00 1763-6 Frontmatter
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02 1763-6 chap2 1/31/05 5:59 PM Page 21 2 The International System I am not referring to the absolute, infinite concept of universal peace and good will of which some fantasize and fanatics dream. I do not deny the value of hopes and dreams, but we merely invite discouragement and incredulity by making that our only and immediate goal. Let us focus instead on a more practical, more attainable peace—based not on a sudden revolution in human nature but on a gradual evolution in human insti- tutions—on a series of concrete actions and effective agreements which are in the interest of all concerned. There is no single, simple key to this peace—no grand or magic formula to be adopted by one or two powers. Genuine peace must be the product of many nations, the sum of many acts. It must be dynamic, not static, changing to meet the challenge of each new generation. For peace is a process— a way of solving problems. With such a peace, there will still be quarrels and conflicting interest, as there are within families and nations. World peace, like community peace, does not require that each man love his neighbor—it requires only that they live together in mutual tolerance, submitting their disputes to a just and peaceful settlement. JOHN F. K ENNEDY Commencement address at American University, June 10, 1963 he year 1945 was the end of a nightmare. Never in world history Thad there been a period as devastating as the years between 1914 and 1945. In the First World War, the trench warfare on the European western front and the massive casualties in Russia, Asia, and the Middle East led to tens of millions of deaths. More than 50 million people died in the Second World War. A genocide carried out with industrial efficiency exterminated close to 6 million people just because of their identity. Per- haps 20 million people died of starvation and in labor camps in Stalin’s Soviet Union. Allied napalm bombing killed 30,000 civilians in Dresden in just one night. The first two atom bombs killed 150,000 Japanese. It is difficult, 60 years later, to fathom the extent of the mayhem. 21 02 1763-6 chap2 1/31/05 5:59 PM Page 22 22 A Better Globalization The disasters of the mid–20th century were no doubt caused and mag- nified in part by the economic hardships experienced during the Great Depression. In the early 1930s, more than 20 percent of the US and Euro- pean workforces were unemployed, with very little of the social welfare state support that was built into the advanced market economies after the Second World War. Economic cooperation between major countries was minimal. Average annual world GDP per capita growth declined from 1.3 percent over 1870–1913 to 0.9 percent during 1913–50. Growth in the volume of merchandise exports decreased from 3.4 percent to 0.9 percent in the respective periods, reflecting a significant decline in integration of the world economy through trade.1 Economic and political problems cre- ated a vicious circle of violence and despair that imposed an almost unimaginable degree of suffering on hundreds of millions of human beings. Against this backdrop, opinion leaders such as British economist John Maynard Keynes conceived of a new international system at the end of the Second World War, with the support of the victorious allied governments. That system included the United Nations as well as the Bretton Woods institutions. The UN charter, signed on June 26, 1945, in San Francisco at the UN Conference on International Organization, came into force on October 24 of that year. The preamble of the UN charter states: We, the peoples of the United Nations determined to save succeed- ing generations from the scourge of war, which twice in our lifetime has brought untold sorrow to mankind, and to reaffirm faith in fun- damental human rights, in the dignity and worth of the human per- son, in the equal rights of men and women and of nations large and small, and to establish conditions under which justice and respect for the obligations arising from treaties and other sources of inter- national law can be maintained, and to promote social progress and better standards of life in larger freedom, and for these ends to prac- tice tolerance and live together in peace with one another as good neighbors, and to unite our strength to maintain international peace and security, and to ensure, by the acceptance of principles and the institution of methods, that armed force shall not be used, save in the common interest, and to employ international machinery for the promotion of the economic and social advancement of all peo- ples, have resolved to combine our efforts to accomplish these aims. 1. Maddison (2001, 126–27, tables 3-1a and 3-2a). 02 1763-6 chap2 1/31/05 5:59 PM Page 23 The International System 23 From its inception, the international system had the mutually comple- mentary objectives of creating structures of world security and political governance, as well as economic cooperation, that would protect the planet from World War III and promote economic reconstruction, stabil- ity, and growth. The extent of the catastrophe that the world had just endured encouraged an ambitious and far-reaching design. Many opin- ion leaders of the time thought that the United Nations should evolve toward a limited form of international governance that would prevent a return to balance-of-power politics and protect the world from nuclear holocaust. The invention of nuclear weapons and their terrifying poten- tial to destroy humankind made a world order based on the rule of law the overriding priority. It is important to stress, however, that the limited world governance envisaged by the UN’s founding fathers was firmly based on cooperation between territorially based and sovereign Westphalian nation-states. These states were the only actors on the international stage and the only entities that could claim democratic legitimacy. It was correctly foreseen that the end of colonial empires would multiply the number of these sov- ereign actors. Decolonization would not, however, change the nature of the international system based on nation-states as the legitimate entities to engage in cooperation, sign treaties, and agree to abide by certain stan- dards. The ideological atmosphere in the second half of the 1940s was broadly conducive to the “one nation-state, one vote” system that became the basic operating principle for the UN General Assembly. Thus, the period immediately following the Second World War was one of great tri- umph for nation-states. In the postwar struggle for the hearts and minds of the people of the world, both the United States and the Soviet Union stressed the right of the nations emerging from the old colonial empires to self-determination. In theory, if not in practice, the superpowers also sub- scribed to the notion of basic legal equality between nation-states. However, the founding fathers of the postwar international system wanted to maintain the alliance against the defeated axis powers to fore- stall a resurgence of the defeated, particularly Germany, as happened in the 1930s. In addition, the design of the UN had to recognize that nation- states were very unequal in power and wealth. This led to a structure with five permanent members on the UN Security Council with veto power—the United States, the United Kingdom, France, Russia and China, often called the “Permanent Five.” The permanent members, in effect, were the key victors of World War II. The veto arrangements reflected the 02 1763-6 chap2 1/31/05 5:59 PM Page 24 24 A Better Globalization unwillingness of the most powerful nation-states to subscribe to a system that could at times overrule them. This dual design was a hybrid between idealism and realism that was in tune with the world of the mid–20th cen- tury. The General Assembly was to be a kind of world consultative body with the individual sovereign states as equal members, and the Security Council would be the governing directoire managing world affairs, at least in the political and security sphere. The design was less than perfect from the start, but it was a vast improvement over what preceded it—the absence of any institutional framework whatsoever—and it marked the beginnings of institutionalized international legality in the postwar period. In the economic sphere, freer trade and orderly cooperation were to replace the extremely harmful “beggar thy neighbor” policies of protec- tionism and competitive devaluations that had been responsible for much damage during the interwar years. At the domestic level, active and coun- tercyclical monetary and fiscal policies were to prevent high levels of unemployment. At the international level, fixed exchange rates and orderly trade arrangements were to prevent attempts by individual coun- tries to export their unemployment to others. The key event in designing the postwar economic architecture was the Bretton Woods Conference held in New Hampshire on July 1, 1944, while war was still raging. Keynes, along with Harry Dexter White from the US Treasury, led the conference. While the United States clearly was the dominant power, Keynes’ personal authority as the leading economist of his time conferred great weight to his views. Though construction of the postwar economic and financial system began with the Bretton Woods Conference, the emergence of the envi- ronment that made it possible can be traced back to the end of the First World War. The participants at Bretton Woods were convinced that the primary cause of the Second World War had been the mismanagement of peace after the first war.