chapter  III
The Historical Evolution of the Key Arrangements
ByRobert B. Packer
Pages 40

In this chapter, the author reviews the key arrangements that undergirded the postwar economic system. He emphasizes the international systemic, the domestic macroeconomic structural, and the economic doctrinal elements of policy change. The Western economies functioned not through free-market orthodoxy but through regulation and intervention aimed at ensuring market stabilization and political peace both within and between countries. The dominant role of the United States and Britain in postwar economic planning affected the Bretton Woods regime in important ways. American politico-economic dominance and embedded liberalism combined after the Second World War to foster an international regime of "Smith abroad and Keynes at home". The folklore associated with the development of the Eurocurrency market has it that the market started as a response of the Soviet government to political risk in the 1950s. Financial market liberalization was not a dramatic event, but rather an evolutionary process, as Western governments sought to cope with the changed international political economy.