Financial power in the global village: Financial globalization and the United States

This dissertation empirically investigates the roots and motives of financial globalization, and analyzes its various aspects and far-reaching influence on global financial markets. The existing research focuses on how technical development and market forces brought financial globalization, while this dissertation argues that the hegemonic financial power has greatly influenced modern financial globalization. Applying systems theory, hegemonic stability theory, and levels of analysis, it examines the structural power of the United States and its behavior in constructing globalization in international financial markets from an international political economic perspective. The United States has strenuously pursued bilateral and multilateral foreign policies to persuade industrialized countries and applied pressure on developing countries to participate in global financial liberalization. Due to this external pressure and domestic needs, developing countries opened their financial markets, and used foreign capital to finance their current account deficit and economic development. As financial globalization proceeded, volatile speculative short-term capital rushed into developing countries, which further opened their financial market without preparing a sound supervisory system and following proper sequencing. This caused serious policy dilemmas and frequently led to financial crises. Managing these financial disasters, the United States and international financial institutions (IFIs) designed a financial governance framework (New International Financial Architecture, NIFA) adopting various international financial standards, financial sector assessments, and encouraging transparency in monetary and financial policy by strengthening the role of IFIs. However, many developing countries criticized that NIFA facilitates unilateral policy reforms toward developing countries, and ignores a direct prescription to regulate hazardous speculative short-term financial capital. As an alternative proposal, many civil society groups promote the 'Tobin tax,' which imposes a steep tax on short-term financial capital inflows. However, many industrialized countries are unwilling to accept this prescription. Through a critical evaluation of contemporary global governance of international finance, this dissertation highlights the need for a global forum to adjust various financial sector governance proposals, and a global disclosure system to monitor and control speculative capital motilities as alternatives to construct a stable international financial system.