American Power after the Financial Crisis

American Power after the Financial Crisis

Jonathan Kirshner
Copyright Date: 2014
Edition: 1
Published by: Cornell University Press
https://www.jstor.org/stable/10.7591/j.ctt1287dx7
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    American Power after the Financial Crisis
    Book Description:

    The global financial crisis of 2007-2008 was both an economic catastrophe and a watershed event in world politics. InAmerican Power after the Financial Crisis, Jonathan Kirshner explains how the crisis altered the international balance of power, affecting the patterns and pulse of world politics. The crisis, Kirshner argues, brought about an end to what he identifies as the "second postwar American order" because it undermined the legitimacy of the economic ideas that underpinned that order-especially those that encouraged and even insisted upon uninhibited financial deregulation. The crisis also accelerated two existing trends: the relative erosion of the power and political influence of the United States and the increased political influence of other states, most notably, but not exclusively, China.

    Looking ahead, Kirshner anticipates a "New Heterogeneity" in thinking about how best to manage domestic and international money and finance. These divergences-such as varying assessments of and reactions to newly visible vulnerabilities in the American economy and changing attitudes about the long-term appeal of the dollar-will offer a bold challenge to the United States and its essentially unchanged disposition toward financial policy and regulation. This New Heterogeneity will contribute to greater discord among nations about how best to manage the global economy. A provocative look at how the 2007-2008 economic collapse diminished U.S. dominance in world politics,American Power after the Financial Crisissuggests that the most significant and lasting impact of the crisis and the Great Recession will be the inability of the United States to enforce its political and economic priorities on an increasingly recalcitrant world.

    eISBN: 978-0-8014-5479-0
    Subjects: Political Science, History

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Preface
    (pp. ix-xiv)
  4. 1 The Global Financial Crisis as World Politics
    (pp. 1-17)

    The 2007–8 global financial crisis was a watershed event. With the flicker of screens—overlooking Times Square, on desktop computers, on hand-held devices—trillions of dollars of wealth simply drained away, as if pouring uncontrollably down city streets and vanishing into the sewer. The US financial economy threatened to implode and, with it, the entire global economy. The world was on the brink of another Great Depression. Luckily, the real economic wreckage wrought by the 2007-8 crisis, the worst economic downturn since the Great Depression, wasn’t quite as bad as that earlier catastrophe. Nevertheless, after the initial dust settled,...

  5. 2 Learning from the Great Depression
    (pp. 18-36)

    It might seem odd to begin a discussion of the international political implications of a twenty-first-century financial crisis by looking back at events from the 1930s. But there are good, even compelling reasons to do so. First-year undergraduate students of world politics still study World War I, because, as one legendary professor of international relations explained, World War I is “the great teacher,” a virtual laboratory of the causes of war and handily summarized as a “don’t let this happen to you” booklet distributed to future generations of leaders so that they might not be so naïve, headstrong, or foolish...

  6. 3 From the First to the Second US Postwar Order
    (pp. 37-58)

    The United States has been the dominant power in world politics since World War II and the leading influence on the nuts and bolts of how global economic relations are organized. That hegemony, however, found expression in the orchestration and supervision of two very different postwar international economic orders: the Bretton Woods system of 1948–73, and what can be called the “globalization project” of 1994–2007. Crucially, these orders were ideationally distinct. The first was a Keynesian-influencedembedded liberalorder that encouraged orientation toward an expanding international economy while nevertheless seeking to “embed” market forces in the context of...

  7. 4 Seeds of Discord: The Asian Financial Crisis
    (pp. 59-81)

    Liberated finance was the American vision—at home, as seen in the previous chapter—and abroad as well. As Lawrence Summers, who, first as right-hand man to Treasury Secretary Robert Rubin and then as Rubin’s successor was one of the principal architects and orchestrators of implementing this vision, which he stated plainly at the time: “Financial liberalization, both domestically and internationally, is a critical part of the US agenda.” Country by country, meeting by meeting, and institution by institution, in the 1990s the United States pressed countries to dismantle their capital controls and to create opportunities and access for the...

  8. 5 The New American Model and the Financial Crisis
    (pp. 82-105)

    “As a scholar of the Great Depression, I honestly believe that September and October of 2008 was the worst financial crisis in global history, including the Great Depression,” Ben Bernanke, former world-class macroeconomics professor and sitting chairman of the Federal Reserve Board, told a closed-door session of the Financial Crisis Inquiry Commission in November 2009. He estimated that “out of … 13 of the most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two.”¹

    How did it come to that? In this chapter I argue that the catastrophe...

  9. 6 The Crisis and World Politics
    (pp. 106-130)

    The United States emerged from the global financial crisis with its banking model essentially intact or, more precisely, with its system dominated by fewer and larger too-big-to-fail institutions, playing by modified versions of most of the same rules and by all of the same norms. In much of the rest of the world, however, there has been a more consequential reassessment of the management of money and finance. This can be observed in policy choices throughout the developing world and in Asia generally; elements of new thinking can even be seen, if expressed tentatively and cautiously, in some Western international...

  10. 7 The Crisis and the International Balance of Power
    (pp. 131-156)

    The global financial crisis will not only affect the nature of world politics and the pattern of international economic relations, it will also have an effect on the balance of power between states, and on the power and capabilities of the United States. To be clear, the US economy will remain the world’s foremost, and US military power is unrivaled and will remain so indefinitely.¹ Nevertheless,relativepower,changesto the balance of power over time, and theequilibriumbetween a state’s power and its international political ambition and commitments are the crucial metrics for understanding international relations.² And from...

  11. 8 Conclusions, Expectations, and Speculations
    (pp. 157-172)

    Before the financial crisis, trends at home and abroad were already suggestive of new macroeconomic constraints on American power. The global financial crisis of 2007–8 was an inflection point that accelerated those underlying trends, and it has left the United States vulnerable to the possibility that macroeconomic factors will inhibit, rather than enhance, its capabilities on the world stage—a reversal of the experiences of the past seventy-five years. Those new constraints (and more difficult international politics) derive from a basic and generally underappreciated shift in the US engagement with the global macroeconomic order, as well as from new...

  12. Notes
    (pp. 173-208)
  13. Index
    (pp. 209-218)