320 CHAPTER NiNE ■ InternatIonal Po lItI cal economy
Industrial Revolution, the major trading state and source of international capital, as well as
a po liti cal and cultural hegemon, contested only by France. Britain facilitated trade
by lowering its own tariffs and opening its markets, policing the sea to provide safer
transit, and encouraging investment abroad. It is no won der that this period has been
labeled the “Pax Britannica,” when the hegemonic power of Great Britain, under
the guise of economic liberalism, expanded so that “the sun never set on the British
empire.”
The excesses of that period gave rise to another economic perspective—
radicalism— drawing on the body of Marxist and neo- Marxist writings. Having seen
the harsh living conditions of the working class during nineteenth- century industrial-
ization and imperialist expansion, and cognizant of the economic chasm between the
developed and the developing worlds during the twentieth century, economic radicals
blamed the cap i tal ist system under liberalism. Although interpretations vary, the core
belief found in Marxist and neo- Marxist writing is that society basically is conflictual.
Conflict emerges from the competition among groups of individuals— namely, the
owners of wealth and the workers— for scarce resources. The state tends to support
the owners of the means of production. Fi nally, the owners of capital are determined to
expand and accumulate resources at the expense of the working class and those in the
developing world. As Marx himself argued, the constant expansion of cap i tal ist mar-
kets leads to crises; dangerous speculation by those holders of capital only exacerbates
these crises.
The worldwide depression of the 1930s saw a major decline in trade and investment,
made worse by “beggar thy neighbor” policies, when states seeking to protect themselves
from the effects of the economic crisis hurt others. Thus, at the end of World War II,
the goal of the Western victors was to promote openness of trade and stimulate
international capital flows while establishing a stable exchange- rate system. While
multinational corporations (MNCs) would play a major role in stimulating growth,
benefiting from innovations in transportation and communication, the Bretton Woods
system, discussed below, is central to understanding the evolution of the interna-
tional economy since the middle of the twentieth century.
Post– World War II economic Institutions
At the end of World War II, policy makers established a set of intergovernmental organ-
izations to support economic liberalism.^2 The so- called Bretton Woods institutions—
the World Bank, the International Monetary Fund (IMF), and, to a lesser extent, the
General Agreement on Tariffs and Trade (GATT), now the World Trade Or ga ni za-
tion (WTO)— have all played, and continue to play, key roles in the expansion of eco-
nomic liberalism (see Figure 9.1).