A NEO-WESTPHALIAN INTERNATIONAL FINANCIAL SYSTEM?

Today's global economic system is marked both by increased trade -- including greater trade in financial assets -- and by a far larger state role in the financial markets. Martin Wolf, the Financial Times' influential columnist, recently wrote that "Globalization was supposed to mean the worldwide triumph of the market economy. Yet some of the most influential players are turning out to be states, not private actors." For much of the post-war period, global integration was driven by a reduction in government intervention at the border. That is no longer the case. The enormous growth in China's exports has been spurred by an increase in China's intervention in the foreign exchange market as much as by a reduction in barriers to trade. Financial globalization has not proved to be the same as financial Americanization. The state has not withered away. Rather, the power of ratings agencies and multilateral institutions like the International Monetary Fund has been reduced.