My research at Hagley (supported by a research grant) aimed at finding if/how large American industrial corporations influenced the transformation of the international financial regime, catalyzing the rise of global finance during the past several decades. This work is part of my dissertation project, which examines the rise of finance in the US, emphasizing the role of large American industrial corporations. I argue that these corporations facilitated the financialization of the US economy in the late twentieth century. I see financialization emerging from three causes: (1) the resurgence of global finance, (2) the expansion of unregulated financial markets in the US, and (3) the change in US monetary policy. These shifts brought about the unprecedented prominence of finance in the US economy by inducing deregulation of financial markets and raising real interest rates.
At Hagley, I wanted to learn more about shifts in the policy preferences of large industrial firms as their intended markets changed. In the early postwar years, industrialists, having business heavily reliant upon stable domestic market growth, supported government regulations on international capital movement. However, as they increased overseas operations, I hypothesize, they changed their attitude toward the controls on cross-border capital flows. By the early 1970s, the firms succeeded not only in abolishing US controls but also in weakening the international rules on capital controls. The documents I discovered at Hagley support the claim that the industrialists changed their position on international capital mobility and began arguing for a liberal reform of the international financial regime.
For example, in the mid-1940s, the National Association of Manufacturers (NAM) remained acquiescent toward the Bretton Woods system that legitimized the use of capital controls. However, according to the Annual Report of 1972, NAM formed a high-level “Monetary Reform Task Force” in 1972 to develop a position on monetary reform. Moreover, at a meeting of the Board of Directors in 1974, policy language was drafted stating that the new rules of the international monetary regime “should forbid any course of action on the part of governments which would prevent exchange rates from responding to fundamental market forces. Efforts by governments to influence exchange rates through direct restrictions or controls on the flow of funds across borders should also be discouraged.” (“The International Monetary System,” submitted by International Economic Affairs Committee, at the Board of Directors meeting. September 16, 1974.)
This new look at the role of large industrial firms makes an important theoretical contribution to the scholarship on financialization. It demonstrates an alternative mechanism of financial development by extending our focus from the activities of narrowly-defined financial institutions to those of other economic actors. Specifically, as major suppliers and demanders of funds in postwar years, large industrial firms critically influenced the transformation of international financial markets.
Youn Ki received her Ph D. from the University of Chicago in 2015. She now is an assistant professor of political science at Miami University of Ohio. She can be reached at kiy@miamioh.edu.
