The Money Mandarins

Book excerpt: This book explores the development of the new "supranational" economy, and how it contributed to the conservative advance and the liberal retreat in economic policy during the 1980s. Howard Wachtel shows how the international economic system worked from 1946 to 1971, and why it collapsed. Each of the key actors in the global drama--banks and corporations, the IMF and the World Bank, central banks and the Federal Reserve Board--is skillfully portrayed. Wachtel provides a concise account of the often arcane and confusing world of foreign exchange rates, the value of gold, Eurodollars, and petrodollars, and the role of the dollar as the international currency. He examines the hidden meanings of the great gold wars of the 1960s and 1970s, and why Vietnam so weakened the dollar only to have OPEC's rise restore its central role. He then reveals the links, in the 1980s, between the oil crisis, Third World debt, the fragile banking system, and merger mania. With a rare gift for making complex issues intellectually accessible, Wachtel lets us understand how in the world economy a private supranationalism, energized by the technological revolution in information and communications, has overwhelmed public institutions and found its ideological home in the "free-market monetarism" lauded today. And in carefully showing how the emerging supranationalism led to the conservative revival and an attack on liberalism and the welfare state, Wachtel suggests why their convergence is fueling the risk of economic collapse, as governments are unable to restore monetary stability in an increasingly unmanageable world economy.