Bibliographic Essay

IPE-competing conceptions include liberalism (Cohen 1977), realism , Marxism (Block 1977),  focus on structured interactions within the private sphere or market as key elements determining how  financial systems have evolved.  Rationalism (Singer 2007) and constructivism (Abdelal 2007) focus on the incentive structures which incline public agencies to set up systems of rules through which private financial actors operate.  Realist (Strange 1986, Kirshner 2000) and Marxist (Soederberg 2004) traditions looks at way in which power has been a key structural dynamic of financial systems.  2 dominant contending theoretical approaches:  rationalist, empiricist bent centred in the US (the 'American School'), and a historical, normative bent centred in the UK (the 'English School').  IPE has roots in ancient history that asks how authority is organized and how the public or political dimension of authority intersects with its private economic counterpart to generate structures of behaviour and governance.  Thucydides, St. Augustine, Machiavelli.  Thomas Hobbes, and  John Locke extended the idea of state power to property  and by extension wealth, states and the market.  Jean-Jauques Rousseau and Immanuel Kant, Adam Smith had distinct ways of thinking about the relationship of wealth and power.  Georg Hegel and Karl Marx address the interposing of the sphere of civil society between those of wealth production and political power.

Global Financial Systems - As discussed above, 5 major approaches.  "Liberal approaches stress the pre-eminent role of markets and private actors in establishing the principle dynamics driving forward the global system" (p.177).  Barry Eichengreen (2008), Eatwell and Taylor (2000).  Realist scholars pay more attention to the evolution of state preferences and the distribution of capabilities, claiming it is the state that establishes the framework within which private capital markets operate (Kapstein 1994, Pauly 1997, Strange 1998, Underhill 1997).  Some work within and between these two traditions to strike a balance between the two poles (Cerny 2002, Porter 2005).  Constructivist scholars (Blyth 1997, Best 2005) do not ask which set of actors, public or private, have more or less sway at particular moments in time but are interested, rather, in the combination of actor networks and their inputs (in the form of rules and norms).  They focus on the broader debates and discourses as the templates around which actor's strategies coalesce, sharing a common scholarship with rational choice theorists (Sobel 1999).  Marxist or self-proclaimed radical approaches to finance begin with private actors but are interested in the organization of such actors into a social class formation (van der Pijl (1998), Robinson (2004), and Watson (1999)).

Global Financial Governance - Same groupings as above, but describe how incentives and how rules are shaped by market dynamics and the interests of agents (governments, private firms).  "The interplay of dynamics and interests generates the incentives and their corresponding sets of rules, as moderated by the capacity (or power) of agents to achieve their goals."  Realists link modes of governance to the evolution of American power (Pauly 1997); liberals to the imperatives of progressive market integration (Herring and Litan 1995), constructivists to changing conceptions of credibility (Hall 2009), rationalists to the intensity and/or trade-off between competing interests and costs (Keohane 1984; 2002), and Marxist and historical materialist tradition to class relations and evolving frames of (collective) consciousness (Baker 2006; Panitch and Gindin 2009).

Global financial governance explored by those in Globalization scholarship.  Zurin (2000), (also Coeman and Porter 2000), ask how cosmopolitan or global democratic impulses are becoming instantiated beyond the nation state.  Others ask how private forms of authority are encroaching upon and becoming entwined with more public forms (Hall and Biersteker 2002; Cutler et al. 1999; Hewson and Sinclair 1999).  Still others explore the emergence of civil society as a meaningful but problematic interlocuior in governance processes (Amoore and Langley 2005), or ask how the practices we associate with governance actually become individualized within and are executed by governance subjects (Latham 1999; Hardt and Negri 2000; de Geode 2005).

Summary of Chapter 2: Forging Financial Governance

This chapter covers the period from the middle of the nineteenth to the middle of the twentieth century.  The world's financial system underwent dramatic changes:  greater state authority, financial institutions more internationally active.  Stronger national governance enabled more globalized behaviour.  And the state of great power relations contributed to the ability of states to cooperate in strengthening of the international dimension of governance.  In the 1920s came the first genuine international governance infrastructure (eg. the Dawes Plan, gold standard).  Finance is impossible without determined political support, especially in times of economic and political breakdown.  There must be a balance between the national and the international or global dimensions of financial governance.  When domestic economic and political systems break down, a global system cannot be maintained.  Likewise, if an adequate international support infrastructure is unavailable, national efforts will not be fully successful either.  The answer for post WWII planners was to embed an internationalized and relatively liberalized financial system into the structure of national political authorities.      

Book 1: Global Politics and Financial Governance (Randall Germain, 2010)

Germain focuses on the relationship between polity (the state) and financial institutions active in the market.  He takes a path dependent approach in recognizing how this relationship has developed over centuries.  Financial institutions are the result of cherished beliefs about the role politics should play in our lives.
Chapter 1:  Financial Governance and the State
How should financial systems be governed? 1. Financial governance is most effective when organized at the national level. 2. the proliferation and design of financial instruments needs to be better regulated so that the entire financial systems are not capsized if one class of instruments suffers.  The regulatory capacity of nation-states needs to be reinforced in order to restrict the ability of financial institutions (p.2).  Historically, governments have facilitated the movement of capital through domestic liberalization and globalization of the financial market infrastructure.  Germain advocates a strengthened set of national or regulatory regimes supported by a limited set of international cooperative mechanisms that have no global aspirations or illusions.  Global political economy not global economy, which better reflects the centrality of the state.   The tide of globalization is about to be rolled back, deliberalization, resulting in a global political economy that is better balanced in trade and capital flows, and sustainable (although slow) growth.  The political question of how to distribute wealth within the wealthier countries will become more important as a result (p.4).  The 2007/09 credit crisis did not end globalization, rather it revealed global capitalism to be a sham. Definition of finance = money+time.  Better yet, finance = money + time + intersubjective beliefs.  Institutions allow intersubjective beliefs and time to influence money.  The financial system then is that set of institutions through which access to financial resources is organized (p.6).  It is a system of intermediation.  The four pillars of the financial system:  banks, capital markets, long-term assets such as pension funds, and the insurance business (p.7).   Financial institutions are regulated in two manners, by compulsion as well as through a set of principles that guide financial behaviour through norms and incentives.  These two mechanisms are governed by state authority.  Germain uses a historical method to examine political economy with financial institutions operating within a capitalist market economy as the foundation of his framework (p.11).  The pressures facing public authorities to provide a stable and efficient financial environment and the conflicts that result must also be considered within this framework in order to chart the pathway of governance.  Financial governance must manage two competing goals:  1.  to create credit as to promote economic growth without igniting inflation, and 2.  to equitably distribute credit across all sectors of society.  The extent of globalization is determined by the reach of the state, especially as the US becomes less central to the global structure of political power.  Germain seeks for the ideational changes that arise out of financial crises in order to understand future developments in financial governance.  The result of the Great Freeze will be is closer attention to national lines of accountability and a streamlined international element that supports national forms of financial regulation.