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International Organizations and Economic Governance

Summary and Keywords

Global economic governance refers to efforts to organize, structure, and regulate economic interactions. In substantive terms, economic governance deals with a host of policy challenges, including the definition of basic property rights, efforts at monetary and fiscal cooperation, ando concerns for the “macroprudential regulation” of financial markets. The Global Financial Crisis has demonstrated not only the importance of macroeconomic and regulatory cooperation, but also the role of crises in redefining the purposes of economic governance itself. Debates in the fields of international relations (IR) and international political economy (IPE) over global economic governance have revolved around strategic interactions, social psychological forces, and the post-crisis emergence of new agents and international organizations. In applied IPE settings, these debates more explicitly pertain to the systemic importance of hegemonic power, multilateral interactions, or intersubjective interpretations. These views intersect with neorealist, neoliberal, and constructivist assumptions regarding systemic interactions. Over the 1990s, IR and IPE scholars would increasingly seek to move beyond both the structural materialism associated with hegemonic stability theory and the structural idealism associated with “first-generation” Wendtian constructivism. Future research should focus on broader questions of whether the Global Financial Crisis will spark renewed theoretical creativity and contribute to an enhanced policy relevance, or whether IR and IPE will continue to work to mask the role of power in limiting such possibilities.

Keywords: global economic governance, Global Financial Crisis, international relations, international political economy, strategic interactions, international organizations, neorealism, neoliberalism, constructivism, hegemonic stability theory


It is almost a cliché to invoke the Global Financial Crisis and its aftermath as an opening for an essay on international organizations and economic governance. Yet these events have demonstrated not only the importance of macroeconomic and regulatory cooperation, but also the role of crises in redefining the purposes of economic governance itself. In this essay, I offer a review of IR and IPE debates over global economic governance, defined broadly as encompassing efforts to organize, structure, and regulate economic interactions (Barnett and Duvall 2005). First, tracing the interplay of shifting moments of consensus, crisis, and change, I offer a history of post–Great Depression trends, contrasting neorealist (Gilpin 1981; Andrews 1994), neoliberal (Keohane 1984), and constructivist analyses (Ruggie 1982; Blyth 2002). Secondly, I shift to address the more recent tendency, in the context of the Global Financial Crisis, to synthesize insights from these approaches in analyses of strategic interactions (Finnemore and Sikkink 1998; Barnett and Finnemore 2004), social psychological forces (Best 2005; Ross 2006; Epstein 2008), and institutional innovations (Sharman 2006, Seabrooke 2007; Weaver 2008; Tsingou 2009; Avant, Finnemore, and Sell 2010). In concluding, I address broader tensions between pragmatic and critical orientations, arguing that these extend “beyond theory,” to encompass differences over the purposes of theory itself.

IPE Debates: Neorealism, Neoliberalism, and Constructivism

In substantive terms, economic governance concerns an array of policy challenges, from the definition of basic property rights, through efforts at monetary and fiscal cooperation, to concerns for the “macroprudential regulation” of financial markets. To be sure, from the vantage point of academic economists, such efforts are often limited by unambiguous market constraints which “speak for themselves” in limiting policy effectiveness. For example, Milton Friedman (1968:8) posited the existence of a “natural rate of unemployment.” Below this rate, Friedman argued, “excess demand for labor […] will produce upward pressure on real wage rates.” Policy efforts to reduce unemployment below this ostensible natural rate were therefore fated to fail over the long run, as they would spur domestic inflation – and, in turn, exchange rate instability. In this way, arguments regarding domestic constraints are paralleled in claims regarding global “Impossible Trinity”-styled constraints on economic openness, currency stability, and policy autonomy (Summers 1999). In applied terms, efforts at maintaining economic openness and exchange rate stability come at the cost of accepting market pressures for macroeconomic restraint – tensions that Federal Reserve Chairman Paul Volcker once cast as a “trilemma” between currency stability, domestic price stability, and full employment levels of growth (Federal Open Market Committee 1979).

Yet, even while economists’ paradigmatic claims about such policy constraints and tradeoffs form a crucial backdrop to IPE debates, such views are neither self-implementing nor sufficient to explain actual policy preferences. Consider first that economists themselves often disagree, as their debates can at times be prone to a faddish instability. As Mark Blyth (2002:148) and Matthew Watson (2002) have noted, every decade or so economists develop a new theory of inflation. Secondly, even if economists could establish a theoretical consensus, institutional and societal support would be necessary to influence policy. Put bluntly, even given paradigmatic agreement among economists, state and societal agents are always free to ignore academic voices (Ikenberry 1993). Finally, even if a paradigmatic consensus might be established across economists, institutional actors, and societal agents, confidence in such a consensus might “feed back” on shared beliefs, engendering new practices which might eventually undermine and negate the consensus itself. Indeed, as Columbia University Finance Professor Emanuel Derman put it to the US Financial Crisis Inquiry Commission (2011:44), “It's not like trying to shoot a rocket to the moon where you know the law of gravity […] The way people feel about gravity on a given day isn't going to affect the way the rocket behaves.” Put more formally, monetary economist Charles Goodhart (1975) highlighted the limits to certainty in positing “Goodhart's law,” which holds that “any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.” In short, even if economic paradigms could dictate policy, the resulting policy consensus could alter market expectations in ways that would later require paradigmatic change.

In this light, to the extent that economic paradigms are underdetermining, making sense of global economic governance requires an understanding of politics, which comprises the focus of IR and IPE scholars in debates over the interplay of coercive, institutional, or social influences on economic interests (Olson 1965). In applied IPE settings, these debates more explicitly pertain to the systemic importance of hegemonic power (Waltz 1979; Gilpin 1981), multilateral interactions (Keohane 1984), or intersubjective understandings (Ruggie 1982; Wendt 1999). Over the remainder of this section, I juxtapose these views, contrasting respective neorealist, neoliberal, and constructivist assumptions regarding systemic interactions.

Neorealist Perspectives: Hegemonic Stability Theory and Its Offshoots

In debates over the sources of global economic governance, the origins and evolution of the post–World War II Bretton Woods order, encompassing the International Monetary Fund (IMF), World Bank, and General Agreement on Tariffs and Trade (GATT) – and, subsequently, institutions like the Group of Seven (G7), Financial Stability Board, and World Trade Organization – provide a recurring focus of concern. Perhaps the most enduring explanations for the founding of the initial Bretton Woods framework accord with the “neorealist” structural materialism of theorists like Kenneth Waltz (1979) and Robert Gilpin (1981), which casts the distribution of power as the primary determinant of systemic stability. In this light, anarchy, defined broadly as the absence of centralized monetary authority, limits the willingness of states to aid one another, for fear that others may later fail to reciprocate and reap relative gains (Waltz 1979:105, 126). Along these lines, Gilpin (1981:170) argues that anarchy drives states “to secure hard currency” and run balance of payments surpluses. Given such assumptions, cooperation can only be approximated where a hegemonic state possesses sufficient market power to offset the costs of providing for systemic stability. In more applied terms, Charles Kindleberger (1973: 289, 304) argues that “for the world economy to be stabilized, there has to be a stabilizer – one stabilizer.” Kindleberger goes on to charge this leader with five key tasks – sustaining a market for distress goods, providing countercyclical long-term lending, supporting a relatively stable system of exchange rates, overseeing macroeconomic policy coordination, and acting as global lender of last resort during crises. From this view, to explain the Great Depression and postwar cooperation, Kindleberger (1973:289) argues that the interwar economic system “was rendered unstable by British inability and U.S. unwillingness to assume responsibility for stabilizing it.” In the absence of a systemic leader capable of promoting free trade, monetary aid, and reconstruction loans, the Great Crash eventually devolved into the Great Depression. In contrast, the early postwar hegemonic dominance of the US made possible the emergence of the Bretton Woods system, enabling the US to not only permit a degree of discrimination against its exports to Europe, but also to undertake financial and monetary efforts – most importantly through the Marshall Plan – to close the “dollar gap” and enable postwar demand.

However, even as hegemonic stability theory provides an important “first cut,” it remains wanting to the extent that US policy makers could have pursued a range of potential institutional orders. For example, the US might have favored the establishment of an order more akin to the nineteenth-century gold standard, which would have enforced deflationary pressures on states as a means to adjust. In this light, supplementary materialist analyses have sought to highlight the intervening domestic sources of hegemonic interests. For example, building on Waltz's analysis of competitive pressures by providing a focus on intervening intellectual debates, G. John Ikenberry and Charles Kupchan (1990:284) offer a framework which highlights the ways in which “socialization occurs primarily after wars and political crises, periods marked by international turmoil and […] legitimacy crises at the domestic level.” Applying these insights to explain the specific postwar order, Ikenberry (1993:62) stresses the role of shared Anglo-American “policy ideas about monetary order,” arguing that these were crucial in moving [the Bretton Woods] negotiations from stalemate to agreement” and enabling the cementing of accord between US and UK policy makers. Refining Waltz's basic arguments, Ikenberry's analysis suggests that where the dictates of power are uncertain, shared ideas can provide “focal points” that enable multilateral accord.

From a slightly different vantage, hegemonic stability theory can also be supplemented through a stress on intervening coalitional alignments. For example, Peter Gourevitch (1986:3, 20–1) highlights the role of crises like the Great Depression as “major downturn(s)” in the business cycle, which matter most as they alter the resources available to capital, labor, and their partisan allies in coalitional struggles. From this perspective, the Great Depression mattered most as it weakened capital, strengthened labor, and enabled support for interventionist policies like the use of wage and price guidelines. In a similar way, the later Great Stagflations of the 1970s combined with the rise of capital to spur a renewed focus on limiting inflation through monetary austerity and economic liberalization. Given the broader context of globalization, capital found the evasion of controls easier, and labor was left to bear the brunt of adjustment to new communications and transportation technologies. In this way, Gourevitch's analysis makes possible a more dynamic analysis of punctuated moments of change, integrating concerns for shifts in the global distribution of power with those for underlying domestic trends.

Indeed, as the dominant US position eroded, concerns for change intensified over the postwar decades. By the late 1950s, signs were appearing that the early postwar dollar gap was yielding to an expanding dollar glut, as US efforts to bolster global liquidity by printing more dollars worked to undermine confidence in the dollar itself. In more formal terms, the US was said to have encountered a paradoxical “Triffin Dilemma,” in which global imperatives of dollar liquidity and dollar stability proved at odds. Over the 1960s, the US faced a number of “bank run”-styled crises, as concerns for convertibility spurred recurring runs on the dollar. By the 1970s, the reality of declining US power would force a more fundamental adjustment, as policy makers and scholars alike pondered alternatives to a fixed exchange rate regime sustained by hegemonic power.

Neoliberal Perspectives: New Forms of Cooperation “After Hegemony”

By the 1970s, in the eyes of many policy makers, the relative decline of the US as a hegemon threatened the gold/dollar basis of the Bretton Woods system and held the potential to reignite the interwar trend of mercantilist competition and competitive devaluations. Yet, as things would develop, these later decades would witness no wholehearted return to mercantilism. Instead, they would see continued cooperation to limit macroeconomic instability, even as states grew more willing to accept austerity and reduced growth – as exemplified in the 1979–82 “Volcker shock,” when a change in operating procedures at the Federal Reserve brought on a sharp increase in interest rates. To make sense of these changes, there would emerge a set of systemic arguments, advanced by “neoliberal institutionalists” like Robert Keohane (1984), who held that states in the aftermath of US decline might continue to cooperate. From this vantage, the Bretton Woods institutions established under US hegemony could persist even “after hegemony.” To be sure, neoliberal institutionalists did not deny that the erosion of US resources played a key role in the breakdown of fixed exchange rates. However, they did reject suggestions that a wider breakdown of cooperation must ensue, on the grounds that institutions and norms established in the context of US hegemony could acquire lives of their own.

For example, even as the Bretton Woods fixed exchange rate system was disintegrating, informal forms of monetary cooperation and macroeconomic coordination would persist. In April 1973, US Treasury Secretary George Schultz met with his German, French, and British counterparts in the White House Library to address the likely evolution of the international monetary system. This meeting in turn provided the template for discussions over succeeding decades, as the “Library Group” expanded in September 1973 to include the Japanese finance minister, giving birth to the G5, and, with the addition of Canada and Italy, the eventual G7. The G7 provided a focal point for economic consultation and crisis-response over the remainder of the decade, most prominently in the London and Bonn summits of 1977 and 1978, which saw explicit efforts at macroeconomic policy coordination.

Over the 1980s, similar informal “clubs” would enable macroeconomic and financial cooperation. For example, as Charles Lipson (1981) argued, sovereign debt rescheduling was less the concern of official actors than the purview of private banks in the “London Club” of creditors. To be sure, Lipson (1985) later offered a more nuanced account, as the August 1982 onset of the global debt crisis saw the London Club's efforts eclipsed by those of the official Paris Club, with the IMF and World Bank, to assemble a series of rescue packages that in turn provided the foundation for the later Baker and Brady Plans for debt restructuring and relief. Such efforts at public–private coordination anticipated the late 1990s activities of policy makers to encourage “bail-ins” by private agents in response to the Asian crises. However, even as such cooperation produced benefits, it had limits, as states proved more willing to countenance reduced growth as the price of monetary stability. Against this backdrop, the global debt crisis resulted in a “lost decade” for Latin American growth, and deindustrialization in the north led to the emergence of what some termed a new protectionism and “strategic trade theory” (Krugman 1986). Subsequently, the sprawling nature of multilateral efforts at trade liberalization – as the Uruguay Round of GATT negotiations took eight years to complete – led to the emergence of a new regionalism, most clearly seen in the European Union (EU) and North American Free Trade Agreement (NAFTA).

By the 1990s, IR and IPE scholars would increasingly recognize that neorealist and neoliberal frameworks each offered important insights into different aspects of global economic governance, as cooperation coexisted with diminishing policy autonomy. In this context of tentative theoretical convergence, a neorealist “capital mobility hypothesis” regarding competitive market pressures on states (Andrews 1994) converged with an increasing neoliberal focus on domestic-level shifts (Haggard and Maxfield 1996). Regarding the former approach, the neorealist capital mobility hypothesis can be seen as a kind of an inversion of hegemonic stability theory, one which emphasizes less the relative decline of states vis-à-vis one another than the relative decline of states vis-à-vis markets (Goodman and Pauly 1993). Such structural analyses suggested that the anarchy of international capital markets constituted a world in which agents would collectively fail to cooperate in promoting mutual autonomy, forcing their individual acceptance of market limits on expansionary policies. Regarding the latter, neoliberals argued that these systemic developments could not be understood in abstraction from a transnational convergence of societal trends (in the rise of capital) and ideational shifts (in the spread of classical economic ideas). Applying such insights, Gourevitch (1986) argued that the postwar rise of labor had enabled policy activism, but that the more recent rise of capital drove a shift to greater tolerance for austerity, while McNamara (1998) argued that the stagflationary crises of the 1970s had undermined Keynesian beliefs in a stable Phillips Curve tradeoff between growth and stability, discrediting macroeconomic activism. With the end of the Cold War, John Williamson (1993) famously suggested that a “Washington Consensus” on free market policies now characterized domestic and global institutions.

Nevertheless, despite their merit, these approaches remained wanting to the extent that, in treating material incentives as unambiguous, they underrated possibilities for interpretive variation in systemic and domestic settings. In this light, just as a hegemon might develop interests in a range of classical or Keynesian frameworks, coalitional agents could develop shifting beliefs regarding their needs. Consider that elements of capital paradoxically favored the use of wage, price, and capital controls from the early postwar decades into the 1970s, while elements of labor often opposed controls over the same decades. Even something as ostensibly “obvious” as financial sector support for tight money and anti-inflationary policies could not be taken as given to the extent that financial actors – particularly in the run-up to the Global Financial Crisis – often favored central bank transparency, lower interest rates, and loose money as a means to enable a higher “volume” of activity. Given this scope for interpretive variation, scholars sought to highlight the ways in which shifting beliefs could drive variation in state and societal interests, igniting a “constructivist turn” in international relations scholarship.

Constructivism: Self-Imposed Constraints and Self-Fulfilling Prophecies

In advancing more socialized theoretical frameworks, constructivists argue that systemic incentives cannot be identified in abstraction from an intersubjective context (Ruggie 1982; Wendt 1992; Katzenstein 1996). Put differently, given a pervasive constraint of uncertainty, neither state nor societal agents can make efficient use of information, and must rely on shared understandings to give meaning to material changes (Blyth 2002; Widmaier 2003; Best 2005). In more specific IR and IPE terms, constructivists argue that hegemonic actors and domestic agents cannot react to events before interpreting them. Indeed, consider that even “major” crises like the Great Depression of the 1930s and the Great Stagflations of the 1970s remain subjects of ongoing debate, as scholars continue to argue over the relative importance of state or market failures to their onset. Such controversies have had continued importance for domestic and global economic cooperation, influencing debate through to the Global Financial Crisis itself (Bernanke 2002).

In the context of concerns for Bretton Woods–era global governance, this analysis suggests that it was neither shifts in the global balance of power nor a transnational convergence of domestic interests that shaped interests in cooperation so much as broader intersubjective shifts that reshaped state and societal beliefs themselves. The seminal analysis of such influences was offered by John Gerard Ruggie (1982), who argues that interwar attitudes regarding the scope for public authority over private choices presaged a Keynesian “compromise of embedded liberalism.” This compromise provided a basis for postwar efforts to reconcile international openness with policy autonomy, as states worked to counter the effects of deflationary pressures, cooperating to create space for more expansionary monetary and fiscal policies.

Yet, even as these initial varieties of constructivism represented an advance on materialist frameworks, they remained limited to the extent that they were biased in the direction of explaining stability to the neglect of agency and change. Indeed, Wendt (1999:1, 312) explicitly defined constructivism as a “structural idealism” and stressed the role of “exogenous shocks” as sources of change. In this vein, Ruggie (1982) fell short of a fully socialized analysis of the collapse of Keynesian ideas and fixed exchange rates. Instead, while insisting that the Keynesian norms underpinning the Bretton Woods order had survived into the 1980s, Ruggie incorporated materialist insights regarding the abovementioned Triffin Dilemma to explain the weakening of the fixed exchange rate system. In the process, he obscured the intersubjective bases of the breakdown of Keynesian cooperation, as an erosion of systemic norms regarding monetary aid led states to increasingly “assume the worst” regarding multilateral cooperation in ways that took on the cultural force of a self-fulfilling prophecy. Such attitudes would, over the 1980s and 1990s, find fuller expression in the rise of “rational expectations” frameworks among economists and the abovementioned ostensible Washington Consensus. To the extent that Ruggie's constructivism stressed the importance of structural constraints vis-à-vis agent practices, it was limited in its ability to anticipate or recognize sources of instability and change – oversights that would prove increasingly significant with the approach of the Global Financial Crisis.

New Directions of Debate: Strategic, Social Psychological, and Substantive Shifts

Prior to the Global Financial Crisis, economic theory and policy debate were characterized by substantial certainty, as policy makers spoke of a two-decades “Great Moderation” secured through the development of macroeconomic policy expertise (Bernanke 2004). Where critics argued for more effective regulation or oversight, economists and policy makers often dismissed such concerns for underrating the efficiency of market forces. However, in the aftermath of the subprime boom and bust – and subsequent “two-speed” recovery, marked by continued slump in the North Atlantic and growth in the Asia-Pacific region – scholars have placed a greater focus on the dynamic nature of strategic interactions, the social psychological sources of instability, and their effects in spurring an array of policy responses to the Global Financial Crisis. Over the remainder of this article, I accordingly address these IR and IPE trends, as scholars have placed a greater stress on strategic interactions, social psychological forces, and the post-crisis emergence of new agents and institutions, before turning in the conclusion to debates over the purposes of theory itself.

New Turns I: Strategic Practice and a Rationalist–Constructivist Synthesis?

Over the 1990s, IR and IPE scholars would increasingly seek to move beyond both the structural materialism associated with hegemonic stability theory and the structural idealism associated with “first-generation” Wendtian constructivism, on the grounds that each obscured possibilities for agency, practice, and change. These parallel trends in turn gave rise to increasing efforts at synthesizing rationalist and constructivist perspectives as a means to make sense of rhetorical and persuasive struggles (Finnemore and Sikkink 1998; Risse 2000). Such a synthesis was justified on the grounds that while rationalists assumed that agents’ strategic choices reflected consistent preferences, these preferences could be based in either material or social structures (Fearon and Wendt 2002).

For example, Martha Finnemore and Kathryn Sikkink (1998:888, 895–7) advanced a highly influential model of a “norm life cycle,” tracing the interplay of policy experts and political leaders in efforts at “strategic social construction.” They argue that where “norm entrepreneurs,” who identify policy problems and appropriate responses, attract the support of “norm leaders,” these leaders in turn engage in more direct efforts at public persuasion. Where successful, the subsequent “norm cascades” advance change as norms and ideas take on self-reinforcing “lives of their own.” In a similar fashion, Emanuel Adler and Peter Haas (1992) stress the ways in which transnational agents in “epistemic communities” reshape state and societal ideas and interests. In contrast to Ikenberry's (1993) above-referenced analysis of the ways in which US policy makers used Keynesian ideas to cement the Bretton Woods accords, Adler highlights the importance of intellectual interactions in directly shaping policy beliefs. Empirically, Adler (2005:83–4) stresses the interactions of “a small group of key US economists and officials, working mainly at the Treasury Department and operating under the leadership of Undersecretary Harry Dexter White,” and parallel efforts “on the other side of the Atlantic […] engineered by John Maynard Keynes.” In this way, these frameworks highlight possibilities for the intentional change of systemic orders.

In more specific settings, such strategic analyses can also be applied to explain change within international organizations (IOs), as Nielson, Tierney, and Weaver (2006:109–10) draw upon both “rationalist (principal-agent) and constructivist (organizational sociology) approaches” to “focus on both strategic and principled behavior within the [World] Bank's bureaucracy.” They argue that although agents “become partially socialized into their bureaucratic environment” over time, “individuals are neither pure creatures of habit nor cultural ‘dupes’” and so “maintain the cognitive ability to recognize culture for what it is and resist it.” In this light, Nielson, Tierney, and Weaver conclude that change can be advanced where norm entrepreneurs within IOs “strategically engage culture towards their ends […] couching change goals in ways that do not appear ‘counter-hegemonic,’ but instead are culturally compatible.”

Finally, expanding on the interplay of agency and organizational dysfunction, Barnett and Finnemore (1999:722–3; 2004) highlight the practices that can destabilize IOs, as insulation from external feedback can lead them to “develop internal cultures and worldviews that do not promote the goals and expectations of those outside the organization who created it and whom it serves.” For example, in their analysis of the World Bank, they suggest that professionalization, taken to extremes, has given rise to values that run counter to those held in the wider environment, as the Bank “has been dominated for much of its history by economists, which […] has contributed to many critiques of the bank's policies.” In a broader sense, Barnett and Finnemore highlight the ways in which IOs, even as they espouse liberal norms, pose challenges to concerns for democratic accountability and legitimacy.

Writ large, these strategic analyses emphasize important possibilities for, and impediments to, agency. Yet, to the extent that they cast strategic interactions as occurring in essentially bureaucratic settings, and as they rely on exogenously given “periods of rapid global change” (Barnett and Finnemore 2004:162) to explain change, they obscure the larger contexts of everyday interactions in the rise and demise of norms. More formally, they risk obscuring not only analytically prior popular influences on the success of specific norm entrepreneurs, but also subsequent implications of normative certainty in causing systemic instability. In recent years, such oversights have spurred a greater stress on the social psychological sources of ostensibly strategic choices and exogenous shocks, trends which have been reinforced as a climate of liberal triumphalism and paradigmatic hubris contributed to the subprime boom and the Global Financial Crisis.

New Turns II: From Thinking to Feeling in a Social Psychological Political Economy?

While strategic analyses of the “norm life cycle” provide important insight into the ways in which entrepreneurs reshape intersubjective understandings, they often leave unexplained the success of specific norms and the sources of normative decay. In recent years, this has prompted a “social psychological” turn in IR and IPE debates. More specifically, it has led scholars to highlight the interplay of the social, everyday influences which prefigure paradigmatic choices and, secondly, the psychological, unconscious influences which can alter the context of strategic calculations in unenvisioned ways.

First, scholars have increasingly argued that paradigmatic frameworks cannot persist if they lack grounding in everyday or popular values. From this vantage, a “top-down” focus on the resocialization of the mass public risks obscuring “bottom-up” popular influences on elite, intellectual debates. Such insights have been developed by Leonard Seabrooke (2006), who emphasizes “everyday” influences on economic policy, and Adler and Bernstein (2005:296), who situate Adler's earlier stress on epistemic communities in an analysis of the larger “epistemes,” or social “‘bubble[s]’ within which people happen to live [and which shape] the way people construe their reality.”

Secondly, extending these insights, scholars focusing on broader psychological concerns stress the ways in which everyday and intellectual beliefs are shaped by psychological contexts, in ways that cannot be reduced to cognitive strategizing (Shannon 2000; Crawford 2000; Ross 2006; Mercer 2010; Jeffery 2011). Developing these insights, Andrew Ross (2006:199–200) has argued that social psychological influences are “inspired and absorbed before being chosen” and “tinge our intellectual beliefs” in ways that have implications for policy choices. Ross further stresses the collective nature of affective influences on the grounds that “affects cut across individual subjects and forge collective associations from socially induced habits and memories” in ways that are “experienced by decision-makers and publics alike.” From such perspectives, affective forces can not only shape and distort the interactions of norm entrepreneurs and IOs-as-actors, but also reshape the views of the wider public in ways that cannot be reduced to the preferences of norm leaders, but rather generate what Seabrooke (2006:44–7) terms “axiorational” logics that assume lives of their own.

In this light, countering claims for the strategic efficiency of norm entrepreneurs, social psychological analyses have highlighted the ways in which normative consensus and certainty can cause ostensibly exogenous shocks and crises. Particularly where overconfidence engenders a misplaced certainty on the part of policy intellectuals, the resulting “policy bubbles” can lead to crisis and change just as surely as economic bubbles in financial markets. For example, Jacqueline Best (2008:362–3) argues that a persistent tendency has been for policy makers to reduce deeper forms of uncertainty to more calculable forms of risk. Best elaborates that risk “seeks to [escape] the obscurities of language through the transparency of numbers, treating the self-reflexivity of human understanding as one more variable to be factored in […] This may help to explain why governments prefer to frame problems like security, migration or finance in the language of risk and uncertainty […] and to deny their inherent ambiguity.” Such tendencies in official contexts can subsequently spill over in what might be seen as wider “certainty cascades” that reshape everyday attitudes. Indeed, Hyman Minsky (1992:2, 7–8) stresses the mounting effects of intellectual inflexibility in economic settings over the course of “real calendar time,” as markets exhibit a diminishing sensitivity to risk. Minsky argues that “over periods of prolonged prosperity, the economy transits from financial relations that make for a stable system to financial relations that make for an unstable system.” Over a period of prolonged growth, as memories of past financial crises fade, economies would move to assume increasingly unsustainable levels of risk – an analysis which has been widely applied to the Global Financial Crisis.

In this way, social psychological insights offer a dynamic perspective on tendencies to consensus, crisis, and change, in ways that reduce the need to rely on deus ex machina-styled exogenous shocks to explain change, and rather highlight endogenous sources of instability (Fioretos 2011). Such a stress on social psychological forces stands to offer a more complete appreciation of the norm life cycle itself, suggesting that IO insulation may not generate insular “gaps” between internal and external communities which prompt eventual adjustment so much as such pathological tendencies may reshape the interests of leaders and publics alike, as technocratic overconfidence provides a source of popular enthusiasm, and popular support reinforces technocratic overconfidence. Moreover, as Richard Rorty (1987:245–6) argues, when policy debate becomes overly reliant on “the sterile jargon of ‘quantified’ social sciences (‘maximizes satisfaction’, ‘increases conflict’, etc.), [policy makers] either tune out, or, more dangerously, begin to use the jargon in moral deliberation.” To the extent that policy makers and publics accept technocratic claims to expertise in limiting risk, such tendencies may limit the scope for policy deliberation itself, as issues are removed from the wider agenda on the grounds that they are not normative so much as technical. The result is to create an increasingly “imperfect” market in ideas, one prone to eventual failure. Taken as a whole, such analyses highlight ironic social psychological tendencies to technocratic overconfidence in ways that cause “exogenous shocks” and change.

New Turns III: Power, Paradigmatic, and Policy Shifts

Beyond reinforcing these strategic and social psychological turns, the Global Financial Crisis has had more issue-specific, substantive effects on IR and IPE debates. To be sure, the ultimate “result” of the Global Financial Crisis remains uncertain: In the case of earlier crises like the Great Depression and Great Stagflations, it took nearly two decades for any sort of consensus to be established regarding their political implications. Similarly, the evolution of reactions to the Global Financial Crisis is likely to be an erratic process, marked by persistent debate over its causes and implications. However, even as these debates will continue to evolve, IR and IPE research has been shaped in a number of already-apparent ways, marked by concerns for the influence of the Global Financial Crisis as a material and intersubjective “critical juncture,” as a more specific paradigmatic shock to policy practices, and as a source of ongoing institutional and policy reforms in settings like the Group of 20 (G20) and Financial Stability Board (FSB).

First, in the post–Global Financial Crisis context, US hegemony – both in its material and social leanings – has come under increasing pressure. In a basic material sense, the Global Financial Crisis made manifest an emergent shift in the global distribution of capabilities, as the locus of the global economy moved to the Asia-Pacific region. Paralleling this material shift, the once–dominant “Washington Consensus,” based on a classical economic commitment to the competitive efficiency of market forces (Friedman 1968; Lucas and Sargent 1978) yielded to models premised on assumptions regarding imperfect competition, whether as prices are distorted by monopolistic abuses or driven by Keynesian-styled “irrational exuberance” (Akerlof and Shiller 2009). In the absence of a clear Washington Consensus, some have even suggested that the Global Financial Crisis may spur the rise of a “Beijing Consensus,” though that view may be overstated.

Secondly, to the extent that these shifts in the distribution of power and purposes of global governance do not speak for themselves, they have given rise to ideational and policy innovations, particularly regarding the need for regulation. For example, in their overview of the lessons of the crisis, IMF Chief Economist Olivier Blanchard, Giovanni Dell'Ariccia, and Paolo Mauro (2010) stressed that the pre-crisis Great Moderation was marked by overconfidence in monetary governance. They argued that the crisis has shown that monetary policy “is a poor tool to deal with excess leverage, excessive risk taking, or apparent deviations of asset prices from fundamentals.” In the absence of the ability of monetary mechanisms to affect the expectations of financial agents – or at least to do so in a way that inflicts limited collateral damage on the broader economy – policy makers have increasingly advocated the revival of the more direct “macroprudential” controls employed during the early postwar decades. These include a range of executive pay controls meant to discourage risky behavior, as well as new capital and liquidity requirements meant to reduce fears regarding the solvency or liquidity of banks.

Thirdly, with respect to institutional developments, the Global Financial Crisis has given rise to a strengthening of multilateral frameworks for global governance. Of particular importance is the institutional shift in the supplanting of the G7 by the G20, expanded to provide a more representative context of debate, and the parallel strengthening of the Financial Stability Forum as it was reshaped into the Financial Stability Board. This has had implications not only for efforts at conventional macroeconomic coordination, as followed from the September 2008 collapse of Lehman Brothers, but also the abovementioned macroprudentially styled measures. It is therefore likely that these “low end of town” activities – addressed in pre-crisis concerns for tax evasion (Sharman 2006) and housing, and credit (Seabrooke 2007) policies – will receive further increased attention, as the Financial Stability Board has provided a forum for efforts to coordinate global standards for macroprudential regulatory efforts spanning broad concerns for the Basle capital standards (Tsingou 2006, 2009), executive compensation (Culpepper 2010), and corporate governance (Gourevitch and Shinn 2005).

To be sure, while these G20 and FSB-sponsored reforms have been consequential, neither such policy shifts nor the transfers of private debt to the public balance sheet seem to have altered something of a conventional wisdom that what is good for the finance sector must be good for the economy more generally. Though Marxism has long since faded from the mainstream of IPE (Maliniak and Tierney 2011), the culpability and impunity of the finance industry could conceivably give pause for thought on this score (Arrighi 1994). To the extent that a revived Marxism may not be in the offing, scholars like Barnett and Duvall (2005a:4) have urged a more critical approach to the study of global governance, lamenting that “much of the scholarship on global governance proceeds as if power either does not exist or is of minor importance.” To the extent that they argue a classically liberal bias on the part of IR and IPE scholars has spurred a focus on coordination problems among similarly situated agents, Barnett and Duvall (2005:7) urge an expanded approach better suited to highlighting the structures that limit agents’ options and shape “how global life is organized, structured, and regulated.” Such a more critical approach accords as well with recent calls for a rethinking of international regulatory efforts, to counter arguable pre-crisis tendencies to equate institutional development with regulatory strengthening (Helleiner and Pagliari 2011).

Conclusions: Pragmatism, Criticism, and Scholarship

In concluding, this essay has provided a broad overview of neorealist, neoliberal, and constructivist analyses of global governance, as well as an overview of new avenues of research spanning concerns for the interplay of strategic practices, social psychological influences, and the Global Financial Crisis itself. Rather than conclude on a note suggesting that any of these particular theoretical frameworks deserves pride of place, I want to briefly raise broader questions of whether the crisis will prompt renewed theoretical creativity and contribute to an enhanced policy relevance, or whether IR and IPE will continue to work to mask the role of power in limiting such possibilities. Indeed, to paraphrase Richard Rorty (1987:253), one might argue that the deepest divide in studies of global governance is “beyond method,” falling between a Deweyan pragmatic stance and a more Foucauldian critical orientation. In characterizing this divergence, Rorty argues that, from the Deweyan vantage point, scholars seek to stress “the moral importance of the social sciences – their role in widening and deepening our sense of community and of the possibilities open to this community.” In contrast, from a more critical Foucauldian perspective, scholars seek to emphasize “the way in which the social sciences have served as instruments of ‘the disciplinary society’,” and to direct attention to the ways in which social scientists have “helped [policy makers to] manipulate all the other classes (not to mention, so to speak, helping them manipulate themselves).” In such debates, Rorty argues that the key difference is not analytical or methodological so much as normative, or, as he puts it, “not over a theoretical issue, but over what we may hope.” From this vantage point, lurking in the background of the above global governance debates is an enduring tension over whether scholars have taken a naïve view of instruments of social domination or whether they have identified important – if sometimes problematic – pathways for social progress. Taken as a whole, what is at stake across these debates is an enduring concern for the pragmatic or critical role of theory as a factor, and of the theorist as an actor, in international politics.


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                                                                                                                                      For their comments and criticisms, I thank Charlotte Epstein, Susan Park, Leonard Seabrooke, Jason Sharman, and Catherine Weaver. The usual disclaimers apply.