BITUANAN, SITTIE MAIZAM S.

October 2, 2019
BSMLS 2C

SUSAN STRANGE’S STRUCTURES OF GLOBALIZATION

Susan Strange was a British scholar of international relations who was "almost single-
handedly responsible for creating international political economy". She was one of the
pioneers of the modern study of international Political economy and had a major impact
on the way we now understand the global political economy. Always thoughtful and
accessible, often contentious and sometimes highly provocative. Within the last few
years, Susan Strange has made history by becoming the first female academic to have a
professorship named after her at the London School of Economics. But even in the field
she helped to establish, international political economy, some still dismiss her as a
journalistic writer with few theoretical insights. It is because her arguments are now
“obsolete” and students report being discouraged from studying her. Benjamin Cohen,
who has written a history of international political economy says that much of the field has
moved away from her vision and that her legacy lies not in her ideas but in the ways she
stimulated others. As evidence grows that 2008 crisis has ‘scarred’ the pay of a
generation of workers and turned our political sour, I looked at five of her big ideas.

Strange’s main idea was that economics alone cannot explain what happens in the global
economy and financial markets. As markets developed alongside state institutions, the
two are inevitably locked together in a dance. To Strange, trying to explain economics
without consideration of political power is like studying the movement of the tides without
paying attention to the moon. Markets need the security, law and order, and court system
that states provide. The idea of self-regulating markets, she argued, is politically naive.
Strange’s theory of ‘structural power’ argued that world affairs can be best explained by
paying attention to four power structures which she named: security, production, financial
and knowledge structures. Each one influences and interacts with the others. And, she
reminded her students to always ask like a detective, “who benefits?”
Structure of Security: Security can be threatened by nature or by human beings, and
the threat to security can be local or global, selective or general. Thus, in any political
economy environment there is a significant need for security for things to be done properly
and thus to ensure the survival of that social system. According to Strange, “The security
structure is the framework of power created by the provision of security by some human
beings for others and those who provide the security acquire a certain kind of power which
lets them determine, and perhaps limit, the range of options available to others.”
Accordingly, whoever or whatever is in a position to exercise control over people’s
security, especially from violence, possesses structural power. According to Strange,
whoever or whatever offers protection against the possibility of violent conflict that
threatens security is able to exercise power in other non-security domains as well.

Structure of Production: It focuses on social agreements, which determine what is

produced, by whom, by what methods and by what terms. The interaction between the
structure of production and social groups (including the State) influences outcomes and
the allocation of costs and benefits. Changes in production methods involve shifts of
power between different social groups, firms and the State. It also implies adjustments in
the responsibilities and capacities of States, which leads to a transformation of the State
(Strange, 1994). In short, the structure of production incorporates the relationship
between state power and the transnationalization of production and technological change,
thereby reducing the importance of the factors of production linked to the territory-land,
raw materials and labor-, and increasing the importance of capital and technology in
foreign direct investment flows.

Credit and Finance Structure: It focuses on state power in monetary affairs and credit.
The structure of finance is defined as the set of agreements that govern the availability of
capital and the exchange of currencies (Strange, 1994). The crucial points of analysis are
credit generation, monetary policies and the international monetary system. The power
to generate credit is shared by governments and banks, and by the regulatory frameworks
defined between them; and this is affected by both monetary policies and the behavior of
markets.

Structure of Knowledge: It determines what knowledge is discovered, how it is stored

and transmitted, who communicates it and by what means, to whom and in what terms.
In this structure, power and authority are conferred on those persons and institutions who
occupy key positions in making decisions about what knowledge is "right" and desirable
(Strange, 1994). These people, groups and key institutions within this structure as holders
of expert knowledge, generate consensus on the definition of problems and feasible
solutions in a context of uncertainty; and therefore, they have a key role in risk mitigation
and in defining the interests of States. The analytical framework for the knowledge
structure reviews changes in the following areas: provision and control of information and
communication systems; language and non-verbal communication channels; and
fundamental perceptions and values of the human condition that influence value
judgments and, through them, in political decisions and economic policies (Strange,
1994).
BITUANAN, SITTIE MAIZAM S. October 2, 2019
BSMLS 2C

“True Story of Bretton Woods”

The Bretton Woods Conference, officially known as the United Nations Monetary and
Financial Conference, was a gathering of delegates from 44 nations that met from July 1
to 22, 1944 in Bretton Woods, New Hampshire, to agree upon a series of new rules for
the post-WWII international monetary system. The 1944 Bretton Woods agreement
established a new global monetary system. It replaced the gold standard with the U.S.
dollar as the global currency. By so doing, it established America as the dominant power
in the world economy. After the agreement was signed, America was the only country
with the ability to print dollars. The two major accomplishments of the conference were
the creation of the International Monetary Fund (IMF) and the International Bank for
Reconstruction and Development (IBRD).

Timeline Synopsis:
MARCH 6-9, 1993 Establishment of Bank Holiday
 all bank deposits were guaranteed
and they made the government as
a share holder in thousands of
under capitalized banks
 The FDR created securities in
exchange commissions, establish
social security, and the federal
reserve into a national bank which
is facilitated by the government

NOVEMBER 1941 The day for Bretton Woods Pre-Meeting /

Atlantic Charter

MARCH 1943 Agreement of the Bretton Woods

Founding Fathers to lead the conference

 US Congress approval
DECMEMBER 1943  There are a lot of countries joined
the Bretton Woods conference

 UK would not go on a dollar

1943 standard and rejected the idea of
the dollar being given any kind of
special status
  Emergence of Statement of
Principles

Monetary Conference of Bretton Woods

 proposal of US dollars to be the
official currency
 spearheaded by Henry
Morgenthau, secretary of the
treasury and president of the said
conference, and Harry Dexter
White, chief economist and head
of the division of economic
research, together with American
delegation
 John Maynard Keynes (head of
British Delegation and advocate of
JULY 1944 British Imperial System of
Economics) opposed by setting up
“International clearing or currency
union”. He also issued bancor or
unitas.
 There are two systems that were
presented and these are the
Roosevelt’s system of credit and
Keyne’s system of central banking
 Establishment of Gold Standard on
July 1
 Establishment of dollar as the
international currency on July 2
 Establishment of fixed exchange
rates on July 3
 International currencies are
pegged to be dollar on July 4

2ND COMMITTEE MEETING

 White devised his three series of
brilliant steps and made his first
movement by submitting the
JULY 6, 1944 “Alternative A”
 He was able to discuss that the par
value shall be expressed in terms
of gold as a common denominator
or in terms of a gold convertible
currency unit
 Meeting on Commission 1
 White contacted Morgenthau to tell
him that what will happen is crucial
 Indian delegations stated that
Keynes did a statement that gold
convertible currency did not exist.
 Robertson suggested that the
JULY 13, 1944 vague phrase of “gold convertible
currency” must be replace by “Gold
and US dollars”.
 He and the special committee
worked until 3 am in the morning
just to make the final draft of the
IMF (International Monetary Fund)

 White reported to Morgenthau

JULY 14, 1944 about the current situation of the
draft which is good and the
document was able to be present
to the delegates

 Approval of Marshal Plan in the

reconstruction of Europe
 September, 1945 - Conclusion of
World War II
1945-1948  November, 1945 - France receives
the first loan from the IMF for post
WWII reconstruction
 British pound was considered as
the sick men of the system.
 British pound sterling currency was
known as second to the dollar

First Devaluation
 British authorities devalued their
1949 pound by 30.5% bringing the value
from 4dollars and 3 scents to 80.

1958 European currencies can be converted to

dollars and foreign exchange markets
opened up. However, British people were
not allowed to enjoy currency
 convertibility to dollar. British authorities
have put enormous taxes on goods and
created cheap labor conditions. It sure
acted against the principles of United
States

IMF managing director Pierre Schweitzer

was approached by Wilson for a loan of 3
NOVEMBER, 1967 billion dollars to save the pound. He
turned down the request.

Schweitzer demanded that the US use its

gold reserves to finance its deficits.
However US golds were low (2/3 of the
1970 world golds). With this, US took itself off
from the fixed exchange rate system and
the murder of Roosevelt legacy was done.

AUGUST, 1971 U.S officially abandons dollar

convertibility to gold. / The Nixon Shock

DECEMBER, 1971 Smithsonian agreement establishes the

post Bretton Woods monetary system.