University of Greenwich

School of Social Science

The European Union’s External Relations

(MA)

Book Review

The European Community

and
the Developing Countries

Enzo R Grilli

Reviewed
By
Abdisalam M Issa-Salwe
May 11 , 1995
 Content
Pages
Overview

Making Sense of the International Economic System

The Dawn of Cold War

Conclusion

2
Joan Edelman Spero, The Politics of International Economic Relations, fourth ed.,
(London: Routledge, 1990).

Overview

Since Joan E. Spero published her first edition of The Politics of International Economic
Relations in 1997, many changes occurred in the international scene which was to
reinforce the academic evolution of the international political economy. Her work was
published at a the time when the turbulence in the world economy and the political
dimension of international economic relations steered the world to new heights. Above
all, the persistent problems of the dollar, the dislocation in the international trading system,
the international oil crisis in the aftermath of the Arab-Israeli conflict, the problem of
developing country debt. To cope with the changing situation of politics of international
economic relations, the author was to bring up to date her work.

This work is divided into an extensive introductory, four main parts, and a conclusion.
The introductory lays down the perspective of the book as it opens with a well presented
analysis of the link between economics and politics. By examining the political dynamics
of international politics and the international economic system, the author, takes us back
to the root of this interlink and the historical perspective which shaped them.

Part One of the book opens with an overview of the management of international
economic relations since World War II. Part Two focuses on the Western system and the
international monetary management in harmony with the international trade and domestic
politics influenced by the multinational corporations. Part Three looks at the North-South
system from the international financial flows to the political economy which shaped he
North-South dependency policy. Part Four digs the East-West economic relations which
consequently ushered the dawn of the Cold War and its subsequent effect.. The
conclusion begins with a critical review of the post-Cold War order.

3
Making Sense of the International Economic System

The book focuses mainly on two themes: the influence of politics on international
economic relations and the political management of international economic relations since
World War II.

To make sense of the nature of international economic conflict and co-operation and their
management, the author forwards the notion that management must be seen in three
subsystems: the Western system of interdependence, the North-South system of
dependence, and the East-West system of independence.

Following the World War II, Western government developed and enforced set of rules,
institutions, and procedures to regulate important aspects of international economic
interaction. This post-war order, known as Bretton Woods system, was aimed to establish
an international economic system that would prevent another economic and political
collapse and another military conflict.1 To attain this goal the system had three political
bases: the concentration of power in a small number of states, the existence of a dominant
power, namely the United States, willing and economically able to shoulder the leadership
role, and the existence of a cluster of important interests shared by those states.2

International economic requires an accepted vehicle for investment, trade, and payment;
the US dollar became the key international currency after the World War II (taking over
from the British pound and gold) by becoming the unit for international trade investment,
and finance. By 1947 it was clear that gold and the pound could no longer serve as
growing international trade and investment as the British economy was in ruin because of
the war. The only currency strong enough to meet the rising demands for international
liquidity was the dollar.

For nearly two decades, the Bretton Woods system looked working effective in
controlling conflict. However, by 1947 it was evident that the new economic order was in

4
shamble as many caused its outcome, one of which being the collapse of European
economic machine following the World War II. The Bretton Woods institutions, namely
the International Monetary Fund and the World Bank, could not cope with these
problems.3

The Dawn of the Cold War

This was also the time of the appearing of the US and USSR superpowers and the new
world order. The creation of bipolar political systems led to the separation of the Western
and Eastern economic systems and provided a base for the dominant role of the United
State in the Western system and of the Soviet Union in Eastern system. On another front,
the easing of political and security tensions, in turn, has set the ground for East-West
economic interaction.

In March 1947 the United States took over Britain's traditional role of keeping the Russians

out of the eastern Mediterranean. Truman took Greece and Turkey under the American wing

and promised material aid to states threatened by communism. Three months later the United

States inaugurated the Marshal Plan to avert an economic collapse of Europe which could, it

was feared, leave the whole continent helplessly exposed to Russian power and communist

lures. American aid was on offer to all European countries including the USSR, however,

Moscow refused, for itself and for its satellites, to join the Organisation for European

Economic Co-operation (OEEC), the European organisation established to co-ordinate

European use of Marshal Plan funds. To counter the Western economic order, the Soviet

Union with the new communist states of Eastern Europe, created a separate economic system.

The creation of a separate Eastern economic system was part of the Soviet Union's post-war

policy of dominance and of its international political strategy. Marxist ideology provided the

5
justification for Soviet control. These development were the building block of the Cold War,

which was eventually intensified with the different political and economic systems of both sides

and their global strategies.

The institutional expression of the Eastern block was the Council for Mutual Economic

Assistance (CMEA or Comecon). This economic organisation, whose member included the

Soviet Union and the states of Eastern Europe (except Yugoslavia), was established in 1949 as

Eastern Europe's response to the Marshal Plan.

The creation of the East's own economic system was a clear challenge to the West, therefore

the United States and the West policy was to deny the Soviet Union and its allies economic

resources that would enhance their military capacity and political power.

The End of the Cold War

On 15 August 1971, President Nixon without consulting the other members of the international

monetary system, announced a new economic policy: henceforth, the dollar would no longer

be convertible into gold. This marked the beginning of the decline of the American economic

hegemony. The economic foundation of the US management of the international system was

confidence in the US dollar, as this confidence was based on the US economy. However, from

the early 1970s this was not true.

6
It was time for the US to change its global policy and accept the USSR as a partner in

international peace and stability. Also in the Soviet Union there was an ongoing political and

economic change. Mikhail Gorbachev, who became General Secretary in March 1985, began a

program to address economic, political, and social problems. These policy known as

perestroika (reconstructing the society and the state) and glasnost (the policy of openness),

was to change the course of the Soviet Union, as its impelling force ushered Soviet Union to its

demise and disintegration. The breakdown of the USSR had also an international dimension,

as this led also the end of the Cold War.

Conclusion

By examining the historical and political background of the post-war international

economic relations, the book illustrates how the post-war security system moulded
economic outcomes.

However, where the books falters is the range of the North-South relations, and how it
was shaped it. She briefly explains the three main North-South System theories, namely
the Liberals, the Marxists and the Structuralists.

Since the end of the World War II, developing countries have pursued several different
strategies in an effort to alter their dependence. This tendency, however, ended in
isolating themselves, and as a result to that, failure was inevitable, as the author describes.
How and why this policy failed and the role which the West are not well defined. In spited
that the author did not make clearly explained, perhaps, she had in mind that when the
developing countries’ leaders where influenced by Marxist theory of the North-South
System.

7
Raul Prebisch, the first secretary of United Nations Conference on Trade and
Development, had the idea that “the natural operation of the market works against
developing countries because of a long-term decline in developing countries’ term of trade
and because of Northern protectionism. What is needed is a redistribution of world
resources to help the South: reconstructing of trade, control of multinational corporations,
and great aid flows.”4

In spite of these few oversights, we cannot deny the immense contribution of Spero to the
international political economy. By contemplating toward a new international economic
order following the end the Cold War, Spero reasonable concludes that the future order
will continues to rely on political management by a core of powerful market state, and that
future management, if it is to be effective, will have to take account of new power centres,
such the developing countries.

1
Joan Edelman Spero, The Politics of International Economic Relations, fourth ed. (London: Routledge,
1990), pp.31-32.
2
Ibid., pp.21-24.
3
Ibid., pp.34-36.
4
Ibid., p.155.