg|thumb|250px|An elaborate map of the [https://en.wikipedia.org/wiki/British_Empire British Empire] in 1886, marked in pink, the traditional colour for imperial British dominions on maps.]]

Along with that comes a geopolitical context in which England is the dominant power, coined by some authors as [https://en.wikipedia.org/wiki/Pax_Britannica Pax Britannica] with a global economy that is centred and structured around London.<ref>Schedvin, C. B. “Staples and Regions of Pax Britannica.” The Economic History Review, vol. 43, no. 4, 1990, pp. 533–559. JSTOR, https://www.jstor.org/stable/2596734.</ref><ref>Morris, Jan. [https://books.google.fr/books?id=pgftEXaDykkC&printsec=frontcover&dq=Pax+Britannica+By+Jan+Morris&hl=en&sa=X&ved=0ahUKEwiexaDRqp_oAhXODmMBHZUPB3cQ6AEIKTAA#v=onepage&q=Pax%20Britannica%20By%20Jan%20Morris&f=false Pax Britannica : the climax of an Empire]. London: Faber, 1968. Print.</ref> Today, New York is the capital of global capitalism; in the 19th century, London was the capital of capitalism.<ref>MARCHILDON, G. P. (1995). From Pax Britannica to Pax Americana and Beyond. The ANNALS of the American Academy of Political and Social Science, 538(1), 151–168. https://doi.org/10.1177/0002716295538000013</ref><ref> Parchami, Ali. [https://books.google.fr/books?id=Pwt6AgAAQBAJ&printsec=frontcover&dq=Hegemonic+Peace+and+Empire:+The+Pax+Romana,+Britannica+and+Americana&hl=en&sa=X&ved=0ahUKEwjMyNGIq5_oAhUAAGMBHYk0AHYQ6AEIKTAA#v=onepage&q=Hegemonic%20Peace%20and%20Empire%3A%20The%20Pax%20Romana%2C%20Britannica%20and%20Americana&f=false Hegemonic peace and empire : the Pax Romana, Britannica and Americana]. London New York: Routledge, 2009. Print.</ref>

What London and the United Kingdom do? What were the functions that they assumed?

Withing this global capitalism, the United Kingdom acted as a hegemon that anchored the system by assuming several functions. First, it provided free access to the domestic market. A free-trade dominated by England meant that other countries could export freely to the United Kingdom. Since the United Kingdom had the biggest economy, it also provided the biggest export markets for other economies that used that access to that market to grow their economies.

Therefore, the United Kingdom provided free access to its market as well as capitals for investment across the globe. Most of the infrastructural investment that took place before the First World War across the globe, including most importantly in American railways<ref>Jenks, L. H. (1951). Britain and American Railway Development. The Journal of Economic History, 11(4), 375–388. https://doi.org/10.1017/s0022050700085119</ref>, came from the United Kingdom, and that had a powerful developmental effect for the global economy as a whole.

Last, the United Kingdom and the London financial market, in particular, anchored the international monetary system through the [[International triumph of the gold standard: 1871 - 1914|gold standard]] and through the functions that London bankers played in lending money to different people and different firms across the globe. This allowed to stabilize currencies and stabilize commercial transactions.

These are the origins of the First Globalization or the Years of classical liberalism.

==Trade==

===The Cobden-Chevalier Treaty and the colonies===

How did international economic relation look like in the period between the abolition of the Corn law in 1846 and the Versailles Treaty in 1919?

[[Image:Lord-Palmerston-Addressing-The-House-Of-Commons-During-The-Debates-On-The-Treaty-Of-France-In-February-1860,-1863.jpg|thumb|250px|[https://en.wikipedia.org/wiki/Henry_John_Temple,_3rd_Viscount_Palmerston Lord Palmerston] Addressing the House of Commons During the Debates on the [https://en.wikipedia.org/wiki/Cobden%E2%80%93Chevalier_Treaty Cobden–Chevalier Treaty] in February 1860, as painted by [https://en.wikipedia.org/wiki/John_Phillip John Phillip] (1863).]]

There was a gradual dismantling of protections until about 1880 driven by United Kingdom policy. The United Kingdom began to liberalize its foreign trade unilaterally at first, and then to sign bilateral free trade treaties, most importantly with France and the [[Between Free Trade and Protectionism: 1846 - 1914|Cobden-Chevalier treaty]] in 1860. The treaty ended tariffs on the main items of trade such as wine, brandy and silk goods from France, and coal, iron and industrial goods from Britain. The economic effects were small, but the new policy was widely copied across Europe.<ref>Wikipedia contributors. (2020, February 8). Cobden–Chevalier Treaty. In Wikipedia, The Free Encyclopedia. Retrieved 18:43, March 16, 2020, from https://en.wikipedia.org/w/index.php?title=Cobden%E2%80%93Chevalier_Treaty</ref>

The [[Between Free Trade and Protectionism: 1846 - 1914|Cobden-Chevalier treaty]] is important because France is the most important continental power at the time. Before the unification of Germany, France is still not a hegemonic power on the continent but a dominant power on the continent. Thus, the fact that the dominant player of the world system, the United Kingdom, signs free trade deals with the dominant regional power in continental Europe, which is the centre of the world at the time, had a significant impact on the way the global economy worked at that time.

Another critical aspect of the gradual liberalization of commercial relations was the spread of colonial possessions. It is important to remember that notably the United Kingdom and France had a few colonies before the 19th century. But the spread of colonialism takes place during the 19th century. That is important because colonial possessions became open to free trading area.

The United Kingdom and France had converted to free trade, and through the dominance that they exercised political dominance through their colonial possessions, they opened up markets across the world to free trade. They did that through their dependencies and also by free trading former colonies in particular in Latin America, and particularly Argentina.

At the time, Argentina was a very important market. Argentina was a very important state for the global economy of the Golden Era.<ref>“[https://internationalman.com/articles/why-argentinas-golden-days-faded-and-why-its-a-huge-bargain-today/ Why Argentina's Golden Days Faded, and Why It's a Huge Bargain Today].” International Man, 4 Mar. 2016</ref> It was as rich as France; it was richer than Italy and Germany. In the 1870s real wages in Argentina were around 76% relative to Britain, rising to 96% in the first decade of the 20th century.<ref>Sánchez‐Alonso, Blanca. "[https://s3.amazonaws.com/academia.edu.documents/36855914/sexysexy.pdf?response-content-disposition=inline%3B%20filename%3DSexysexy.pdf&X-Amz-Algorithm=AWS4-HMAC-SHA256&X-Amz-Credential=AKIAIWOWYYGZ2Y53UL3A%2F20200316%2Fus-east-1%2Fs3%2Faws4_request&X-Amz-Date=20200316T185140Z&X-Amz-Expires=3600&X-Amz-SignedHeaders=host&X-Amz-Signature=8a15019ac2bccb7613a803641ce3d7e33ab8cdd11702e07716b74223b7b4a559 Making sense of immigration policy: Argentina, 1870–1930]." The Economic History Review 66.2 (2013): 601-627.</ref> GDP per capita rose from 35% of the United States average in 1880 to about 80% in 1905,<ref>Jorge Avila (May 25, 2006). "[https://web.archive.org/web/20160303175246/http://www.jorgeavilaopina.com/?p=61 Ingreso per cápita relativo 1875–2006]". Jorge Avila Opina. Archived from the [http://www.jorgeavilaopina.com/ original] on March 3, 2016.</ref> similar to that of France, Germany and Canada.<ref>Christopher Blattman; Jason Hwang; Jeffrey G. Williamson (June 2004). "[https://web.archive.org/web/20111015134547/http://chrisblattman.com/documents/research/2004.Winners%26Losers.NBERw10600.pdf The impact of the terms of trade on economic development in the periphery, 1870–1939: Volatility and secular change]" (PDF). National Bureau Of Economic Research. p. 39. Archived from the [https://chrisblattman.com/documents/research/2004.Winners&Losers.NBERw10600.pdf original] (PDF) on October 15, 2011. Retrieved February 1, 2017.</ref><ref>Wikipedia contributors. (2019, December 28). Economic history of Argentina. In Wikipedia, The Free Encyclopedia. Retrieved 18:55, March 16, 2020, from https://en.wikipedia.org/w/index.php?title=Economic_history_of_Argentina</ref>

===The exception: the United States and Germany===
There are two major exceptions to this picture.

The first one was the United States. From the [[The American Civil War and Reconstruction: 1861 - 1877|Civil War]] onwards and throughout the 19th century and until the mid-1930s, the United States was the most protectionist country. Its domestic market was virtually sealed to inputs from the United Kingdom. That was enabled by the victory of the North over the South during the Civil War because before that the Southern landowners and the slave owners were the main free trading political forces within the United States.<ref>Moore, John A. "[https://web.b.ebscohost.com/abstract?direct=true&profile=ehost&scope=site&authtype=crawler&jrnl=0896226X&AN=62799009&h=dd%2brSUVZPouInXJiaQ5axIxU%2bc75SDNLCyMVs2LQU8dJq5j6mQqEuZPwzRj8g3RQ5y%2b6nvCjmiU4iv0BN%2bhaNw%3d%3d&crl=c&resultNs=AdminWebAuth&resultLocal=ErrCrlNotAuth&crlhashurl=login.aspx%3fdirect%3dtrue%26profile%3dehost%26scope%3dsite%26authtype%3dcrawler%26jrnl%3d0896226X%26AN%3d62799009 THE GROSSEST AND MOST UNJUST SPECIES OF FAVORITISM" COMPETING VIEWS OF REPUBLICAN POLITICAL ECONOMY: THE TARIFF DEBATES OF 1841 AND 1842]." Essays in Economic & Business History 29 (2011).</ref><ref>Taussig, Frank William. The tariff history of the United States. New York: GP Putnam's Sons, 1923.</ref><ref>Hofstadter, Richard. “The Tariff Issue on the Eve of the Civil War.” The American Historical Review, vol. 44, no. 1, 1938, pp. 50–55. JSTOR, https://www.jstor.org/stable/1840850.</ref> The victory of the Northern industrialists and the Industrial Working Class in the Civil War paved the way for protecting the domestic market and for promoting and implementing developmentally infinite industry promotion policies.<ref>Nivola, Pietro S. “The New Protectionism: U.S. Trade Policy in Historical Perspective.” Political Science Quarterly, vol. 101, no. 4, 1986, pp. 577–600. JSTOR, https://www.jstor.org/stable/2150795.</ref>

The second major exception is Germany shortly after the unification when the landowners represented by Bismarck’s allies with the rising capitalists, rising bourgeoisie against the SPD, against the socialist movement, against the working class implemented policies of protectionism across the board.<ref>Webb, S. B. (1980). Tariffs, Cartels, Technology, and Growth in the German Steel Industry, 1879 to 1914. The Journal of Economic History, 40(2), 309–330. https://doi.org/10.1017/s0022050700108228</ref><ref>Becker, Andreas. “[https://www.dw.com/en/protectionism-from-bismarck-to-trump/a-43134923 Protectionism: from Bismarck to Trump].” DW.COM, 26 Mar. 2018.</ref> In 1879 the Reichstag (under the guidance of Chancellor Otto von Bismarck) imposed tariffs on industrial and agricultural imports into Imperial Germany.<ref>Duggan, Lawrence G., and Karl A. Schleunes. “[https://www.britannica.com/place/Germany/The-economy-1870-90 The Economy, 1870–90].” Encyclopædia Britannica, Inc.</ref> As explained by Asaf Zussman, the tariffs were imposed on a wide variety of industrial and agricultural goods marking a turning point in nineteenth-century European tariff history: the decades preceding it were characterized by trade liberalization while the following decades were characterized by a return to protectionism in continental Europe.<ref>Zussman, Asaf. "[http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.194.6563&rep=rep1&type=pdf The rise of German protectionism in the 1870s: A macroeconomic perspective]." Stanford Institute for Economic Policy Research, Discussion Paper. (2002).</ref><ref>Böhme, Helmut. “Big-Business Pressure Groups and Bismarck's Turn to Protectionism, 1873-79.” The Historical Journal, vol. 10, no. 2, 1967, pp. 218–236., https://www.jstor.org/stable/2637863.</ref>

The major difference between Germany and the United States is that the landowners in Germany are protectionists. In contrast, the landowners in the United States are pro-free trade. In ''Commerce and Coalitions: How Trade Affects Domestic Political Alignments'' published in 1989, Ronald Rogowsky applies the [[The Heckscher-Ohlin model: differences in factor endowments as a determinant of trade|Heckscher-Ohlin theory]] to the international economy to show how coalitions between factors of production of classes played out during the 19th century and led to the three outcomes mentioned earlier: free trading in the United Kingdom and protection in the United States and Germany.<ref>Rogowski, Ronald. [https://books.google.fr/books/about/Commerce_and_Coalitions.html?id=LsWBHAAACAAJ&redir_esc=y Commerce and coalitions : how trade affects domestic political alignments]. Princeton, N.J: Princeton University Press, 1990. Print.</ref><ref>Ronald Rogowski. ''Commerce and Coalitions: How Trade Affects Domestic Political Alignments''. Princeton: Princeton University Press. 1989. Pp. xvi, 208. $24.50. (1991). The American Historical Review. https://doi.org/10.1086/ahr/96.3.831-a</ref><ref>Reading summary: Ronald Rogowski, Commerce and Coalitions:How Trade Affects Domestic Political Alignments. http://www-personal.umich.edu/~franzese/ps489.Rogowski.pdf</ref><ref>Diebold, William. “[https://www.foreignaffairs.com/reviews/capsule-review/1991-06-01/commerce-and-coalitions-how-trade-affects-domestic-political Commerce And Coalitions: How Trade Affects Domestic Political Alignments].” Foreign Affairs, Princeton University Press, 28 Jan. 2009.</ref>

===Trends in international trade===
{{Article détaillé|Between Free Trade and Protectionism: 1846 - 1914}}

In terms of the overall dynamic of the system exports as a share of the world, output picked just before the First World War in 1913. Although there is a slump in the ratio of exports to the world output in the 1900s, then the share goes up in 1913, the moment when the global economy is the most open during the classic era.<ref>Estevadeordal, Antoni, et al. “The Rise and Fall of World Trade, 1870-1939.” The Quarterly Journal of Economics, vol. 118, no. 2, 2003, pp. 359–407. JSTOR, www.jstor.org/stable/25053910.</ref>

Despite the fact that the 19th century ended with a strong protectionism, the trade between the countries of the whole world knows a historical growth. The annual growth is 3.5% during the 19th century against 1% from 1500 to 1800. As a result, the importance of countries' foreign trade in relation to their economies is clearly increasing, and these economies are becoming increasingly open.

[[Image:Exportations de marchandises pour quelques pays développés en 1910.png|thumb|300px|Exports of goods for some developed countries in 1910.]]

Exports represented 2% of GNP in 1830, in 1860 it was 9% and in 1913 it was 14%. There is an increase in the openness of the European economy. The expansion of trade affects different countries unevenly. These differences reflect several factors, but especially the different size of economies. We see this clearly with the United States, because if we look at the level of exports, they arrive at almost the same level in absolute value as those of Great Britain, but account for only 6% of GDP whereas in the United Kingdom we speak of 18%.

The importance of third world trade is also increasing. If we look at the estimates, the share of exports between 1830 and 1913 increases from about 2% to 19%.

[[Image:Commerce international en produits manufacturés.png|thumb|center|400px|International trade in manufactured goods.]]

European countries dominate international trade in manufactured goods. More generally, the country's participation in international trade is closely linked to the structure of its economy. At the end of the period, the surplus of exports is impressive for Great Britain while for Latin America it is the opposite. This is typical because it is a region that has difficulty industrializing. 

[[Image:Commerce international en produits bruts – US$ billions.png|thumb|300px|International trade in gross products - billion US dollars.]]

We must recognize that despite the fact that we are seeing an intensification of industrialization, when we look at a distribution of the world's international trade, even though this trade is becoming more and more important, we see that even so international trade in terms of gross product is becoming more and more important. Great Britain depends on other countries for its gross products, the size of the deficit increases during this period. For Latin America, the situation is different. 

Some cases appear where there are both things at the same time with manufactured product capacities and natural resources to exploit.

==Investment==

As said previously, London provided investing capitals for infrastructure across the world. But, how did that happen? 

This is very important, and this is the question of the composition of international investments during the Golden Age. The shape it took was mostly bank loans for infrastructure investments and extracting activities such as mining and raw materials production.

That very few multinational corporations that existed at the time were in the primary sector in the mining and raw materials and agricultural sectors. They were organized, and it happened along the [https://en.wikipedia.org/wiki/Spoke%E2%80%93hub_distribution_paradigm hub and spokes structure] of that time. The advance countries exported capital to developing countries, but also to the United States while the less developed countries exported raw materials and commodities back to the advanced countries.

Until the Civil War, it is important to note that a country like the United States could be said to be part of the developing world. Why? Because the way it inserted itself in global capitalism was by being one of the hub and spoke structure and the heart being England, and France to a lesser extent. So before the Civil War, the United States mostly exported raw materials and cotton in particular from the South to the United Kingdom and France.

That was a prevalent pattern that during the classical era in the relations between Europe and Latin America, Asia, and Africa. That was the basic structure of the relationship between the advanced world and the developing world whether that developing world was an independent state in Latin America or colonial possessions in Africa and Asia.

[[File:Arthur Mees Flags of A Free Empire 1910 Cornell CUL PJM 1167 01.jpg|thumb|Map of the British Empire (as of 1910).]]

The international investment regime was based on colonialism because colonialism provided a legal framework within which the rights of basically English investors in Africa, Latin America, Africa Asia, and so lesser extent lands in America could be protected. Colonialism was to some extent a legal guarantee that if you were sitting somewhere in London and investing in bonds or equity in South Africa, you were sure that your rights were going to be protected because of Her Majesty’s government care of that.<ref>Frieden, J. A. (1994). International investment and colonial control: a new interpretation. International Organization, 48(4), 559–593. https://doi.org/10.1017/s0020818300028319</ref>

There is also the spread of the United Kingdom’s [[The great formative traditions of law|Common Law]] as the major legal framework that was used to organize international economic activity.<ref>George, Alexandra. [https://books.google.fr/books?id=-AskDwAAQBAJ&printsec=frontcover&dq=Globalization+and+Intellectual+Property&hl=en&sa=X&ved=0ahUKEwj90YiZ-6ToAhVFxoUKHXIjDbMQ6AEIOzAC#v=onepage&q=Globalization%20and%20Intellectual%20Property&f=false Globalization and Intellectual Property]. City: Routledge, 2017. Print.</ref><ref>Silverstein, Gordon. "[https://watermark.silverchair.com/010427.pdf?token=AQECAHi208BE49Ooan9kkhW_Ercy7Dm3ZL_9Cf3qfKAc485ysgAAAlQwggJQBgkqhkiG9w0BBwagggJBMIICPQIBADCCAjYGCSqGSIb3DQEHATAeBglghkgBZQMEAS4wEQQMofPj-GHEN3I3JuxpAgEQgIICB0LYE5dBZkIOSZ05g6FU7IBxZw5_oCbXvwQwqbCIDLP14bGBCBIYHuTEmFAXlZYliZdP2nOyDiH3XVbjCPrq0buRBKW44CXvQ556M3vCoudVdXpyHuwkrelkJEI7ujRHQog59fAbCEG3kF5vTLICF4-7HBaCwJ3fLB7ZeS135IAzHukGf721lxHrnNNdVLTAchY0IRVfFPu-6B3f-bdMVblOJ_9aJ-ZUDwBB3w8cXJZraBtZzpiN0TJFpwnc8myzOn_mbub1O76Fen99ub1jIz44uutAwzekWdrS7nHzT7IeOwFtPu0yge4Zq-p377HgQBRN1mr_HEQI1cNo2FHzqWo9JVsE4UIs6RUWUu-ovcFYRkzKW-3aVHDZ-Fh-9h1H5CrtRU7thI6eVVFaVHAlxsWqhcK6LyToyyjpsOa2rd5_sZufcrSrx1kAS_5UyupZFwGfOgx6gxcw0CDab_-D5wrglOMyzKMbpVV5v0-9LaIteTBP3txld-7WyDNn_paxaq3NuLXFzpW0YdwR9JiZmYaM_TAWzJh22NxKBkjM_Uq2yxqgLxfzHg_UU5yqn2FuYJjt-8ulic15WYedtyiIWzbZ9HF9ArDF1QgrCe5Qs-kb4vug-9OJ1mNSFwmITT8Fz-RWvwVnAIrcbkN_A6agbZf2o4d1S2iiqyGMHD7qmIJ9QJUu3C0fTA Globalization and the rule of law: A machine that runs itself]." Int'l J. Const. L. 1 (2003): 427.</ref><ref>Magee, Gary B., and Andrew S. Thompson. Empire and globalisation : networks of people, goods and capital in the British world, c.1850-1914. [https://books.google.fr/books?id=dVfEQmRuPC0C&lpg=PA115&ots=BFkCSrO09a&dq=british%20common%20law%20first%20globalization&pg=PA115#v=onepage&q=british%20common%20law%20first%20globalization&f=false Page 115]. Cambridge New York: Cambridge University Press, 2010. Print.</ref>

The second pillar was the [[International triumph of the gold standard: 1871 - 1914|gold standard]]. The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold.<ref>Lioudis, Nick. “[https://www.investopedia.com/ask/answers/09/gold-standard.asp What Is the Gold Standard?]” Investopedia.</ref> The gold standard operated as a good housekeeping seal of approval whereby investors knew that if a country was attached to the gold standard, it pursued microeconomic policies that safeguarded the interests of investors.

From that spot in the North Atlantic, a big chunk of the global economy was organized. By repercussion, the rest of the global economy was organized around the British Empire. And of course, China was under the influence of foreign powers and to a large extent of the United Kingdom.

==The organization of the international monetary system==

[[File:Bank act 1844.jpg|thumb|upright|Bank Act of 1844.]]

How was the international monetary system organized?

As Pax Britannica gradually spread across the globe, the monetary standard used in the United Kingdom became the monetary standard for the world, namely the [[International triumph of the gold standard: 1871 - 1914|gold standard]]. Gradually the world abandoned the silver standard or bimetallic standard, combining two gold and silver standards by establishing parity between the prices of the two metals. Sometimes after 1870, the gold standard more or less became the international monetary standard. It is the [https://en.wikipedia.org/wiki/Bank_Charter_Act_1844 Bank Charter Act of 1844] in the United Kingdom that formalized the adoption of the gold standard.<ref>[http://www.ledr.com/bank_act/1844032.htm Bank Charter Act 1844]</ref> This act, passed under the government of [https://en.wikipedia.org/wiki/Robert_Peel Robert Peel], was an attempt to limit the strong growth of the money supply allowed by the multiplication of banks in the 1830s.<ref>Horsefield, J. K. “The Origins of the Bank Charter Act, 1844.” Economica, vol. 11, no. 44, 1944, pp. 180–189. JSTOR, https://www.jstor.org/stable/2549352.</ref><ref>Whale, P. Barrett. “A Retrospective View of the Bank Charter Act of 1844.” Economica, vol. 11, no. 43, 1944, pp. 109–111. JSTOR, https://www.jstor.org/stable/2550283.</ref> The Bank Charter Act imposes the [https://en.wikipedia.org/wiki/British_Currency_School currency principle] on the United Kingdom, gives the Bank of England a monopoly on banknote issuance and requires it to hold gold reserves equal to 100% of the banknotes issued.<ref>O'Brien, D P. [https://search.proquest.com/openview/95eb72f03702f8c7744c79656672b76d/1?pq-origsite=gscholar&cbl=34921 Monetary base control and the Bank Charter Act of 1844]. History of Political Economy; Durham Vol. 29, Iss. 4,  (Winter 1997): 593-633. </ref> This is the triumph of the gold standard. 

It is important to know that just as today the international monetary system is based on the dollar and therefore, the New York financial markets play a dominant role in regulating the way the system works. That was the same back then with the City of London. Today the City of London plays a similar role to New York, but it does so in dollars and sterling. London is a major global hub for finance, but it is a hub for dollar finance, not sterling finance. In a way, it is not an annexe of New York, but it plays a similar role to New York in the current system.

At the time, the City of London provided the international reserve currency. People knew that just as under the [[Bretton Woods System: 1944 - 1973|Bretton Wood system]], dollars was as good as gold. At the time they knew that sterling was as good as gold. If you held sterling and assets in sterling, you were sure that their value would be preserved. Therefore, central banks across the world, private investors, were keen to hold sterling. Sterling became the world money in a way, an international reserve currency, and provided liquidity to stabilize international monetary systems for bank loans organized by private finance.

The gold standard was a good housekeeping seal of approval.<ref>Bordo, M. D., & Rockoff, H. (1996). The Gold Standard as a “Good Housekeeping Seal of Approval.” The Journal of Economic History, 56(2), 389–428. https://doi.org/10.1017/s0022050700016491</ref> Because in theory, the gold standard function in an automatic way. If a country registered trade deficits, it was importing more than it was exporting, there were gold outflows. There was a net outflow of gold. Why? Because countries had to pay with gold for their imports, and if they were in earning as much gold as they needed to pay for their inputs, there was a net outflow of gold.<ref>Wandschneider, Kirsten. “The Stability of the Interwar Gold Exchange Standard: Did Politics Matter?” The Journal of Economic History, vol. 68, no. 1, 2008, pp. 151–181. JSTOR, https://www.jstor.org/stable/40056779. </ref>

Because prices and wages were linked to gold, if there was a net outflow of gold, there was a deflationary effect that dragged prices and were just down and that led to an automatic process of macroeconomic adjustment. If prices and wages, in particular, fell in the domestic economy that was registering in trade deficit then obviously the purchasing power of that domestic economy came down, diminished and therefore the volume of inputs diminished and balanced was restored. That is the theory. It was not exactly like that, but that was a dominant way in which the international economy function at the macroeconomic at that time.

It is important to understand that what that meant was that external stability and monetary stability are either linked between domestic currencies and the domestic money supply to gold prevailed over the primacy of internal considerations. It was not possible under the gold standard to say that you wanted to reflect your economy by raising prices, by raising spending whilst at the same time you had a trade deficit. It was impossible to do that, or it was necessary to leave the gold standard. And if a state didn’t want to leave the gold standard because as the gold standard was the good housekeeping of approval. If a state did that, then inward investments from the United Kingdom and Europe would stop, and there would have been a problem in funding investment projects and so forth.

Thefore, adjustments were entirely domestic. It happened entirely based on deflating prices and wages. Thus, it required full elasticity of prices in wages.

=The interwar disintegration of global capitalism=

==The Absent Hegemon==
Let us start with the geopolitical and ideological conditions. The major feature in the transition between the first two stages of global capitalism is geopolitical with the decline of Pax Britannica and the absence during the interior-war period of a replacement, of a new hegemon that would take over the role played by the United Kingdom in the classical era and Pax Britannica. In other words, [https://en.wikipedia.org/wiki/Pax_Britannica Pax Britannica] was no longer, but [https://en.wikipedia.org/wiki/Pax_Americana Pax Americana] had not yet arrived. That is the basic story. And of course, that is the theory developed by Charles Kindleberger in his book, and that provided the impetus for the first major theoretical debate in international political economy in the 1970s, namely hegemonic stability theory.

The key fact was that American foreign policy was not yet fully liberal internationalist. Moreover, the American economy was still very much inward-looking.<ref>Simmons, Beth A. [https://books.google.fr/books?id=n_3RDwAAQBAJ&printsec=frontcover&dq=Who+Adjusts?:+Domestic+Sources+of+Foreign+Economic+Policy+During&hl=en&sa=X&ved=0ahUKEwiJ1ZTkj6noAhW3AmMBHRgPDFEQ6AEIKDAA#v=onepage&q=Who%20Adjusts%3F%3A%20Domestic%20Sources%20of%20Foreign%20Economic%20Policy%20During&f=false Who adjusts?: domestic sources of foreign economic policy during the interwar years]. Princeton University Press, 1997.</ref> [https://en.wikipedia.org/wiki/Jeffrey_Friedman_(political_scientist) Jeffrey Frieden] documents how during the interwar period, American banking and American finance as well as some capital intensive industrial sectors became outward looking because they had started to internationalize and to earn generate important profits abroad. Therefore they provided the basis for liberal internationalism. However, their weight within the domestic economy was not yet dominant enough in order to shift decisively the foreign policy of the United States towards liberal internationalism and away from protectionism and isolation.

<youtube>g9eOLbNgODE</youtube>

It is important to note that in the history of American foreign policy, you have two major stages: the 19th century and until the interwar period, you have protectionism and isolationism. The United States protects systemic markets and keeps out of the affairs of the political affairs of the world. And then from the interval period onwards, America became globalist power. On 24 September 2019, [https://en.wikipedia.org/wiki/Donald_Trump Donald Trump] gave a speech at the United Nations, and he said that the globalists are not going to fashion the 21st century, but patriots will.<ref>The White House. “[https://www.whitehouse.gov/briefings-statements/remarks-president-trump-74th-session-united-nations-general-assembly/ Remarks by President Trump to the 74th Session of the United Nations General Assembly].” The United States Government.</ref><ref>Crowley, Michael, and David E. Sanger. “[https://www.nytimes.com/2019/09/24/us/politics/trump-nationalism-united-nations.html Trump Celebrates Nationalism in U.N. Speech and Plays Down Iran Crisis].” The New York Times, The New York Times, 24 Sept. 2019.</ref> He is trying to reverse the secular course of American policy. From the interwar period, America became a globalist power, a liberal internationalist power that promoted free trade in open global capitalism and at the same time, both became interventionists abroad.

The issue that crystallized this geopolitical dynamic was the ratification of the [[The Peace of Paris and the League of Nations|League of Nations treaty]]. The League of Nations was the project first and foremost of President Wilson, it was an American project. However, the treaty was negotiated, but the United States Senate refused to ratify the treaty. Therefore, the United States never took part in the look off.<ref>Wright, Q. (1933). Book Review:The United States and the League of Nations: 1918-1920. Denna Frank Fleming. Ethics, 43(3), 350. https://doi.org/10.1086/208092</ref>

In terms of international economics, there was a gradual turn to protectionism in the 1920s under the Republican administrations.<ref>“[https://history.state.gov/milestones/1921-1936/protectionism Protectionism in the Interwar Period].” U.S. Department of State.</ref> It happened when the Republicans regained power after the war and restored the usual high rates, with the [https://en.wikipedia.org/wiki/Fordney%E2%80%93McCumber_Tariff Fordney–McCumber Tariff] of 1922.<ref>Wikipedia contributors. (2020, February 26). Protectionism in the United States. In Wikipedia, The Free Encyclopedia. from https://en.wikipedia.org/w/index.php?title=Protectionism_in_the_United_States</ref> So, until the 1940s, the Republican party was the party of protectionism and isolation, while the Democratic party was the party of free trade engaging with Europe. Before, the Republican Party was the party of the industrialists in the North. In contrast, the Democratic Party was the party of the slave owners in the South.

There was a turn to [[New Challenges in International Trade: 1914 - 1929|trade protectionism in the 1920s]] with a series of hikes in tariffs resulting in the passage of the [https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act Smoot-Hawley Tariff Act] in 1930.<ref>O’Brien, Anthony, et al. “[http://eh.net/?s=tariff%2B1920 Smoot-Hawley Tariff].” Economic History Association, 2013.</ref> This act is often referred to as being linked to the Great Depressi,on and it is true that this act plays a role in triggering reactions on the part of the United States' trading partners. The act raised US tariffs on over 20,000 imported goods.<ref>F. W. Taussig. [https://catalogue.nla.gov.au/Record/643865 The tariff history of the United States]. 8th ed., including a consideration of the tariff of 1930. New York, London, G. P. Putnam's sons.</ref>

In terms of finance, the United States refused to play the role of lender of last resort to stabilise the international system by extending credit after 1929 when panic ensued after the [[Dark history for the world economy: 1930 - 1945|Wall Street crash]]. The United States went off the gold standard in 1933 by giving primacy to domestic considerations. This was made through the [https://en.wikipedia.org/wiki/Executive_Order_6102 Executive Order 6102] signed on April 5, 1933, by President Franklin D. Roosevelt.<ref>Franklin, D. "[http://www.famguardian1.org/Subjects/MoneyBanking/Money/LegHistory/EO6102.pdf Roosevelt:" Executive Order 6102-Requiring Gold Coin, Gold Bullion and Gold Certificates to Be Delivered to the Government,"] April 5, 1933. Online by Gerhard Peters and John T. Woolley." The American Presidency Project.</ref><ref>“[https://www.history.com/this-day-in-history/fdr-takes-united-states-off-gold-standard FDR Takes United States off Gold Standard].” History.com, A&amp;E Television Networks, 24 Nov. 2009.</ref> Franklin D. Roosevelt, the President of that time, said so in so many words that crystallized isolationism in the 1930s. However, there has been a shift from the 1930s onwards towards liberal internationalism, but that shift did not culminate until the Marshall Plan in 1945.

In terms of ideology, the interwar period sees the decline of free trade and liberal economic doctrines and the associated rise of [https://en.wikipedia.org/wiki/Keynesian_economics Keynesianism] in terms of macroeconomic management, the idea that you cannot allow the macroeconomy to operate automatically as the gold standard prescribed. The idea of the welfare state is that there had to be some way of securing the incomes of workers. Along with the welfare state comes the idea of collective bargaining recognition of unions to set a floor below which wages cannot fall, and state interventionism in macroeconomic policies of the state taking over corporations regulating economic activity.

In terms of foreign economic policy, there is the rise of economic nationalism that in some cases assumes the form of economic autarky in particular in Nazi Germany, but also in the Soviet Union. In other cases, such as in the case of the United Kingdom, it assumes the form of imperial trade preferences and imperial protectionism within the [[Great Britain: The Largest of Empires at the Service of a Dominant Economy|British Empire]]. In contrast, before, the British Empire was opened to the trade of the world. From 1932, it ceases to be so.

Keynes wrote two pamphlets that marked the period namely ''A Revision of the Treaty'' in 1922 to advocate a reduction of German reparations and in ''A Tract on Monetary Reform'' published in 1823 he denounces the post-World War I deflation policies.<ref>Skidelsky, Robert Jacob Alexander. "John Maynard Keynes, 1883-1946: economist, philosopher, statesman." (2003).</ref> One was a critique of the Versailles Treaty and the way that the Allies tried to settle the issue and the other one is a critique of the attempt by the United Kingdom government to go back onto gold in 1925 by applying a deflationary policy.

==Trend in protectionism in the 1920s and 1930s==

There is a trend of protectionism in the 1920s, and it culminates in the early 1930s leading to a general turn into economic nationalism and autarky. The key date to remember is the Smoot-Hawley Tariff Act, formally United States Tariff Act of 1930, a law that implemented protectionist trade policies in the United States. 

[[Fichier:The evoluton of trade and tariffs since 1890.png|centre|vignette]]

It is possible to see the spike in the tariff level in the United States that’s the highest point of protectionism in the United States history, and it happened in 1930. It reversed in 1934, but 1930 is the culmination of American protectionism.

The [https://en.wikipedia.org/wiki/Imperial_Preference imperial preference system] set up by the United Kingdom in 1932 at the [https://en.wikipedia.org/wiki/British_Empire_Economic_Conference Commonwealth Conference on Economic Consultation and Co-operation] held in Ottawa whereby the dominions and colonial possessions agree to raise tariffs for inputs from outside the British Empire.<ref>Miners, N. (2002). Industrial development in the colonial empire and the imperial economic conference at Ottawa 1932. The Journal of Imperial and Commonwealth History, 30(2), 53–76. https://doi.org/10.1080/03086530208583141</ref><ref>Constantine, Stephen. [https://books.google.fr/books?id=CfSQAgAAQBAJ&printsec=frontcover&dq=The+making+of+British+colonial+development+policy,+1914-1940&hl=en&sa=X&ved=0ahUKEwjdltqYi7roAhUvy4UKHSR7BYAQ6AEIKDAA#v=onepage&q=The%20making%20of%20British%20colonial%20development%20policy%2C%201914-1940&f=false The making of British colonial development policy, 1914-1940]. London, England Totowa, N.J: F. Cass, 1984. Print.</ref> It was considered as a method of promoting unity within the British Empire and sustaining Britain's position as a global power as a response to increased competition from the protectionist of Germany and United States.<ref>"[https://www.globalsecurity.org/military/world/europe/uk-imperial-preference.htm British Empire]". www.globalsecurity.org.</ref><ref>The Editors of Encyclopaedia Britannica. “[https://www.britannica.com/topic/imperial-preference Imperial Preference].” Encyclopædia Britannica, Inc., 27 Oct. 2014.</ref> Thus, the United Kingdom is promoting an inward-looking trading block centred around the Empire. France also turns towards its empire, which is much smaller and so it is less of a problem.

There are German and Japanese attempts to form close regional trade blocks in the 1930s. That begins before Hitler takes power in 1933 with an attempt in 1931 to form a customs union between Germany and Austria.<ref>Orde, A. (1980). The Origins of the German-Austrian Customs Union Affair of 1931. Central European History, 13(1), 34–59. https://doi.org/10.1017/s0008938900008992</ref> It took also other forms, such as attempting to form preferential trade agreements with states in Eastern Europe as with the Schacht Agreements.<ref>Eichengreen, B., & Irwin, D. A. (1995). [https://www.dartmouth.edu/~dirwin/docs/Blocs.pdf Trade blocs, currency blocs and the reorientation of world trade in the 1930s]. Journal of International Economics, 38(1–2), 1–24. https://doi.org/10.1016/0022-1996(95)92754-p</ref><ref>Spaulding, Robert Mark. “German Trade Policy in Eastern Europe, 1890-1990: Preconditions for Applying International Trade Leverage.” International Organization, vol. 45, no. 3, 1991, pp. 343–368. JSTOR, https://www.jstor.org/stable/2706735.</ref><ref>Batou, Jean, and Thomas David. Uneven development in Europe : the obstructed growth of the agricultural countries, 1918-1939. Genève: Droz, 1998. Print.</ref><ref> Melo, Jaime, and Arvind Panagariya. New dimensions in regional integration. Cambridge New York, NY, USA: Cambridge University Press, 1995. Print.</ref><ref> Forbes, Neil. Doing business with the Nazis : Britain's economic and financial relations with Germany, 1931-1939. London Portland, OR: Frank Cass, 2000. Print</ref> Japan tries to set up the [https://en.wikipedia.org/wiki/Greater_East_Asia_Co-Prosperity_Sphere Greater East Asia Co-Prosperity Sphere]. It was an attempt initiated during the Shōwa era to create, for the benefit of the Empire of Japan, a self-sufficient bloc of Asian countries led by Japan and not dependent on Western countries. Japan invaded China in 1937, takes over the Philippines, and attempts to proceed in the same way as Nazi Germany, but in the East Asian economy.<ref>Kerry A. Chase. [https://www.press.umich.edu/pdf/047209906X-ch3.pdf CHAPTER 3: Interwar Trading Blocs - Japan, Britain, and Germany, 1919–39]. In ''Trading Blocs: States, Firms, and Regions in the World Economy''. The University of Michigan Press</ref>

The Soviet Union turned toward self-sufficiency after Stalin decided to abandon the New Economic Policy in 1928. The USSR was rushing toward a degree of economic isolation unparalleled by any industrial economy at peace.<ref>Dohan, Michael R. “[https://www.cambridge.org/core/services/aop-cambridge-core/content/view/127F025AAD6EF0BC74AA0F009B24ECC7/S0037677900087787a.pdf/economic_origins_of_soviet_autarky_1927281934.pdf The Economic Origins of Soviet Autarky 1927/28-1934].” Slavic Review, vol. 35, no. 4, 1976, pp. 603–635. JSTOR, https://www.jstor.org/stable/2495654.</ref> According to Dohan, the  motive for autarky most frequently cited by Western observers is Soviet fear of capitalist aggression, both military and economic.<ref>Alexander Gerschenkron, Economic Relations with the USSR (New York, 1945), p. 140</ref> But it can also be cited the other causes for the decline in Soviet trade such as Stalin's xenophobia and distaste for the uncontrollability of the foreign sector, effects of the world depression, and systemic characteristics of a Soviet-type economy which hinder the coordination of a highly variable foreign trade sector with a central plan. However, for Dohan, these explanations although insightful are not sufficient. The collapse of Soviet foreign trade in the 1930s had  its roots in the pre-World War I structure of the Russian economy and foreign trade sector.<ref>Dohan (1969), pp.118-48; and Holzman (1963), pp.29S-98.</ref> The USSR was probably the most closed of these national economies in the 1930s and the 1940s.<ref>Armstrong, Willis C. “The Soviet Approach to International Trade.” Political Science Quarterly, vol. 63, no. 3, 1948, pp. 368–382. JSTOR, https://www.jstor.org/stable/2144779.</ref><ref>Hough, J. F. (1986). Attack on protectionism in the Soviet Union? A comment. International Organization, 40(2), 489–503. https://doi.org/10.1017/s0020818300027211</ref>

Then Latin America, in particular, Argentina abandoned free trade in the 1930s. trade openness significantly declined during the 1930s while Argentina showed high openness ratios ranging from 30 to 40 per cent during the first globalization era.<ref>Brambilla, I., Galiani, S., & Porto, G. (2018). [https://latinaer.springeropen.com/articles/10.1007/s40503-017-0050-9 Argentine trade policies in the XX century: 60 years of solitude]. Latin American Economic Review, 27(1). https://doi.org/10.1007/s40503-017-0050-9</ref> Until the 1930s, the economy of Argentina and other Latin american countries were centred on the export of raw materials and the dominance of landowners over capital and the working class. This can be explained as following the 1929 crisis, raw materials prices collapsed while the prices of manufactured imports do not falling.<ref>Iriye, A, Akira Iriye, and Saunier. The Palgrave dictionary of transnational history. New York: Palgrave Macmillan, 2009. Print.</ref>

If one were to determine the point at which this dynamic was reversed, one would have to choose the [https://en.wikipedia.org/wiki/Reciprocal_Tariff_Act Reciprocal Tariff Act] of 1934 that authorizes the American president to pass trade agreements with other nations, particularly Latin American countries, without ratification by Congress.<ref>Schnietz, K. E. (2000). The Institutional Foundation of U.S. Trade Policy: Revisiting Explanations for the 1934 Reciprocal Trade Agreements Act. Journal of Policy History, 12(4), 417–444. https://doi.org/10.1353/jph.2000.0032</ref><ref>Haggard, S. (1988). The institutional foundations of hegemony: explaining the Reciprocal Trade Agreements Act of 1934. International Organization, 42(1), 91–119. https://doi.org/10.1017/s0020818300007141</ref><ref>Schnietz, K. E. (2003). The Reaction of Private Interests to the 1934 Reciprocal Trade Agreements Act. International Organization, 57(1), 213–233. https://doi.org/10.1017/s0020818303571089</ref><ref>Berglund, Abraham. “The Reciprocal Trade Agreements Act of 1934.” The American Economic Review, vol. 25, no. 3, 1935, pp. 411–425. JSTOR, https://www.jstor.org/stable/1802526.</ref><ref>Irwin, Douglas A. "[https://www.nber.org/chapters/c6899.pdf From Smoot-Hawley to reciprocal trade agreements: changing the course of US trade policy in the 1930s.]" The defining moment: The Great Depression and the American economy in the twentieth century. University of Chicago Press, 1998. 325-352.</ref> From that point onwards, the American president becomes a bastion of free trade as opposed to the more protectionist-inclined Congress. American industry also becomes much more internationalized and abandoned the traditional policy of protectionism and isolationism. The Republican Party from the late 1930s onwards started to advocate liberal internationalism, culminating with the administration of [https://en.wikipedia.org/wiki/Dwight_D._Eisenhower Dwight Eisenhower] in the 1950s.<ref>Kupchan, C. A., & Trubowitz, P. L. (2007). [https://www.mitpressjournals.org/doi/pdf/10.1162/isec.2007.32.2.7 Dead Center: The Demise of Liberal Internationalism in the United States]. International Security, 32(2), 7–44. https://doi.org/10.1162/isec.2007.32.2.7</ref><ref>Ikenberry, G. J. (2018). [https://watermark.silverchair.com/iix241.pdf?token=AQECAHi208BE49Ooan9kkhW_Ercy7Dm3ZL_9Cf3qfKAc485ysgAAAk4wggJKBgkqhkiG9w0BBwagggI7MIICNwIBADCCAjAGCSqGSIb3DQEHATAeBglghkgBZQMEAS4wEQQMxGCHNPRBFPmo_1YMAgEQgIICAVXI5j7I8bWyQQ3J1laiIxRHqBtMVLdIiQRofOCvyT5bKSbHLNoytg4EUKn4OLO9x-5b2iZniGf_9z5nuUnWy80k8QfMVfMzQ3SNOBummGNNB5EwshSnDjnV0szqYYDnEBhki0SpbV9ixYvvFf2GnP4h_Rhg_IZ7mZ60uqnPaTBdbD6TbLQPyjG2FYN-OnLcBqZ8c8DUo1DBCUcCLAhoVNojC_bN1Y1BPoRafOhlezGKohQlXdfG2ELF3Lj9S5FbTQikQgxB8xiNfX8YBOA3FJhHEsleYqWl5BwzvBn_hIKvTcFNWNz5Yjn2ckrKyAiBeeYJ-uq4foWmBIbE58ORaD1P0mG2LMwuiuriNEPvcn4IPJhkgJFqRal3Fvd-y8K__1zFPJiOd1tgE1O-m4IzrLu0sFRLYx1n-bMnWKkrAkAvJcfVQ_giddf0FiSab5RO9-5_WeouEuX2TnHyxnQaB5sUMLFpG0suUWAk4_dXm2n7fmmqdvZnbHG9hgUL9DcGl9PD7nZ-WLT6z3BaIn8L50h0Ep-DbF4YEjv1-NzffKEOybArZT2Um0S83fLrVObTKcMb8XAA5yoI2QMZWV5t0X1C-iVUadbDjJhsZjIIOHWbqH7e_8KANTeuGvskDTVhJvh68Xe1c3jInR95ZXb49usXNir1g_Ye_237YMAT5sHKig The end of liberal international order?] International Affairs, 94(1), 7–23. https://doi.org/10.1093/ia/iix241</ref>

==A new pattern of international investment==

This period is the beginning of a major shift in the way the international economy operates. That is the most important fact that distinguishes what happens after the Second World War with what happened in the classical era before the First World War.

That is when American corporations begin to invest for production abroad. There is a new pattern of international investment. It doesn’t happen within the hub and spoke structure, and it is no longer North-South. It is no longer developed countries exporting manufactured goods and importing raw material from the south. It takes more the form of North-North foreign direct investment within the same sectors of activity in particular industrial sectors.

Bank loans as a share of international investment decline and foreign direct investment (FDI) operate themselves. Economic operations abroad take over. That is the beginning of multinational enterprise as we know it today.<ref>Lipsey, R. (2001). [https://www.nber.org/papers/w8665 Foreign Direct Investment and the Operations of Multinational Firms: Concepts, History, and Data]. National Bureau of Economic Research. https://doi.org/10.3386/w8665</ref> Before, in the classical era, there were no multinational enterprises in the form that we know them today.

In the case of Europe that sparks. It took of commercial invasion of Europe and stimulated the surge for a large unified market with Europe to rival the size of the American and imitate the size of American corporations. That is where the beginnings of the idea of European unification come from. While looking at the history of Europeanism and ideologies in the 1910s, 1920s and 1930s, it is clearly a reaction to American economic dominance, and American economic dominance and advance are perceived as a function of the size of the American domestic market. The idea is that Europe has to have the same domestic market as the United States or at least equal to that of the United States to be able to develop large corporations, just like the American had done. Similarly, Japan attempts to broaden its domestic market through the [https://en.wikipedia.org/wiki/Greater_East_Asia_Co-Prosperity_Sphere Greater East Asia Co-Prosperity Sphere] (GEACPS).

In less developed countries, there is a decoupling that initiates from global capitalism. There was an inward turn because of the degradation in terms of trade which initiated a wave of expropriations of foreign multinational corporations in particular in the oil sector. 

The oil sector was the sector that typified the hub and spoke structure of international investment and international production. The key date characterizing that turn towards expropriating for investment is the [https://en.wikipedia.org/wiki/Mexican_oil_expropriation Mexican oil expropriation of 1938] that created the national oil corporation [https://en.wikipedia.org/wiki/PEMEX Pemex] in Mexico and then was followed in particular by Saudi Aramco.

==The end of Gold Standard==

The gold standard broke down in 1914 and countries, including the United Kingdom, started issuing fiat currencies.<ref>Bemanke, Ben, and Harold James. "[https://www.nber.org/chapters/c11482.pdf The gold standard, deflation, and financial crisis in the Great Depression: An international comparison]." Financial markets and financial crises. University of Chicago Press, 1991. 33-68.</ref> What are fiat currencies? Fiat currencies are what you have in your pockets today, namely paper money. It is a currency without intrinsic value that has been established as money, often by government regulation.<ref>Wikipedia contributors. (2020, March 3). Fiat money. In Wikipedia, The Free Encyclopedia. Retrieved 20:42, March 28, 2020, from https://en.wikipedia.org/w/index.php?title=Fiat_money</ref> That value is not fixed to a metallic standard or to precious metal. Its value depends on the money supply, on the volume of money, and that is a decision of the central banks. 

Central banks now can decide the value of a currency interactively, and that is the question of monetary policy related to inflation. It is what happened during the First World War to facilitate war finance.

[[File:Tyldesley miners outside the Miners Hall during the 1926 General Strike.jpg|thumb|upright=2.1|Striking miners during the 1926 general strike.]]

From 1919 onward there was an attempt to restore some the gold standard. The major problem here is that for the United Kingdom it would result in deflating its domestic economy, make the British pound too strong for effective exporting, and pushdown wages. With policies associated with Winston Churchill, the standard was reinstated in 1925.<ref>“[https://www.parliament.uk/about/living-heritage/transformingsociety/private-lives/yourcountry/collections/churchillexhibition/churchill-the-orator/gold-standard/ Churchill's speech about the Gold Standard].” UK Parliament.</ref> Ten months later the [https://en.wikipedia.org/wiki/General_Council_of_the_Trades_Union_Congress General Council of the Trades Union Congress] (TUC) called a [https://en.wikipedia.org/wiki/1926_United_Kingdom_general_strike general strike] in the United Kingdom that lasted nine days, from 3 May 1926 to 12 May 1926, and the attempt goes down the drain. There is a general strike because workers did not want to take deflation, lengthening the workday and reducing wages. So the gold standard is history because of the general strike in the United Kingdom in the 1920s.

A new reality emerged, which is that external monetary stability will no longer prevail over domestic economic considerations and policies. There has to be some accommodation between external constraints and domestic imperatives. 

The basic political fact behind that is the rise of the labour and the socialist movement which led to wage rigidity and the end of perfectly elastic wages. Because workers are now organized, they can organize and strike to resist pay cuts. Therefore, it is no longer possible to have a monetary system that works automatically by deflating prices and wages.

In practice, the gold standard was over in 1926. Formally it ended in 1930 when the United Kingdom abandoned the gold standard in 1931 under a Labour government.<ref>Morrison, J. A. (2015). Shocking Intellectual Austerity: The Role of Ideas in the Demise of the Gold Standard in Britain. International Organization, 70(1), 175–207. https://doi.org/10.1017/s0020818315000314</ref><ref>Bordo, Michael D., et al. “[https://www.econlib.org/library/Enc/GoldStandard.html Gold Standard].” Econlib.</ref> It led to a sharp devaluation in sterling and helped the United Kingdom to recover from the crisis.<ref>Titcomb, James. “[https://www.telegraph.co.uk/finance/commodities/11330611/How-the-Bank-of-England-abandoned-the-gold-standard.html How the Bank of England Abandoned the Gold Standard].” The Telegraph, Telegraph Media Group, 7 Jan. 2015.</ref> 

[[Fichier:Gold standard-the new york time archives.png|vignette|droite|Photo Credit: The New York Times Archive.<ref>Krishna, Mrinalini. “[https://www.investopedia.com/news/when-fdr-abandoned-gold-standard/ When FDR Abandoned the Gold Standard].” Investopedia, Investopedia, 29 Jan. 2020.</ref>]]

In 1933, in the middle of the [https://en.wikipedia.org/wiki/London_Economic_Conference London Economic Conference] that attempts to rebuild international monetary cooperation and win agreement on measures to fight the Great Depression, Roosevelt announced that the United States will not support the Conference agenda as outlined.<ref>Rauchway, Eric. “[https://www.bloomberg.com/opinion/articles/2013-03-21/how-franklin-roosevelt-secretly-ended-the-gold-standard How Franklin Roosevelt Secretly Ended the Gold Standard].” Bloomberg.com, Bloomberg, 2013.</ref><ref>Edwards, Sebastian. “[https://www.bloomberg.com/opinion/articles/2018-05-22/fdr-s-battle-over-the-gold-standard-changed-the-u-s The Untold Story of FDR and the Battle Over Gold].” Bloomberg.com, Bloomberg, 2018.</ref> Roosevelt did not want to tie his hands by tying the value of the dollar to gold to allow the external value of the Dollar and the exchange rate to float according to the vagaries of his domestic economies.

That corresponds to the collapse of the international trading system in the early 1930s. There is one date that marks the reversal of that trend. It is 1936 and the [https://en.wikipedia.org/wiki/Tripartite_Agreement_of_1936 Tripartite Agreement of 1936] between the United States, the United Kingdom and France. Subscribing nations agreed to refrain from competitive depreciation to maintain currency values at existing levels, as long as that attempt did not interfere seriously with internal prosperity.<ref>Wikipedia contributors, 'Tripartite Agreement of 1936', Wikipedia, The Free Encyclopedia, 18 December 2019, 07:56 UTC, <https://en.wikipedia.org/w/index.php?title=Tripartite_Agreement_of_1936</ref> That is the first attempt to restore some kind of international monetary system based on active cooperation between central banks. Central banks from now pledge to help each other, counteract outflows of gold and money in order to stabilize exchange rates between the major currencies that make up the world economy. The agreement stabilized exchange rates, ending the [https://en.wikipedia.org/wiki/Currency_war currency war] of 1931 - 1936, but failed to help the recovery of world trade.<ref>Robert A. Mundell and Armand Clesse (2000). The Euro as a stabilizer in the international economic. Springer. p. 284. ISBN 978-0-7923-7755-9.</ref>

=The postwar economic order: Embedded Liberalism=

The third stage in the history of global capitalism is the stage called Embedded liberalism. The concept of embedded liberalism was introduced by John Ruggie in the article ''International regimes, transactions, and change: embedded liberalism in the postwar economic order'' published in 1982.<ref>Ruggie, J. G. (1982). [https://bbs.pku.edu.cn/attach/20/c5/20c50510067906d7/io82ruggie.pdf International regimes, transactions, and change: embedded liberalism in the postwar economic order]. International Organization, 36(2), 379–415. https://doi.org/10.1017/s0020818300018993</ref> According to Ruggie, embedded liberalism is a commitment to a new kind of liberal multilateralism compatible with 'domestic interventionism' aiming at supporting domestic social security and economic stability within Western industrialized countries.<ref>Helleiner, E. (2019). The life and times of embedded liberalism: legacies and innovations since Bretton Woods. Review of International Political Economy, 26(6), 1112–1135. https://doi.org/10.1080/09692290.2019.1607767</ref> Embedded liberalism is a term designed to convey the fact that the operating principle of this stage of global capitalism was a way to accommodate the imperative of external stability and the imperative of domestic policy autonomy.<ref>Abdelal, Rawi, and John G. Ruggie. "[https://tobinproject.org/sites/tobinproject.org/files/assets/New_Perspectives_Ch7_Abdelal_Ruggie.pdf The principles of embedded liberalism: Social legitimacy and global capitalism]." New perspectives on regulation (2009): 151-162.</ref> 

==The advent of Pax Americana==

The major shift takes place after 1947 with the advent of the [https://en.wikipedia.org/wiki/Pax_Americana Pax Americana] and the replacement of the previous hegemon before the First World War, Pax Britannica.

During the second half of the 1930s and the 1940s, liberal internationalism prevails over isolationism and protectionism in the United States. Just at the same time as in the 1930s, American industry turned to free trade, converts to free trade, and the Republican Party gradually also became a pro-free-trade position.

Why is it so? 

Because during the Second World War, most of the sectors in the American economy internationalized developping activities with important sources of profit abroad. Therefore there is a stake in the way the international economy works, and sectors want the American state to play a stabilizing role in order to safeguard their investments and markets abroad.

The United States promotes multilateral liberalization in trade and financial flows. It keeps its domestic market open for its allies, and that is a significant feature of the few decades following the end of the Second World War. The United States notably becomes a source of international investment for construction in particular in the late 1940s and the early 1950s operating also in Europe, Japan and Korea. It stabilizes the international economic system by providing finance and creates space by doing so to reconcile external imperatives and domestic policy autonomy across the world.

==The Second and Third Worlds==
But just as the United States is doing, there are vast chunks of the world that stand aside. Those are the so-called second and third worlds. The second world is the world under the domination of the USSR and China after 1949. The Third World is the former colonial world that will, later on, give rise to the non-aligned movement and the [https://en.wikipedia.org/wiki/Group_of_77 Group of 77] (G77) in the United Nations.

[[Fichier:First-Second-Third-world-map.png|vignette|Worldmap of the First, Second, and Third World. The map shows the countries of the US aligned countries of the First World (in green), the Communist states (in red), the Third World (in yellow). European neutral states (in white), and countries which have been communist nations for a short period in light red. Image: [https://www.nationsonline.org/oneworld/third_world_countries.htm nationsonline.org]]]

Those states pursue inward-oriented industrialization and development. In the case of Latin America and Asia and particular India that takes the name of [https://en.wikipedia.org/wiki/Import_substitution_industrialization Import substitution industrialization] (ISI).<ref>Silva, E. (2007). The Import-Substitution Model. Latin American Perspectives, 34(3), 67–90. https://doi.org/10.1177/0094582x07300589</ref><ref>Baer, Werner. “Import Substitution and Industrialization in Latin America: Experiences and Interpretations.” Latin American Research Review, vol. 7, no. 1, 1972, pp. 95–122. JSTOR, https://www.jstor.org/stable/2502457.</ref><ref>Sapelli Claudio. 2003. [https://repositorio.uc.cl/bitstream/handle/11534/4837/000352269.pdf?sequence=1 The Political Economics of Import Substitution Industrialization] - [https://www.uc.cl/ Pontificia Universidad Católica de Chile] - [https://economia.uc.cl/ Instituto de Economia]</ref>

To a large extent, ideologically, this is a return to prescriptions that derived from mercantilist thought, in particular from the thinking of economic nationalists like [https://en.wikipedia.org/wiki/Alexander_Hamilton Alexander Hamilton] and [https://en.wikipedia.org/wiki/Friedrich_List Frederick List].<ref>Mehmet, Ozay (1999). Westernizing the Third World: The Eurocentricity of Economic Development. London: Routledge.</ref><ref>Chang, Ha-Joon (2002). Kicking Away the Ladder: Development Strategy in Historical Perspective. London: Anthem Press.</ref>

The idea is that to develop industrial capacities and technological capacities, a country has to see a lot of itself from the world economy. In order to keep out the imports of more advanced countries that prevent its own industry from acquiring those capacities and developing its own economies of scale, the country has to reserve the domestic market to its own industrial firms. It is, therefore, necessary for them to replace these imports with domestic production to gaining their independence. They do so notably by placing high tariffs on imports and by implementing protectionist and inward-looking trade policies. For those countries, it is an attempt to reduce foreign dependency through local production of industrialized products, whether through national or foreign investment, for domestic or foreign consumption. 

In those cases in the Second and the Third worlds, the shift towards neo-economic nationalism goes hand in hand with the political victory of urban classes, industrial capital, intellectuals the industrial working classes over landowners. Those were the forces that dominated Latin America before the 1930s, and those were no longer the forces that dominated Latin America after the 19th. The same goes before India.

==Multilateral trade liberalization==

===Multilarization===
How did multilateralization in trade play out? 

The United States promoted the setting up of international organizations to promote multilateral trade liberalization. The original idea was to have an [https://en.wikipedia.org/wiki/International_Trade_Organization International Trade Organization]. A treaty began to be negotiated. It is in this context that, in 1948, the [https://en.wikipedia.org/wiki/International_Trade_Organization Havana Charter] attempted to establish international rules to regulate and facilitate trade between the various signatory countries. But it filtered in 1948 because the United States Senate refused to ratify the Charter of the International Trade Organization.<ref>Van den Bossche, Peter. The law and policy of the World Trade Organization: text, cases and materials. Cambridge University Press, 2008.</ref><ref>P.B. Kenen, The International Economy, I, 376</ref><ref>Bronz, George. "[https://heinonline.org/HOL/LandingPage?handle=hein.journals/hlr62&div=68&id=&page= The International Trade Organization Charter]." Harv. L. Rev. 62 (1948): 1089.</ref><ref>Diebold, William. "[https://heinonline.org/HOL/LandingPage?handle=hein.journals/niulr14&div=18&id=&page= Reflections on the International Trade Organization]." N. Ill. UL Rev. 14 (1993): 335.</ref><ref>Bronz, George. “An International Trade Organization: The Second Attempt.” Harvard Law Review, vol. 69, no. 3, 1956, pp. 440–482. JSTOR, https://www.jstor.org/stable/1337394.</ref> In order to understand the reason for this refusal, it is necessary to see that the Havana Charter provides for an organisation fully affiliated to the United Nations. However, the United Nations has a court of justice: the International Court of Justice sits in The Hague replacing the Permanent Court of International Justice of the League of Nations in 1946. The United States, the world's largest economic power at the time, did not want to be under the binding authority of international court judges who would take over the affairs of states.<ref>Organisation internationale du commerce. (2020, mars 19). Wikipédia, l'encyclopédie libre. Page consultée le 22:38, mars 19, 2020 à partir de http://fr.wikipedia.org/w/index.php?title=Organisation_internationale_du_commerce&oldid=168582489.</ref> In the absence of an international trade organization to coordinate their commercial policies and deal with problems related to their trade relations, countries will turn from the early 1950s to the only established multilateral international trading institution: the General Agreement on Tariffs and Trade (GATT). It highlights the continuing influence of protectionist and isolationist currents within the United States even if declining. The United States ratifies the United Nations Charter, ratifies the International Monetary Fund Charter, and the World Bank charter. In this regard, the case of the International Trade Organization is an isolated victory for the protectionists.

At the same time as the International Trade Organization fails, the [https://en.wikipedia.org/wiki/General_Agreement_on_Tariffs_and_Trade General Agreement on Tariffs and Trade] (GATT) takes shape. It is not a formal organization, it does not have formal rules, it does not have arbitration panels, it does not have all sorts of instruments standing to some limited extent above the sovereignty of national states. It is a forum for multilateral negotiation where liberalization takes place. As per its preamble, its purpose is the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis." It is the answer to the World Trade Organization (WTO), which is the ITO reason from its ashes and set up in 1995. And within GATTS are organized a series of rounds of trade liberalization.<ref>“[https://www.joc.com/history-gatt-rounds_19931214.html History of GATT Rounds].” | [https://www.joc.com/ JOC.com].</ref><ref>[https://exhibits.stanford.edu/gatt GATT Digital Library 1947–1994 at Stanford University]</ref>

The reasons why those negotiations are successful is that negotiations in the 1950s the 1960s and even the 1970s are mostly between the United States and Western Europe and to a lesser extent Japan. In particular, after the treaty of Rome comes into effect in 1958, those negotiations until the Uruguay round are mostly a match between Washington and Brussels.

Multilateral trade liberalization is organized along a set of norms and rules that are set to guide the way in which international trade corporation is to take place. There is gradually liberalization. The United States does not push for a total elimination of tariffs and other barriers to trade. However, it promotes a gradual liberalization because it recognizes that to abruptly liberalization can stimulate resistance to trade.

An important principle is the pne of non-discrimination with the [https://en.wikipedia.org/wiki/Most_favoured_nation most favorite nation rule] by which each signatory state undertakes to grant to the other any advantage that it would grant to a third state.<ref>“[https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm Understanding the WTO - Principles of the Trading System].” WTO.</ref> In the World Trade Organization (WTO) agreements, the most-favoured-nation (MFN) clause states that any trade advantage granted by one country to another must be immediately extended to all WTO members. It is the idea, for example, that if the United States lowers tariffs for the United Kingdom for inputs, it has to do the same across the board for all other trading partners in the system. Therefore, it is the idea that there has to be liberalization across the board and not simply preferential trade liberalization. With this principle, what is given to one is given to all without discrimination.

===Preferential Trade Agreements===
There are several safeguards against the stabilizing effects of trade liberalization. The norms of the system allow countries to reinstate barriers to trade, to close up their economies temporarily if the effects of liberalisation result in political and economic destabilization.

That is the theory, in practice, things fold out differently. Why is that so? 

That is mainly because the most important trade liberalisation effort during the Embedded Liberalism stage is preferential in nature and not multilateral. That is, for example, the setting of the European customs union progressively in the 1950s and the 1960s which is also the origin of the European Union of today.

It is important to realize that the setting of the customs union in Europe in 1957 goes against the spirit of the rules of the system. Because it is a [[Preferential Trade Agreements|preferential trade agreement]], it is a preferential liberalization creating trade diversion and to the detriment of American exporters. American opposed the European customs union because they know that they are going to lose out. However, the United States allows and promotes that kind of liberalization because it sees liberalization of trade within Europe as a key plunk very construction of the Western European economy. That takes precedence over multilateral liberalization.

Most importantly, the customs union in Europe sets a precedent for what is going to come in the next stage, namely from the early 1980s a wave of preferential trade agreements. That becomes much more important in terms of the volume of world trade that what multilateral liberalization will be.

In a way, the system promotes one thing in theory, and, in practice, does something different.

==Structural investments and multinational enterprises==

===Structural investments===
There are two aspects to this. One is the way infrastructural investment in the developing world is going to be financed from now. It is no longer done through private funds and bank lending done from London and New York. It is to be done by public credits extended by international organizations or the United States Treasury. That is the origins of [https://en.wikipedia.org/wiki/World_Bank_Group the World Bank Group] (WBG) composed by five members institutions which are the [https://en.wikipedia.org/wiki/International_Bank_for_Reconstruction_and_Development International Bank for Reconstruction and Development]  (IBRD), the [https://en.wikipedia.org/wiki/International_Development_Association International Development Association] (IDA), the [https://en.wikipedia.org/wiki/International_Finance_Corporation International Finance Corporation] (IFC), the [https://en.wikipedia.org/wiki/Multilateral_Investment_Guarantee_Agency Multilateral Investment Guarantee Agency] (MIGA) and the [https://en.wikipedia.org/wiki/International_Centre_for_Settlement_of_Investment_Disputes International Centre for Settlement of Investment Disputes] (ICSID). The first two are sometimes collectively referred to as the World Bank.<ref>Wikipedia contributors. (2020, March 29). World Bank Group. In Wikipedia, The Free Encyclopedia. Retrieved 09:01, April 4, 2020, from https://en.wikipedia.org/w/index.php?title=World_Bank_Group&oldid=948011839</ref>

[[Fichier:GDP history Since 1950 ~ 2016.png|vignette|Gross national income per capita history 1950~2016.]]

The International Bank for Reconstruction and Development (IBRD) was precisely established in 1944 to offers loans and finance infrastructure projects in middle-income developing countries such as Africa, Latin America and Asia. Along with that, there are American initiatives for reconstruction in Western Europe and Japan. That is the [https://en.wikipedia.org/wiki/Marshall_Plan Marshall Plan] and its Japanese equivalent introduced in 1947. A functional equivalent to those plans is the boost to the Korean economy that comes out of wars spending during the Korean War in the Korean Peninsula in the 1950s. 

To a large extent, the origins of what later on was to be called the Western European economic miracle, the [https://en.wikipedia.org/wiki/Japanese_economic_miracle Japanese Economic Miracle], and the [https://en.wikipedia.org/wiki/Miracle_on_the_Han_River Korean Economic Miracle] have to do with the fact that early on the American government decided to fund major investments in infrastructure in those countries to provide them with a platform on the basis of which economic development was going to take place in its allies.<ref>Crawford, Robert J. "Reinterpreting the Japanese economic miracle." Harvard Business Review 76.1 (1998): 178-183.</ref><ref>Hassink, R. (1999). South Korea’s economic miracle and crisis: Explanations and regional consequences. European Planning Studies, 7(2), 127–143. https://doi.org/10.1080/09654319908720508</ref><ref>Foreman-Peck, J. (2014). European Industrial Policies in the Post-War Boom: “Planning the Economic Miracle.” In Industrial Policy in Europe after 1945 (pp. 13–47). Palgrave Macmillan UK. https://doi.org/10.1057/9781137329905_2</ref>

===Multinational enterprises===
The other important trend is the culmination of the shift away from the [https://en.wikipedia.org/wiki/Spoke%E2%80%93hub_distribution_paradigm hub and spoke structure] of the Classical Era towards the years of multinational enterprises. That is a trend that began in the 1920s with American corporations investing in Europe and to a much lesser extent in Japan, but mostly Europe. 

That trend comes mature during the 1950s and 1970s. There is a pattern for interactive investments in which investments between developed countries largely dominate in terms of the volume of investment and takes place in global countries. Between 85% to 90% of foreign investments during the Embedded Liberalism period are done between developed economies and no longer between North and South, no longer between advanced and developing countries.

For instance, American car manufacturers invest in Europe and European car manufacturers a bit later begin investing in the United States. So it is a deeper form of economic integration than integration that takes place through trade. It has a major impact in the 1970s, from the 1970s onwards in terms of the resistance of the global economy too. Nevertheless, it is a fundamental shift. It is the most important developed shift change in the way global capitalism operates during the 20th century. 

There is an exception to this trend. The Second and Third worlds shun incoming for indirect investment from the United States, Europe and Japan.

[[Fichier:Chart for expropriations of foreign companies.png|vignette|center]]

If you look at the chart for expropriations of foreign companies, they pick in the 1970s because it is the time when the attempt to take over for investments is at its highest and so the equivalent attempt to keep out for investment is also at its pick.

==Bretton Woods and the International Monetary Fund==
{{Article détaillé|Bretton Woods System: 1944 - 1973}}

[[File:WhiteandKeynes.jpg|thumb|right|John Maynard Keynes (right) and Harry Dexter White at the inaugural meeting of the International Monetary Fund's Board of Governors in Savannah, Georgia, U.S., March 8, 1946. They were the two main protagonists of the conference held in Bretton Woods.]]

That is probably the most well-known feature of in Embedded Liberalism because the pre-war international monetary system was thrashed out at the [https://en.wikipedia.org/wiki/Bretton_Woods_Conference Bretton Woods Conference] that took place at the Mount Washington Hotel in New Hampshire in the United States between July 1 to 22 in 1944, so just before the war ended. It embodied a consensus between American and United Kingdom policymakers in the persons of [https://en.wikipedia.org/wiki/John_Maynard_Keynes John Maynard Keynes] and [https://en.wikipedia.org/wiki/Harry_Dexter_White Harry Dexter White] for the United States. 

On the need to reconcile the drive for the liberal global financial system, but also domestic policy autonomy, Keynes and White disagreed on the details and in particular on how much the hegemon would have to do to stabilize the system. Keynes wanted the hegemon to do everything it could to stabilize the system by providing liberal countervailing finance to countries whose money was not the dollar. White was not very keen on that and wanted to limit the extent to which the United States would have to intervene. He wanted to limit the extent to which the international regime would force the United States to intervene in cases of financial destabilization and financial crisis.

The international monetary system created through Bretton Woods was a revised form of the [[International triumph of the gold standard: 1871 - 1914|gold standard]] in that the dollar's value to gold was fixed and the value of all other currencies was fixed to the dollar. It was a system where the dollar was as good as gold, and by extension, countries did not have to hold gold, it was enough for them to hold dollar to know that they had stability. But obviously, that held as long as the dollar's value was packed to the gold and had an anchor and it wasn't allowed to freely float up and down as it will happen from the 1970s.

There were fixed rates between national currencies, but they were adjustable. That is another major difference with the classical gold standard. It is that countries agreed that within the International Monetary Fund (IMF), they could negotiate between themselves the adjustment of exchange rate values to facilitate adjustment of the domestic economies through the exchange rate.

Another major feature was countervailing finance. The idea that if there was an outflow of capital in countries that suffered a dollar shortage, the IMF and the United States Treasury would provide dollars to the country experiencing the capital outflow in order to neutralize the effect of the capital outflow. In a way, the United States Treasury was pledging to fight speculators by annulling the effect of capital outflow in particular from Western Europe. 

[[Fichier:IMF Article XI Capital Control.png|vignette|centré]]

The third major feature was capital control.<ref> Helleiner, Eric. States and the reemergence of global finance : from Bretton Woods to the 1990s. Ithaca, N.Y. London: Cornell University Press, 1996. Print.</ref><ref>Garber, Peter M. "[https://www.nber.org/chapters/c6876.pdf The collapse of the Bretton Woods fixed exchange rate system]." A Retrospective on the Bretton Woods system: Lessons for international monetary reform. University of Chicago Press, 1993. 461-494.</ref><ref>Guitián, Manuel. "[https://search.proquest.com/openview/52720d68fcbce842c5b87640d7d1ff4d/1?pq-origsite=gscholar&cbl=1819673 The challenge of managing global capital flows]." Finance and Development 35.2 (1998): 14.</ref> It is the idea that countries could just refuse to accept capital outflows, and they could simply tell the speculators that their money was captive and would not continue to be held in the domestic banks. It was an administrative block to the free movement of capital across.<ref>Ariyoshi, A., Kirilenko, A., Ötker, I., Laurens, B., Canales Kriljenko, J., … Habermeier, K. (2000). Capital Controls: Country Experiences with Their Use and Liberalization. In Occasional Papers. https://doi.org/10.5089/9781557758743.084</ref><ref>Ostry, J., Ghosh, A., Habermeier, K., Chamon, M., Qureshi, M. S., & Reinhardt, D. B. S. (2010). Capital Inflows: The Role of Controls. IMF Staff Position Notes, 2010(4), 2. https://doi.org/10.5089/9781462347513.004</ref> Types of capital controls include exchange controls that prevent or limit the purchase and sale of a national currency at the market rate, caps on the volume of permitted international sales or purchases of various financial assets, transaction taxes, or even limits on the amount of money a private citizen is allowed to take out of the country.

Keynes maintained that capital control was an essential feature of the system to be held in place for as long as necessary in order to stabilize international monetary systems. Probably capital control is the key feature that characterizes Embedded Liberalism, the fact that you both had a gold standard and at the same time you had capital controls. 

The International Monetary Fund embodies these set of rules, and New York became the centre of international finance.

This stage broke ended in the 1970s ushering into the stage of the second globalization which is still underway.

=The Second Globalization=

==Geopolitical developements==
The same developments that were at the basis of the development of international political economy as an academic discipline were also at the basis of the birth of the liberalism stage and the beginning of the second globalization namely the relative decline of American hegemony in the 1970s.

Apart from the United Kingdom, most other major economies in the world economy grew more quickly than the United States in the 1950s and in the 1960s. From a situation where the United States’s share of industrial production was around 50% at the end of the Second World War, that came down to about 30% in the 1970s. On the opposite, the share of industrial production of Western Europe and Japan went up by a lot, in particular in the cases of Germany and Japan the major antagonists of the Second World War.

The fact that crystallized the relative decline of American hegemony was the crisis of the dollar that began sometime in the 1960s culminated in 1968 and 1971 and became an open feature of the global economy in the 1970s with the policy of the American administration of letting the dollar float and letting it depreciate that became known as the B9 neglect on the part of the American administration.<ref>Strange, Susan. “The Dollar Crisis 1971.” International Affairs (Royal Institute of International Affairs 1944-), vol. 48, no. 2, 1972, pp. 191–216. JSTOR, https://www.jstor.org/stable/2613437.</ref><ref>Triffin, Robert. [https://ies.princeton.edu/pdf/E132.pdf Gold and the dollar crisis: yesterday and tomorrow]. International Finance Section, Department of Economics, Princeton University, 1978.</ref>

At the outset, many people said that American hegemony itself was over. It has been the first major theoretical debate in international political economy.<ref>Ikenberry, G. John. “Rethinking the Origins of American Hegemony.” Political Science Quarterly, vol. 104, no. 3, 1989, pp. 375–400. JSTOR, https://www.jstor.org/stable/2151270.</ref> International political economy itself is to begin with a discipline that emerged as a debate about the future of American hegemony. Today, there is a debate about the future of the distribution of power in the global economic system.<ref>Jackson, R., and G. Sorensen. "[https://www.academia.edu/30472605/International_Political_Economy_Contemporary_Debates International Political Economy: Contemporary Debates]." Introduction to international relations: Theories and approaches (2013): 179-207.</ref> Some authors debate the extent to which China is threatening American hegemony, and some authors used to debate in the early 2000s the extent of which the emergence of the European Union was a challenge to American hegemony.<ref>Yong, W., & Pauly, L. (2013). Chinese IPE debates on (American) hegemony. Review of International Political Economy, 20(6), 1165–1188. https://doi.org/10.1080/09692290.2012.761641</ref><ref>Telò, Mario, ed. European Union and new regionalism: regional actors and global governance in a post-hegemonic era. Ashgate Publishing, Ltd., 2013.</ref> In the field of international political economy today, there is no debate over that most academics take it for granted that American hegemony has declined to some extent, but it is still very much around.

There was also the idea that the United States was losing ground and very quickly the very opposite happened as a result of the collapse of the USSR in the 1990s. During the same time in the 1970s and the 1980s, the Second and Third worlds opened up and decided to reintegrate global capitalism.

In the 1990s, after the second and third worlds stopped pretending to pose a challenge to the American economy, reintegrated fully the global economy dominated by the United States. There was a lot of talks about the American unipolar moment, a moment of unprecedented dominance by one single grade power of the global system.<ref>Sheetz, M., & Mastanduno, M. (1998). Debating the Unipolar Moment. International Security, 22(3), 168–174. https://doi.org/10.1162/isec.22.3.168</ref>

<gallery mode="packed" widths="200px" heights="200px">
Fichier:Nixon shakes hands with Chou En-lai.jpg|U.S. President Nixon shakes hands with Chinese Premier Zhou Enlai.
Fichier:Deng Xiaoping and Jimmy Carter review troops during arrival ceremony for the Vice Premier of China. - NARA - 183168.tif|Deng and President Jimmy Carter inspected the joint-service honor guard during an arrival ceremony for Deng at the White House.
</gallery>

Another feature of the geopolitical picture that is important is the rise of China. And again, the rise of China begins with a realignment of China away from the Communist world and towards the United States with the famous <ref>https://en.wikipedia.org/wiki/Richard_Nixon%27s_1972_visit_to_China</ref> and the opening up of the Chinese economy to inward investments under [https://en.wikipedia.org/wiki/Deng_Xiaoping Deng Xiaoping] in 1979.<ref>Ash, Robert F., and Y. Y. Kueh, eds. The Chinese Economy Under Deng Xiaoping. Clarendon Press, 1996.</ref> That initial stage of the rise of China is synonymous with alignment with the United States.<ref>Bramall, Chris. "[https://ideas.repec.org/b/oxp/obooks/9780198296973.html Sources of Chinese economic growth, 1978-1996]." OUP Catalogue (2000).</ref>

That lasts more or less until the early 2000s. From the early 2000s, there are growing discussions about how China poses a challenge to the United States, and there is debate within the United States about revising its China policy from the quality of cooperation promotion shifting towards the quality of containment.<ref>Beeson, M. (2009). Comment: Trading places? China, the United States and the evolution of the international political economy. Review of International Political Economy, 16(4), 729–741. https://doi.org/10.1080/09692290802427766</ref> To a large extent it remains the main debate about the future of global capitalism today. 

Ideologically, Keynesianism is on the decline from the 1970s onwards because it is accused of fostering inflation and because a greater proportion of domestic electorates become inflation adverse. Before, under the gold standard, it was mostly investors and wealth-holders that were averse to inflation and were also the first sections of the electorate. After suffrage became the norm in the first half of the 20th century that change, and moreover because the vast majority of people before the Second World War had a lower stake in the fight against inflation or state because they did not have financial assets.

That changes to a large extent after the 1950s because a good share of the working class develops savings of its own and so the share of the total population that has a stake in low inflation goes up. In this regard, the importance of fighting inflation becomes more important.

[[Fichier:John-williamson.jpg|vignette|John Williamson. Source: [https://voxeu.org/ VoxEU.org]  – CEPR’s policy portal.<ref>“[https://voxeu.org/users/johnwilliamson John.Williamson].”| VOX, CEPR Policy Portal.</ref>]]

Along with the relative decline of Keynesianism ideology, there is the rise of what many people call [https://en.wikipedia.org/wiki/Neoliberalism neoliberalism] or the [https://en.wikipedia.org/wiki/Washington_Consensus Washington Consensus] as it was coined by [https://en.wikipedia.org/wiki/John_Williamson_(economist) John Williamson], an economist in 1990 describing policy reforms that the International Monetary Fund, World Bank, and U.S. Treasury advocated for emerging-market economies.<ref>"[https://web.archive.org/web/20170715151421/http://www.cid.harvard.edu/cidtrade/issues/washington.html Washington Consensus]". Center for International Development | Harvard Kennedy School of Government. April 2003. Archived from the [https://www.hks.harvard.edu/centers/cid original] on July 15, 2017. Retrieved August 24, 2016.</ref><ref>Williamson, John. "[https://heinonline.org/HOL/LandingPage?handle=hein.journals/lbramrca15&div=5&id=&page= A short history of the Washington Consensus]." Law & Bus. Rev. Am. 15 (2009): 7.</ref><ref>Naím, Moisés. “Washington Consensus or Washington Confusion?” Foreign Policy, no. 118, 2000, pp. 87–103. JSTOR, https://www.jstor.org/stable/1149672.</ref><ref>Williamson, John. "[https://elibrary.worldbank.org/doi/pdf/10.1596/0-8213-5872-3#page=47 The Washington Consensus as policy prescription for development]." Challenges in the 1990s 33 (2004).</ref><ref>Agarwal, Prateek. “[https://www.intelligenteconomist.com/washington-consensus/ Washington Consensus].” Intelligent Economist, 10 Feb. 2020.</ref> According to Williamson it "refer to the lowest common denominator of policy advice being addressed by the Washington-based institutions to Latin American countries as of 1989.”<ref>Williamson, John. “[http://documents.worldbank.org/curated/en/624291468152712936/What-should-the-world-bank-think-about-the-Washington-consensus What Should the World Bank Think About the Washington Consensus?]” World Bank Research Observer. Washington, DC: The International Bank for Reconstruction and Development, Vol. 15, No. 2 (August 2000), pp. 251-264.</ref> It is a set of broadly free-market economic ideas with the dominant view of that the economy has to be privatized, has to be deregulated and has to be opened up to international. Williamson  identified ten principles which are:<ref>Pettinger, Tejvan, et al. “[https://www.economicshelp.org/blog/7387/economics/washington-consensus-definition-and-criticism/ Washington Consensus – Definition and Criticism].” Economics Help, 22 Dec. 2017.</ref> 

#Low government borrowing. Avoidance of large fiscal deficits relative to GDP;
#Redirection of public spending from subsidies (“especially indiscriminate subsidies”) toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment;
#Tax reform, broadening the tax base and adopting moderate marginal tax rates;
#Interest rates that are market determined and positive (but moderate) in real terms;
#Competitive exchange rates;
#Trade liberalization: liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs;
#Liberalization of inward foreign direct investment;
#Privatization of state enterprises;
#Deregulation: abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudential oversight of financial institutions;
#Legal security for property rights.

==Global trade liberalization: from multilateral trade liberalization to new regionalism==
How does that play out in terms of the international trade system? 

There is a wave of protectionism called New Protectionism in the late 1970s.<ref> Ethier, Wilfred J., and Ronald D. Fischer. “The New Protectionism.” Journal of International Economic Integration, vol. 2, no. 2, 1987, pp. 1–11. JSTOR, https://www.jstor.org/stable/23000022.</ref><ref>Baldwin, Robert E. "[https://www.nber.org/papers/w1823 The New Protectionism: A Response to Shifts in National Economic Power]," The New Protectionist Threat to World Welfare, ed. by Dominick Salvatore, North-Holland, 1986.</ref><ref>Gandolfo, G. (2013). [https://link.springer.com/chapter/10.1007/978-3-642-37314-5_12 The “New” Protectionism]. In Springer Texts in Business and Economics (pp. 277–295). Springer Berlin Heidelberg. https://doi.org/10.1007/978-3-642-37314-5_12</ref> At the time, one of the major debates in international political economy is the fracturing of the world global capitalism as it did during the interwar period.

However, this time it does not. Helen Milner explores this topic in her article published in 1988 ''Trading Places: Industries for Free Trade''.<ref>Milner, Helen. “Trading Places: Industries for Free Trade.” World Politics, vol. 40, no. 3, 1988, pp. 350–376. JSTOR, https://www.jstor.org/stable/2010217.</ref> And why doesn't that happen? It does not happen because of the rise of multinational production, the rise of [https://en.wikipedia.org/wiki/Multinational_corporation multinational enterprises].<ref>Wilkins, M. (1998). Multinational Enterprises and Economic Change. Australian Economic History Review, 38(2), 103–134. https://doi.org/10.1111/1467-8446.00026</ref><ref>Rugman, Alan M., and Simon Collinson. "Multinational Enterprises in the New Europe: Are They Really Global?." Organizational Dynamics 34.3 (2005): 258-272.</ref><ref>Wilkins, Mira. "Multinational enterprise to 1930: Discontinuities and continuities." Chandler, Alfred D./Mazlish, Bruce (2005): 45-79.</ref><ref>Buckley, P. J., & Ghauri, P. N. (2004). Globalisation, economic geography and the strategy of multinational enterprises. Journal of International Business Studies, 35(2), 81–98. https://doi.org/10.1057/palgrave.jibs.8400076</ref><ref>Markusen, J. R. (1995). The Boundaries of Multinational Enterprises and the Theory of International Trade. Journal of Economic Perspectives, 9(2), 169–189. https://doi.org/10.1257/jep.9.2.169 </ref>

Justice and cooperation have begun to spread across state borders. Firms have begun to have to earn a major share of the profits abroad either through export or production abroad itself. Therefore they have begun to conduct what economists called intra-firm trade which corresponds to international flows of goods and services between parent companies and their affiliates or among these affiliates. Thus, intra-firm trade arises only when firms invest abroad.<ref>Lanz, R. and S. Miroudot (2011-06-24), “Intra-Firm Trade:Patterns, Determinants and Policy Implications”, OECD TradePolicy Papers, No. 114, OECD Publishing, Paris.http://dx.doi.org/10.1787/5kg9p39lrwnn-en</ref><ref>Corcos, Gregory, et al. "[https://www.bruegel.org/wp-content/uploads/2015/09/EFIGEWP14.pdf The determinants of intra-firm trade]." (2009).</ref> Because companies do that and they do that because it is more efficient to produce things now that way, they do not want protectionist barriers to go up because that would have as consequence to interfere with their intra-firm trade and will raise costs and to manage profitability.

The 1970s see a lot of trade liberalization. There is a new GATT round, the Tokyo Round that lasted from 1973 to 1979 and involved 102 countries with the aim to progressively reduce tariffs.<ref>“[https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact4_e.htm Understanding the WTO - The GATT Years: from Havana to Marrakesh].” WTO.</ref><ref>Winham, Gilbert R. [https://www.jstor.org/stable/j.ctt7ztgcg International Trade and the Tokyo Round Negotiation]. Princeton University Press, 1986.</ref><ref>Krasner, S. D. (1979). The Tokyo Round: Particularistic Interests and Prospects for Stability in the Global Trading System. International Studies Quarterly, 23(4), 491. https://doi.org/10.2307/2600327</ref><ref>Jackson, John H., et al. “Implementing the Tokyo Round: Legal Aspects of Changing International Economic Rules.” Michigan Law Review, vol. 81, no. 2, 1982, pp. 267–397. JSTOR, https://www.jstor.org/stable/1288518.</ref><ref>Deardorff, Alan V., and Robert M. Stern. “Economic Effects of the Tokyo Round.” Southern Economic Journal, vol. 49, no. 3, 1983, pp. 605–624. JSTOR, https://www.jstor.org/stable/1058704.</ref> The share of exports in international trade grows more quickly than the international economy does, so the share of international trade in international economic activity goes up. The new protectionism is a dog that does not bark.

Liberalization is also spurred by the fact that less developed countries abandoned input substitution industrialization. This happens first in Eastern Europe opening up gradually most importantly in Poland and Hungary. It is also the case for Latin America who starts importing capital from abroad to fund the growing share of inputs in its economy who therefore turns towards the global market.<ref>[https://www.imf.org/external/np/exr/ib/2001/110801.htm Global Trade Liberalization and the Developing Countries - An IMF Issues Brief]. (2001).</ref>

The way trade liberalization is going to deepen during the stage of the second globalization is not through multilateral trade liberalisation. It's not mostly through multilateral trade liberalization, but through the new regionalism with the spread of preferential trade agreements, just as the customs union was set up in Western Europe in 1957.

<gallery mode="packed" widths="200px" heights="200px">
Fichier:Nafta.jpg|Back row, left to right: Mexican President Carlos Salinas de Gortari, U.S. President George H. W. Bush, and Canadian Prime Minister Brian Mulroney, at the initialing of the draft North American Free Trade Agreement in October 1992. In front are Mexican Secretary of Commerce and Industrial Development Jaime Serra Puche, United States Trade Representative Carla Hills, and Canadian Minister of International Trade Michael Wilson.
Fichier:ASEAN Singapour 1992.jpg|Singapore Declaration Of 1992 Singapore, 28 January 1992. [https://www.facebook.com/aseansecretariat/posts/this-month-in-1992-singapore-hosted-the-fourth-asean-summit-it-was-the-first-tim/10156076450873854/ Source]
</gallery> 

Importantly the United States itself turns towards preferential trade agreement in the early 1980s. Until the late 1970s, the United States itself refused to enter into preferential trade agreements with countries because it did not want to undermine the norms and rules of the international trading system that it had promoted. 

{{World economic integration}}

From the 1980s onwards as the international position of American industry comes under threat from the Japanese and the Western European challenge, the United States shift gear and adopting regionalism itself. There is a series of agreements that lead up to the [https://en.wikipedia.org/wiki/North_American_Free_Trade_Agreement North American Free Trade Agreement] (NAFTA). The first one is the [https://en.wikipedia.org/wiki/North_American_Free_Trade_Agreement Canada–United States Free Trade Agreement] in 1988 that is joined by Mexico in 1992 after Mexico opens up during the 1980s.<ref>"Decreto de promulgación del Tratado de Libre Comercio de América del Norte" Decree of promulgation of the North American Free Trade Agreement. Decree of December 20, 1993 ([http://www.economia-snci.gob.mx/sicait/5.0/doctos/TLCAN.pdf PDF]) (in Spanish). [https://www.senado.gob.mx/ Senate of the Republic] (Mexico).</ref><ref>Pacheco-López, Penélope. "[https://www.tandfonline.com/doi/abs/10.1080/01603477.2005.11051459 The effect of trade liberalization on exports, imports, the balance of trade, and growth: the case of Mexico]." Journal of Post Keynesian Economics 27.4 (2005): 595-619.</ref><ref>Pastor, Manuel, and Clyde V. Prestowitz. “Mexican Trade Liberalization and Nafta.” Latin American Research Review, vol. 29, no. 3, 1994, pp. 153–173. JSTOR, https://www.jstor.org/stable/2503947.</ref><ref>Burfisher, M. E., Robinson, S., & Thierfelder, K. (2001). The Impact of NAFTA on the United States. Journal of Economic Perspectives, 15(1), 125–144. https://doi.org/10.1257/jep.15.1.125</ref> On January 1, 1994, NAFTA enters into force. It's the opposite of the Spirit of multinational trade liberalization promoted by America in the 1940s and the 1950s.<ref>Chase, K. A. (2003). Economic Interests and Regional Trading Arrangements: The Case of NAFTA. International Organization, 57(1), 137–174. https://doi.org/10.1017/s0020818303571053</ref><ref>Bhagwati, J. (1992). Regionalism versus Multilateralism. The World Economy, 15(5), 535–556. https://doi.org/10.1111/j.1467-9701.1992.tb00536.x</ref><ref>Doran, Charles. "[https://books.google.fr/books?hl=en&lr=&id=cGf_bQpTxxgC&oi=fnd&pg=PA40&dq=nafta+multilateralism&ots=bYDahVcw8f&sig=u8pUa6PjfP5VW9KXxcL7wKiqlDw#v=onepage&q=nafta%20multilateralism&f=false The two sides of multilateral cooperation]." International cooperation: The extents and limits of multilateralism (2010): 40-59.</ref>

On 26 March 1991 Mercosur is created by the [https://en.wikipedia.org/wiki/Treaty_of_Asunci%C3%B3n Treaty of Asunción], which establishes: "The free movement of goods, services and productive factors between countries in the establishment of a common external arsenal and the adoption of a common commercial policy, the coordination of macroeconomic and sectoral policies between States and the harmonization of legislation in order to achieve a strengthening of the integration process". Mercosur's purpose is to promote free trade and the fluid movement of goods, people, and currency. At the same time, the deepening of the European Union and the debate about the rise of Fortress Europe, which is the fact that as Europe is gradually coming closer together, is going to be detrimental to American export to the European market.<ref>Hanson, B. T. (1998). What Happened to Fortress Europe?: External Trade Policy Liberalization in the European Union. International Organization, 52(1), 55–85. https://doi.org/10.1162/002081898550554</ref>

Japan pursues its own network of preferential trade agreements that mostly are done bilaterally instead of bringing its trade partners into a block.<ref>Manger, M. (2005). [https://core.ac.uk/download/pdf/95576.pdf Competition and bilateralism in trade policy: the case of Japan’s free trade agreements]. Review of International Political Economy, 12(5), 804–828. https://doi.org/10.1080/09692290500339800</ref> Japan signs a series of treaties with individual countries in the East Asian basin mainly with countres of the Asia Pacific Economic Cooperation (APEC).<ref>Capling, A. (2008). Preferential trade agreements as instruments of foreign policy: an Australia–Japan free trade agreement and its implications for the Asia Pacific region. The Pacific Review, 21(1), 27–43. https://doi.org/10.1080/09512740701868765</ref><ref>Manger, M. (2005). Competition and bilateralism in trade policy: the case of Japan’s free trade agreements. Review of International Political Economy, 12(5), 804–828. https://doi.org/10.1080/09692290500339800</ref><ref>Manger, M. S. (2014). The Economic Logic of Asian Preferential Trade Agreements: The Role of Intra-Industry Trade. Journal of East Asian Studies, 14(2), 151–184. https://doi.org/10.1017/s1598240800008894</ref><ref>Hertel, Thomas W., et al. “Dynamic Effects of the ‘New Age’ Free Trade Agreement between Japan and Singapore.” Journal of Economic Integration, vol. 16, no. 4, 2001, pp. 446–484. JSTOR, https://www.jstor.org/stable/23000768.</ref><ref>Baccini, L., & Dür, A. (2011). The New Regionalism and Policy Interdependence. British Journal of Political Science, 42(1), 57–79. https://doi.org/10.1017/s0007123411000238</ref>

On 28 January 1992 is signed in Singapore the AFTA agreement which gives birth to the [https://en.wikipedia.org/wiki/ASEAN_Free_Trade_Area#ASEAN_Plus_Three ASEAN Free Trade Area].<ref>"[http://eresources.nlb.gov.sg/history/events/bf07b77f-68fd-4473-9ccb-1197fe323cb8 ASEAN leaders agree to create an ASEAN Free Trade Area - Singapore History]". [http://eresources.nlb.gov.sg/history eresources.nlb.gov.sg].</ref> ASEAN is one of the largest and most important free trade areas (FTA) trade bloc agreement supporting local trade and manufacturing, and facilitating economic integration with regional and international partners. It is a bloc of developing countries in the Southeast Asian region which notably includes Thailand, Malaysia, Korea, Indonesia, and the Philippines that are high-growth economies of the 1990S as Taiwan and Hong Kong.

The global trade system is characterized by competitive liberalisation. That is a term coin by an economist called [https://en.wikipedia.org/wiki/C._Fred_Bergsten Fred Bergsten] that was very influential in Washington in the international trading policy.<ref>Bergsten, C. Fred. [https://www.piie.com/publications/working-papers/competitive-liberalization-and-global-free-trade-vision-early-21st Competitive liberalization and global free trade: a vision for the early 21st century]. No. WP96-15. 1996.</ref><ref>Baier Scott L, Bergstrand Jeffrey H, Egger Peter, « The New Regionalism: Causes and consequences », Économie internationale, 2007/1 (n° 109), p. 9-29. URL : https://www.cairn.info/revue-economie-internationale-2007-1-page-9.htm</ref><ref>Andriamananjara, Soamiely. "[https://econwpa.ub.uni-muenchen.de/econ-wp/it/papers/0305/0305002.pdf Competitive Liberalization or Competitive Diversion?]." Preferential Trade Agreements and the Multilateral Trading System. Washington, DC: US International Trade Commission. May 7 (2003).</ref> The difference here is that even if there is a competition just as there was a competition in the interwar period; this time, competition does not spur economic nationalism and an inward trend but competitive liberalization. The major powers such as the European Union, Japan, the United States and also China compete with each other for preferential access to third markets so that their own multinationals can better position themselves in the global competitive struggle that takes place.

Another feature of the trading regime that it takes the shape of deep liberalization. That often comes along with [https://en.wikipedia.org/wiki/Bilateral_investment_treaty bilateral investment treaties]. It is no longer just about tariffs. It is also about so-called non-tariff barriers. Why? Because trade is coupled as it wasn't before with production. Therefore, it's important for multinationals to know that not simply will they be able to import and export out of given market commodities but also that they can organize production within those markets without fear of interference from the local government with their property rights. 

[[Fichier:Evolution of trade agreements in the world 1948-2008.png|vignette|centré]]

This chart shows the evolution of trade agreement in the world. It is possible to see the tremendous spike in the number of such agreements from 1991 onwards. This is the kind of thing that the GATT and later on the WTO were sets up to prevent. That's the key thing.

==Investment Liberalization and Economic Development: the role of bilateral investment treaties==
Let start with competition to attract capital. The abandonment of input substitution industrialisation meant that the source of industrial investment for developing countries now become the world market and no longer the domestic economy. The developing countries have to compete now to attract capital just as they used to compete in the gold standard era, and in the classical era to attract capital.

This time it is however different because now they are competing to attract industrial investments, multinational enterprises in the manufacturing sector, in the high technologies sectors; therefore those companies produce their goods in developing markets and no longer in the advanced markets.

That is the policy of setting up special economic zones in China, in Mexico, the maquiladoras, in Southeast Asia and providing preferential fiscal treatment to multinational companies and so on and so forth.

All of this kind of thing takes the shape of bilateral investment treaties (BITs) that are mostly signed between countries that are the source of multinational investment: the United States, the European Union, Japan and growing China, as well as countries that wish to import capital.<ref>Dolzer, Rudolf, and Margrete Stevens. [https://books.google.fr/books?hl=en&lr=&id=u2CF6a6yvCoC&oi=fnd&pg=PR5&dq=bilateral+investment+treaties&ots=bvoN9T-rXC&sig=L2JsbuTgHx6jNQFZxDr7b24RAGQ Bilateral investment treaties]. Martinus Nijhoff Publishers, 1995.</ref><ref>Neumayer, E., & Spess, L. (2005). Do bilateral investment treaties increase foreign direct investment to developing countries? World Development, 33(10), 1567–1585. https://doi.org/10.1016/j.worlddev.2005.07.001</ref><ref>Elkins, Z., Guzman, A. T., & Simmons, B. A. (2006). Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960–2000. International Organization, 60(4). https://doi.org/10.1017/s0020818306060279</ref><ref>Egger, P., & Pfaffermayr, M. (2004). The impact of bilateral investment treaties on foreign direct investment. Journal of Comparative Economics, 32(4), 788–804. https://doi.org/10.1016/j.jce.2004.07.001</ref> Those countries sign bilateral investment treaties in the same way that in the classical era they adopted the gold standard. There is a good housekeeping silver approval as a guarantee to foreign investors: if they bring their money into the host country, their investment will be protected.

A big push in that direction came in the late 1970s and the 1980s with Latin America and Eastern European countries, and then in the 1990s again, there was a big push into Central and Eastern Europe after the collapse USSR.<ref>Vandevelde, Kenneth J. "[https://heinonline.org/HOL/LandingPage?handle=hein.journals/hilj41&div=16&id=&page= Economics of Bilateral Investment Treaties, The]." Harv. Int'l. LJ 41 (2000): 469.</ref><ref>Vandevelde, Kenneth J. "[https://heinonline.org/HOL/LandingPage?handle=hein.journals/cjtl36&div=36&id=&page= Investment Liberalization and Economic Development: The Role of Bilateral Investment Treaties]." Colum. J. Transnat'l L. 36 (1998): 501.</ref>

Along with that comes to decline and the disappearance of expropriations of multinational enterprises in the least developed countries (LDCs).

From the late 1980s onwards the number of IIAs has soared. Mostly during the 90s because the 90s were the main time when countries were competing to attract capital. The last thing consequence of this is that there is now a web of legal arrangements Not multilateral but preferential legal arrangements that protect the rights of investors across the globe.

From the point of view of international investors, BITs are the functional equivalent of colonialism.<ref> Vandevelde, Kenneth J., A Brief History of International Investment Agreements. U.C. Davis Journal of International Law & Policy, Vol. 12, No. 1, p. 157, 2005; Thomas Jefferson School of Law Research Paper No. 1478757. Available at SSRN: https://ssrn.com/abstract=1478757</ref> It is not to say that the system is neocolonial, it is just as colonialism in the past was there to safeguard the property rights of investors from the advanced world. Today, bilateral investment treaties play the same role.<ref>Mahnaz Malik. 2008. [https://www.iisd.org/pdf/2008/dci_recent_dev_bits.pdf Recent Developments in Regional and Bilateral Investment Treaties]. International Institute for Sustainable Development</ref>

==From Bretton Woods to ad hoc cooperation==

The [[Bretton Woods System: 1944 - 1973|Bretton Woods system collapsed]]; the revised gold dollar standard collapse is 1968-71. Why 1968-1971? Because in the late 1960s, it becomes obvious that the stock of dollars held abroad is greater than the stock of gold held in the United States.<ref>Kirshner, J. (2008). Dollar primacy and American power: What’s at stake? Review of International Political Economy, 15(3), 418–438. https://doi.org/10.1080/09692290801928798</ref><ref>Triffin, Robert. “The International Role and Fate of the Dollar.” Foreign Affairs, vol. 57, no. 2, 1978, pp. 269–286. JSTOR, https://www.jstor.org/stable/20040114.</ref><ref>Université de Sherbrooke. “15 Août 1971  - Dévaluation Et Non-Convertibilité En or Du Dollar.” 15 Août 1971  - Dévaluation Et Non-Convertibilité En or Du Dollar, perspective.usherbrooke.ca/bilan/servlet/BMEve?codeEve=529.</ref> Therefore, if all of the holders of dollar assets abroad attempt to redeem their holdings for gold, the United States goes bust.<ref>Kunz, Diane B. "[https://heinonline.org/HOL/LandingPage?handle=hein.journals/fora74&div=64&id=&page= The Fall of the Dollar Order-The World the United States Is Losing]." Foreign Aff. 74 (1995): 22.</ref><ref>Mundell, Robert A., and Robert Alexander Mundell. [https://heinonline.org/HOL/LandingPage?handle=hein.journals/fora74&div=64&id=&page= The dollar and the policy mix: 1971]. Vol. 85. International Finance Section, Princeton University, 1971.</ref><ref>Mundell, Robert. "[http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.691.6904&rep=rep1&type=pdf#page=19 Dollar standards in the dollar era]." Journal of Policy Modeling 29.5 (2007): 677-690.</ref>

In May 1971, West Germany left the Bretton Woods system, unwilling to revalue the Deutsche Mark.<ref name="'70s 295">{{cite book |title= How We Got Here: The '70s|last= Frum|first= David|authorlink= David Frum|year= 2000|publisher= Basic Books|location= New York, New York|isbn= 0-465-04195-7|pages= 295–98|url= https://books.google.com/books?id=hNsSttYnmxsC&pg=PA296 }}</ref> In the following three months, this move strengthened its economy. Simultaneously, the dollar dropped 7.5% against the Deutsche Mark.<ref name="'70s 295" /> Other nations began to demand redemption of their dollars for gold. Switzerland redeemed $50 million in July.<ref name="'70s 295" /> France acquired $191 million in gold.<ref name="'70s 295" /><ref>Michael J. Graetz & Olivia Briffault, A "Barbarous Relic": The French, Gold, and the Demise of Bretton Woods, THE BRETTON WOODS AGREEMENTS, TOGETHERWITH SCHOLARLY COMMENTARIESAND ESSENTIALHISTORICAL DOCUMENTS, NAOMI LAMOREAUX & IAN SHAPIRO, EDS., YALE UNIVERSITY PRESS, 2019; YALE LAW & ECONOMICS RESEARCH PAPER NO. 558; COLUMBIA LAW & ECONOMICS WORKING PAPER NO. 560(2016). Available at: https://scholarship.law.columbia.edu/faculty_scholarship/2541</ref> On August 5, 1971, the United States Congress released a report recommending devaluation of the dollar, in an effort to protect the dollar against "foreign price-gougers".<ref name="'70s 295" /><ref>Ricchiuto, Steven R. [https://books.google.fr/books?id=Bod0DwAAQBAJ&pg=PT52&lpg=PT52&dq=August+5,+1971+us+congress+devaluation&source=bl&ots=K0uBOgjrAa&sig=ACfU3U2QRZirubcgPOtBuqks361HthRzHg&hl=en&sa=X&ved=2ahUKEwj1yvbfhIbpAhUCx4UKHbBAATcQ6AEwCnoECAgQAQ#v=onepage&q=August%205%2C%201971%20us%20congress%20devaluation&f=false Symptomatic to Systemic: Understanding Postwar Cycles and Financial Debacles]. Greenleaf Book Group Press, 2018.</ref><ref>[https://www.nytimes.com/1971/08/08/archives/devalued-dollar-is-asked-in-study-congress-unit-sees-benefits-in.html DEVALUED DOLLAR IS ASKED IN STUDY]. By Edwin L. Dale Jr. Special to The New York Times. Aug. 8, 1971</ref> On August 9, 1971, as the dollar dropped in value against European currencies, Switzerland left the Bretton Woods system.<ref name="'70s 295" /> The pressure began to intensify on the United States to leave Bretton Woods.<ref>Wikipedia contributors. Nixon shock. Wikipedia, The Free Encyclopedia. April 19, 2020, 10:05 UTC. Available at: https://en.wikipedia.org/w/index.php?title=Nixon_shock&oldid=951875513.</ref> No one is talking about a gold standard except some libertarians in the fringes of the Republican party in the US are talking about a gold standard today.

<youtube>vNAvsrY9vR4</youtube>

What happens is that the dealing of the dollar from the gold, actually reinforced the position of the dollar in the international monetary system. The dollar was as good as gold before. But now the dollar is as good as the dollar. IT means that because the dollar is so important international economic transactions, the United States enjoys an exorbitant privilege in the sense that it can print dollars and pay for whatever it needs to import and suffers no consequences. 

The United States is today the only country in the world for which there is no contradiction between external stability and domestic autonomy. The United States can pursue the domestic policies it wants, and that has a negligible impact on the value of the dollar. It was a way to understand the financial crisis happened in 2008. There was an inflow of capital into the US economy just as the giants of American finance world were collapsing.

Just as there was a major crisis in the heart of the system, investors believed that the most safest of assets was still the US government, and so the dollar went up, whereas in the past, any sensible person would be fleeing the dollar. In any economy in which there was a crisis of that scale would have suffered a collapse of its exchange rate. For the dollar, it was different, it was the other way around.

<gallery mode="packed" widths="200px" heights="200px">
Fichier:G7 leaders 1978.jpg|4th G7 summit in Bonn  - Five of the leaders at the 4th G7 Summit. From left to right: Giulio Andreotti, Takeo Fukuda, Jimmy Carter, Helmut Schmidt, Valéry Giscard d'Estaing.
Fichier:Plaza Accord 1985.jpg|The 1985 "Plaza Accord" is named after New York City's Plaza Hotel, which was the location of a meeting of finance ministers who reached an agreement about managing the fluctuating value of the US dollar. From left are Gerhard Stoltenberg of West Germany, Pierre Bérégovoy of France, James A. Baker III of the United States, Nigel Lawson of Britain, and Noboru Takeshita of Japan.
</gallery> 

What took the place of the Breton Woods system was ad hoc cooperation between the United States and its allies. The [https://en.wikipedia.org/wiki/4th_G7_summit Bonn summit] in 1978, the [https://en.wikipedia.org/wiki/Plaza_Accord Plaza Accord] in 1985 and the [https://en.wikipedia.org/wiki/Louvre_Accord Louvre Accord] in 1987 where the allies of the United States agreed to adjust their economies in a way that would help the United States to stabilize the value of the dollar.<ref>Putnam, Robert D., C. Randall Henning, and Richard N. Cooper. "[https://scholar.harvard.edu/robertputnam/publications/bonn-summit-1978-case-study-coordination The Bonn summit of 1978: a case study in coordination]." Can Nations Cooperate? (1989).</ref><ref>Frankel, Jeffrey. [https://www.nber.org/papers/w21813 The Plaza Accord, 30 Years Later]. No. w21813. National Bureau of Economic Research, 2015.</ref><ref>Richter, Rudolf. “The Louvre Accord From the Viewpoint of the New Institutional Economics.” Journal of Institutional and Theoretical Economics (JITE) / Zeitschrift Für Die Gesamte Staatswissenschaft, vol. 145, no. 4, 1989, pp. 704–719. JSTOR, https://www.jstor.org/stable/40751253.</ref><ref>Commins, Kevin. “LOUVRE ACCORD TERMED MAJOR FACTOR IN CRASH.” LOUVRE ACCORD TERMED MAJOR FACTOR IN CRASH | JOC.com, 17 Nov. 1987, https://www.joc.com/louvre-accord-termed-major-factor-crash_19871117.html.</ref> Why did they agree to do that? Because they wanted the dollar to stop depreciating and they wanted the United States to stop exporting dollars because that fueled inflation in Europe and Japan.

One major epiphenomenon of the breakdown of the Bretton Woods system was European monetary unification.<ref>[https://www.europarl.europa.eu/RegData/etudes/BRIE/2015/551325/EPRS_BRI(2015)551325_EN.pdf History of European Monetary Integration] - European Parliament</ref><ref>EICHENGREEN, B., & FRIEDEN, J. (1993). THE POLITICAL ECONOMY OF EUROPEAN MONETARY UNIFICATION: AN ANALYTICAL INTRODUCTION. Economics and Politics, 5(2), 85–104. https://doi.org/10.1111/j.1468-0343.1993.tb00069.x</ref><ref>Eichengreen, Barry. “European Monetary Unification.” Journal of Economic Literature, vol. 31, no. 3, 1993, pp. 1321–1357. JSTOR, www.jstor.org/stable/2728243.</ref><ref>Eichengreen, Barry, and Fabio Ghironi. "[https://escholarship.org/uc/item/10d518tg European Monetary Unification and International Monetary Cooperation]." (1997).</ref><ref>Eichengreen, Barry, and Jeffry A. Frieden. The Political Economy of European Monetary Unification. Boulder: Routledge, 2018. Print.</ref><ref>Apel, Emmanuel. European monetary integration 1958-2002. London New York: Routledge, 1998. Print.</ref> Initially the European attempted to restore the Bretton Woods system which corresponds to the period between 1971 and 1973 with the Smithsonian Institute agreements. That fails because the United States does not care to restore the link between the dollar and gold.<ref>Morse, Edward L. “Crisis Diplomacy: The Demise of the Smithsonian Agreement.” The World Today, vol. 29, no. 6, 1973, pp. 243–256. JSTOR, https://www.jstor.org/stable/40394706.</ref> What the Europeans do is to begin to restore a regional Breton Woods, a European monetary system. Then, later on, to make sure that arrangement is stable, they replace fixed exchange rates with a central bank and a single currency, and that is the euro that you have today.

Probably the most important feature in terms of the international global financial system is the lifting on capital controls. Universally during the 1970s and the 1980s, countries lift capital controls in advance countries. In the 1990s the process is accomplished in most of the developing worlds with the notable exception of China. In China, there is still no free convertibility of the local currency, an administrative agreement is required to exchange Yuan to another currency and still in 2019.

The last feature of the global financial system is that just as the Bretton Woods system breaks down and international financial flows grow exponentially at a much greater pace than the international economy or the international trading system, that comes with increased financial fragility across the globe. There is a wave of financial crises because investors can shift money across jurisdictions. Very quickly also because of technological developments with the rise of ICT technologies and so on. 

There are therefore three waves of financial crises: the [https://en.wikipedia.org/wiki/Latin_American_debt_crisis Latin American debt crisis of the 1980s], the [https://en.wikipedia.org/wiki/1997_Asian_financial_crisis 1997 Asian financial crisis], and then the crises come to the heart of the system resulting in the [https://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%9308 financial crisis of 2007–2008] and the [https://en.wikipedia.org/wiki/European_debt_crisis eurozone crisis] of the early 2010s. That is the result of the fact that global finance is no longer constrained by capital controls and so many holders can shift vast amounts of money across borders very quickly.

=Annexes=

*Christian Milelli. [https://halshs.archives-ouvertes.fr/halshs-00139467/document The surge of Preferential Trade Agreements across Asia: What is at stake?]. Journalof International Logistics and Trade, 2005, 3 (2), pp.45-58.
*Ministère de l’Économie, des Finances et de l’Industrie. [https://tresor.economie.gouv.fr/Articles/8d57c9da-3265-4cba-bbd3-38400c1216e2/files/28f8c9a8-7d26-46bc-8de6-db789430edf5 Learning from the first globalisation (1870-1914)]. TRÉSOR-ECONOMICS No. 93 – October 2011.
*Milner, H. (1992). International Theories of Cooperation Among Nations: Strengths and Weaknesses. World Politics, 44(3), 466–496. https://doi.org/10.2307/2010546
*Milner, Helen V. [https://press.princeton.edu/books/paperback/9780691010748/resisting-protectionism Resisting Protectionism: Global Industries and the Politics of International Trade]. Princeton University Press, 1988.
*MOORE, Rickie. The Commonwealth as an instrument of globalization In: Le modèle économique anglo-saxon à l’épreuve de la globalisation [online]. Paris: Presses Sorbonne Nouvelle, 1996 (generated 18 mars 2020). Available on the Internet: <http://books.openedition.org/psn/5389>. ISBN: 9782878549010.
*Zartman, I. W., & Touval, S. (2010). International cooperation: the extents and limits of multilateralism. Cambridge: Cambridge University Press.

=References=
<references />

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[[Category:Christakis Georgiou]]
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