ABSTRACT
One of the most remarkable developments in the world economy during the last few decades has been the globalization of financial markets. Beginning in the late 1950s, private international financial activity has grown at a phenomenal rate. Global foreign exchange trading, for example, was negligible in the late 1950s but had grown to a daily capitalization of roughly $1 trillion, almost 40 times the daily value of international trade, by the early 1990s. Similarly, gross international capital flows totaled $600 billion by the end of the 1980s (Goldstein, 1993, p. 24). This chapter investigates the globalization of financial markets, advancing three basic arguments. It begins by arguing that, although the Bretton Woods architects sought to expand international trade at the expense of enhancing financial mobility, in order to restrict potential ‘destabilizing’ competition among states, an open, liberal order has evolved in recent years. Next, without underscoring market dynamics and technological forces, Section III argues that the strategic actions of leading states have been decisive in fostering the development of competitive domestic markets within a global context. Finally, the chapter concludes with a discussion of the implications of the internationalization of finance, arguing that these have been the most feared by post-war system planners.
