The Beginnings of Global Economic Governance

1944 saw the birth of Bretton Woods institutions, including the IMF and World Bank. Yet despite the fanfare, they, as well as other postwar economic structures, represented a new version of an old ambition for global economic control. Indeed, as Martin writes, even before World War I, European empires had “perfected the art of meddling in the affairs of others without needing to formally colonize them.”

After the war, the League of Nations took an active role in opening up the economies of the former Hapsburg and Ottoman empires to international exploitation. Further economic crises like the Great Depression caused other nation-states to turn to the League for help, exchanging sovereignty for loans and other assistance. For example, in the early 1930s, the League removed China’s control over its own tariff levels, industrial development, and agricultural production. This was all done, as defenders of the new order argued, for the sake of financial stabilization. What they were less likely to admit was that the core empires privileged global economic stability over the internal stability of their colonies.

As Martin explains, other postwar economic institutions were either established in the 1930s, or were inspired by ones that were. For example, the International Tin Commission (ITC) was established in the wake of the Great Depression and, according to Martin, was one of the first experiments in global economic governance. Previously, British cartels dominated the global tin trade, the result of the British empire’s control over the Malayan tin and rubber industries. For the UK, this was a significant advantage, given the importance of these commodities for automotive industrialists like Harvey Firestone and Henry Ford. Nevertheless, Great Britain agreed to cede some of its imperial sovereignty to the ITC in order to stabilize tin prices following a collapse in demand during the Great Depression.

The ITC was successful, and it went on to inspire other international groups like the Organization of Petroleum Exporting Countries (OPEC), as well as cartels organizing global markets for wheat, tea, and coffee. Martin explains that as these organizations came to govern trade in key commodities, replacing market competition with collusion, they cut supply in order to raise the commodities’ prices. This is how these cartels guarantee economic stability and profitability for wealthier, Western nations and their corporations, at the expense of poorer nations where the commodities are usually produced.

Weaponized Finance

The book’s discussion of the Bank of International Settlements (BIS) is of particular interest. Created in spring of 1930, the BIS went on to become a template for later institutions. Louis McFadden, a Republican representative from Pennsylvania, called it a “financial League of Nations.” Indeed, according to its most committed supporters, thanks to the BIS, there “would be no need of soldiers nor ships of war. The world bank, and the world’s banking system alone, could keep the peace.”

The BIS did not exactly achieve this goal. Nor did it intervene to help distressed countries stabilize their economies or lend money to assist with economic development. It was instead a central bank of central banks, with the ability to impinge upon sovereign nations’ monetary policy. Following World War II, the same great powers set up the IMF and World Bank to carry out the functions that were outside of the BIS’s remit, including lending.

Martin’s point is that these programs were always designed as extensions of Western economic power. The BIS ensured that central banks around the world aligned their monetary policies with those preferred by the West, while the IMF and World Bank issued loans with conditions that would guarantee unequal global development. Meanwhile, the cartels dominating commodity markets set prices regardless of the interests of workers or poorer nations.

Although the IMF and World Bank have perfected the art of lending money with onerous conditions, this practice also predated World War II. What has changed, however, is that over time, the conditions attached to these loans have become more burdensome. “Structural adjustment” conditions attached to loans — which only apply to borrower countries — have forced developing nations to liberalize markets, raise interest rates, impose austerity, and privatize state-owned enterprises.

Developing nations, in turn, have very little say over this. The IMF and World Bank boards are designed to ensure such nations remain marginal to the decision-making process. These practices are, as Martin argues, “an extension of financial statecraft with over a century of history.”

Indeed, in recent history, the IMF and World Bank have tightened their grip over the world economy. Following the collapse of the Soviet Union, as well as the Asian financial crisis in the 1990s, the IMF issued a new slew of structural adjustment loans, extending neoliberalism into nations like Russia and Mexico. And during the pandemic, the IMF continued to attach conditions to loans, a practice that Martin argues it is unlikely to ever drop.

The point is that the world market was never free. Rather, it has been maintained by economic institutions that both rely on and uphold the geopolitical and economic dominance of the West.

Implications for Today

For Martin, the solution is neither a return to economic nationalism nor a root and branch transformation of the global economic system. As he concludes,

A retreat to nationalist policies is dangerously unsuitable for the global problems of the twenty-first century. But it is also clear that governing the world economy needs to be dramatically rethought if it is to be made fully compatible, for the first time, with real economic self-determination and democratic self-governance — and for all states, regardless of their histories of sovereignty and imagined standings in a hierarchical global order.

Martin argues for a worldwide safety net and an expansion of Special Drawing Rights (SDRs), which would give borrowing countries liquidity and security, but without conditions. He also argues that the institutions governing the world economy must include more non-US representatives or face systemic collapse. Nevertheless, while some of these proposals are supportable, they also indicate the biggest political limit of Meddlers. Despite the criticisms he raises, Martin accepts the existence of the institutions whose history he uncovers.

Yet, as Martin’s historical narrative makes clear, the capitalist classes of dominant Western economies built the World Trade Organization, IMF, World Bank, and BIS to extend their control over the globe. This is why, to fight back against neoliberalism effectively at the local level, it will be necessary to fight for a new, genuinely democratic international system.