Understanding global security - Peter Hough

ECONOMIC THREATS TO SECURITY
premier economic power to promote free trade because, ultimately, they should enjoy
the greatest spoils from the increased volume of world trade which follows. The UK
actively supported free trade in the nineteenth century for much the same reason.
In addition to these two motivations of economic gain and military security,
however, the LIEO was moulded by the belief that building a system to support
economic liberalism was the best way of guaranteeing human security. In this way
the LIEO differs from the nineteenth-century economic system, which was concerned
only with free trade and did not have institutions intended to act as a safety net
for states struggling with financial difficulties. The International Monetary Fund
(IMF) was designed as an international source of liquidity for governments to borrow
from when facing balance of payments difficulties and the World Bank as a source
of development loans.
The Great Depression of the 1930s, in which millions of people starved to death
and/or experienced abject poverty in both the developed and underdeveloped world,
loomed large in the minds of the Bretton Woods negotiators and strengthened the
resolve of capitalist states to move away from the protectionism of the first part of
the twentieth century seen as responsible for the economic meltdown (and, ultimately,
the Second World War also). Clark describes the Great Depression, rather
than either world war or ideological conflict as ‘the greatest formative event
of twentieth century history’ (Clark 2001: 28). The LIEO outlived the Cold War, even
contributing to its termination through its success, and has widened (in terms of
the states involved) and deepened (in terms of the extent of its political impact) in
the years following with the distant memories of the 1930s still lingering.
Although an economic crisis of the magnitude of the Great Depression has not
occurred during the era of the LIEO, financial turbulence has recurred periodically
and had profound effects on the economic security of a number of states and their
populations. The oil crises of the 1970s were the economic making of a number of oil
producing countries but their hiking up of the price of this crucial commodity
prompted economic recession for much of the rest of the world. In the late 1990s the
huge bubble that was East Asian economic growth burst, causing a loss of income
for Japan and more serious hardship for some of the poorer countries affected.
Argentina’s financial meltdown in 2002 had profound social and political effects in
that country and in some of its neighbours. The IMF has been cited as culpable for
the Asian, Argentine and other economic crises but, overall, the global economic
system is more stable than ever. For all of its undoubted failings in sometimes
exacerbating social problems in LDCs with its administering of tough medicine, the
sheer existence of an IMF is a source of global economic stability. The IMF’s role as
a source of international liquidity for states in even the most dire of economic straits
and monetary adviser to all governments serves to give some purposeful direction
to global financial flows. It is undoubtedly dominated by the North in its policy-making
but it is still a global body and must be better than nothing, which is what the world
had before 1944 and during the 1930s Depression. A more representative and humanneeds
oriented IMF is increasingly accepted as necessary, however, for the further
enhancement of human security from economic depression.
94