The Origins of International Economic Disorder

The book begins with an overview of the British gold standard and its gradual breakdown during the interwar period. This sets the stage for the main subject: the history of the monetary order underlying the multilateral free-trade system promoted and managed by the United States. The analysis rests on a distinction between a closed economy, where trade imbalances can be corrected by the imposition of quotas and tariffs, and an open one, where the only way to overcome an imbalance is either to encourage exports by lowering the value of the national currency (devaluation) or to discourage imports by allowing domestic economic activity to stagnate (deflation). Block suggests that while the closed economy is more favorable to the working classes, the open one is sought by those with money to invest, i.e. the capitalists. What the book actually studies is the historical effort by a surplus exporter, the postwar United States, to provide the credit required by its trading partners, essentially the Western European nations and Japan, to continue purchasing its goods and thus sustain its industrial expansion. To do this meant successfully foreclosing the trend toward domestically oriented industrial production (or “national capitalism”) recommended by J.M Keynes as a pathway toward full employment. Here is Block’s thesis in a nutshell: “The traditional Cold War perspective obscures the fact that both before and after the intensification of the Cold War, the struggle to prevent the emergence of national capitalism in Western Europe was central to U.S. foreign policy.