- Writing the rules of global finance: France, Europe, and capital liberalization
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- by Abdelal, Rawi E.
- Why were capital controls orthodox in 1944, but heretical in 1997? The scholarly
literature, following the conventional wisdom, focuses on the role of the
United States in promoting capital liberalization. Although the United States
encouraged capital liberalization bilaterally, US policy makers never embraced
multilateral rules that codified the norm of capital mobility. Rather,
European policy makers wrote the most important rules in favour of the
free movement of capital. Paradoxically, French policy makers in particular
played decisive roles. For the debates that mattered most—in the EU,
OECD, and IMF—the United States was, respectively, irrelevant, inconsequential
and indifferent. Europe did not capitulate to global capital. Rather,
French and other European policy makers created today’s liberal international
financial regime. French and European policy makers have promoted
a rule-based, "managed" globalization of finance, whereas US policy makers
have tended to embrace an ad hoc globalization based on the accumulation
of bilateral bargains. Once liberal rules were codified in the EU and OECD,
they constituted the policy practices of "European" and "developed"’ states,
for which capital controls are no longer considered a legitimate policy tool.
During the middle of the 1990s, the IMF debated new, universal rules in
favour of capital freedom, but the proposal was defeated, primarily by the
US Congress, after the financial crises of 1997–98. By then the vast majority
of the world’s capital flows were already governed by the liberal rules of the
EU and OECD.
- Publication Type: Published Paper
- Published Date: February 2006
- Field of Interest: International Economics
- Abdelal, Rawi. "Writing the Rules of Global Finance: France, Europe, and Capital Liberalization." Review of International Political Economy 13, no. 1 (February 2006): 1-27.