Fighting Balance-of-Payment Imbalances from the Situation Room: The Institutional Logic of National Security in International Economic Policy-Making

Pierre-Christian Fink, University of Virginia

Trade imbalances have recently shot to the top of the international economic policy agenda. Existing multilateral institutions intervene asymmetrically: they put the blame on countries that run trade deficits and respond with the imposition of austerity. Yet an increasing number of scholars stress that trade deficits in some countries are linked to trade surpluses in other countries. In the absence of an institutional mechanism regulating trade-surplus countries, the actor best positioned to influence them is the United States, given its centrality in the world economy. The task at hand amounts to the opposite of imposing austerity: its aim is to raise consumption levels in the trade-surplus country. In practice, however, it has proven difficult for the U.S. to initiate such change abroad. This paper studies a case in which the U.S. failed even though the conditions seemed ideal. In November 1968, the U.S. government sent a high-level delegation to Bonn to convince the West German government to reduce its economy’s trade surplus. The head of the U.S. delegation, Treasury Secretary Henry Fowler, had ensured the financing of the Great Society program and was committed to stabilizing the international economic order. The German minister of economic affairs, Karl Schiller, had only a year before achieved passage of a law that committed German economic policy to the pursuit of Keynesian goals including a balanced trade position. Yet when the American delegation proposed that Germany reduce its trade surplus, the German government refused. The paper traces the failure of U.S. international economic policy in November 1968 to the use of an institutional logic of national security. This institutional logic had expanded into questions of trade in the aftermath of the National Security Act of 1947.

No extended abstract or paper available

 Presented in Session 66. Neoliberalism and Class Politics