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David Lake - American Foreign Policy

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McGill University
Political Science
POLI 354
Mark Brawley

International Economic Structures andAmerican Foreign Economic Policy 18871934David LakeIntroductionTHESIS American foreign economic policy and policy change during the period 18871934 was shaped in important ways by the international economic structure and the position of the US within itoSource of American foreign economic policy was within the international political economyCentral propositions of theory of hegemonic stability form basis for powerful and parsimonious explanation of foreign economic policy and policy changeAfter Civil War US adopted protectionist at home and laissez faire policy toward exportsAfter 1887 US promoted exports through bilateral reciprocity treaties and dutyfree raw materials while maintain structure of protection1897 and WWI US recognized policies could affect international economy and thus pursued Open Door abroadAfter 1913 US greater leadership roleoLowered tariff wall and attempted to create new liberal international economy based on Open Door principle Late 1920s briefly returned to protectionism via SmootHawley Tariff Act of 1930 but reversed in 1934 Reciprocal Trade Agreements Act The Theory of Hegemonic StabilityTwo variants of the theory of hegemonic stability1Provision of collective good of international stability where instability defined as condition in which small disruptions have large consequences ie stock market crash leads to Great DepressionoAssuming markets inherently unstable or nonhomeostatic systemsand tend toward stagnation and fragmentation Kindleberger argues that IE will be stable only if a single leader is willing to assume responsibility for aMaintaining relatively open market for distress goods bProviding countercyclical longterm lendingcDiscounting in a crisisdManaging the structure of exchange rateseProviding a degree of coordination of domestic monetary policies oLeadership for Kindleberger is altruistic an IE is produced only at net physical cost to country in exchange for amorphous privilege of leading oSmall countries are free riders middlesized countries are extremely destabilizing and are spoilers of the system only large states have both the capability and responsibility for leading the IEoFor the world economy to be stabilized there has to be a stabilizer one stabilizer2The second variant differs in three ways the phenomenon to be explained the nature of leadership and the definition of the IE structure oGilpin seeks to explain why regimesor rules and norms that govern IE relationsemerge and change draws heavily upon collective goods approachoAsserts strongest and most advanced countries reap disproportionate share of benefits Britain and US maintained liberal IE regimes because benefits outweighed costs
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