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INFORMATION TO USERS The most advanced technology has been used to photo­ graph and reproduce this manuscript from the microfilm master. UMI films the original text directly from the copy submitted. Thus, some dissertation copies are in typewriter face, while others may be from a computer printer. In the unlikely event that the author did not send UMI a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyrighted material had to be removed, a note will indicate the deletion. Oversize materials (e.g., maps, drawings, charts) are re­ produced by sectioning the original, beginning at the upper left-hand comer and continuing from left to right in equal sections with small overlaps. Each oversize page is available as one exposure on a standard 35 mm slide or as a 17" x 23" black and white photographic print for an additional charge. Photographs included in the original manuscript have been reproduced xerographically in this copy. 35 mm slides or 6" x 9" black and white photographic prints are available for any photographs or illustrations appearing in this copy for an additional charge. Contact UMI directly to order. Accessing the World's Information since 1938 300 North Zeeb Road. Ann Arbor. Ml 48106-1346 USA Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Order Number 8806460 The world system in transition: Information technology and transnational banking Al-Muhanna, Ibrahim A., Ph.D. The American University, 1987 Copyright ©1987 by Al-Muhanna, Ibrahim A. All rights reserved. UMI 300N.ZeebRd. Ann Arbor, 3VH 48106 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. THE WORLD SYSTEM IN TRANSITION: INFORMATION TECHNOLOGY AND TRANSNATIONAL BANKING By Ibrahim A. Al-Muhanna submitted to the Faculty of the College of Public and International Affairs of The American University in Partial Fulfillment of The Requirements for the Degree of Doctor of Philosophy in International Relations Signatures of Committee: Chairman: ___ 7 t I9 T '7 Date 1987 The American University Washington, D.C. 20016 l/l D I THE AMERICA! UUIYERSITY LIBRARY Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. © COPYRIGHT BY IBRAHIM A. AL-MUHANNA 1987 ALL RIGHTS RESERVED Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Dedicated to My brother Abdullah for his teaching, encouragement, and humanist values Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. THE WORLD SYSTEM IN TRANSITION: INFORMATION TECHNOLOGY AND TRANSNATIONAL BANKING BY Ibrahim Al-Muhanna ABSTRACT A close relationship between information and transnational banking industries has existed for over a century. However, the recent development in information technology, where computer and telecommunications converged and which is known as transborder data flows, TDF, has changed the nature of this relationship and the structure of international political economy. TDF makes time, space, and distance meaningless in the process of storing and transferring data. More than any industry, the banking industry is very sensitive to these three elements. Utilizing TDF, transnational banks and other financial establishments have created a variety of communication networks. These networks are used for different purposes which range from personal management to money and fund transfers. Thus, the financial market is internationalized, making the concept of national borders of little relevance. ii Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The impact of TDF goes beyond the international­ ization of banking. As soon as this new technology came into use around the mid-1960s, Western banks began a period of across-the-border expansion. Therefore, by the beginning of the 1970s, the old financial system, which was based on state supervision, started to break down. Currencies were floated, and financial markets were gradually deregulated. At the same time, many financial phenomena such as Euromarket and off-shore financial centers are becoming an integral part of world finance. These phenomena are made possible by TDF, and they further globalized the financial market. By the 1980s, Western governments were losing their power over financial transactions, socialist countries were moving toward more integration with the world capitalist economy, and transnational financial establishments became the master of international financial relations. This structural change has produced many results: Barter becomes an important part of international trade, labor organizations, and third world countries' statures are weakened. Perhaps the most important part in transnational banking is the diminishing role of the state. Since the emergence of the national state system, the state role in political economy was increasing over the years. This iii Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. role, however, is going through a period of reverse in the last fifteen years. The study concludes that the current transforma­ tion in the world system is not over yet. It might lead to the emergence of conflicting economic blocs, or perhaps a total collapse of the world financial system. IV Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ACKNOWLEDGMENTS A friend once asked if my dissertation is about Saudi Arabia. I told him not. He then asked if it is about the Gulf, the Middle East, Islam, or the Arabs. Again, my answer was negative. Hereafter, he looked at me with a peculiar face, wondering "then what?". I told him that it is about information technology, transnational banking, and the transformation of the world system. His look became more eccentric. I tried to explain, but I doubted that he understood. The standard, which I do not know by whom or how it came to be, is that social science graduate foreign students should, or perhaps have to, specialize and write about their respective countries, or at least their regions. In other words, foreign students should not write about the world system or at least the countries where they study. The cited reasons are many: It is easier to write about one's own country, it is more interesting, and/or it will help their societies. However, it seems meaningless and odd for us foreign students to specialize and write about our own societies in the West. Moreover, the information which we collect and analyze is unlikely to be used by our governments, but more by the host country and its v Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. specialists. Still worse, we go home with little knowledge about the country where we studied and the world system where we are peripheries. In this study, I have not followed this standard. In the task of writing this study, I have been helped and encouraged by many admirable people. My advisor, Professor Hamid Mowlana, has been very inspiring since I started my Ph.D. program, and indeed before. Professor Nicholas Onuf was very supportive and offered many valuable and detailed suggestions. Professor Eric Novotny was encouraging and gave many helpful comments. Many of my teachers at the School of International Service have contributed to my learning experience and merit my appreciation: Gary Weaver, Larman Wilson, and Johan Richardson. I owe lasting debts to Gail Homesack, Medlej M. Medlej, and Yahia Ashari for their encouragement, assistance, and, above all, friendship. I would like also to thank Stephanie Reich for her skillful editing and Laurie Smith for her careful typing. Some friends have made my life and study in the United States enjoyable, rewarding, and full of experi­ ence, and I appreciate knowing them: Muhammed S. Abanumay, Awadh al-Badi, Abdulrahman al-Banyan, Nora Bawa, Ibrahim Beayeyz, Dr. Stuart Bullions, Nasser al-Khallifa, Arthur Fern, Lynne Grail, Aqil Kazim, Dr. Abas Malik, Daniel vi Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Masis, Andrea Pedersen, Sallah al-Rajai, Abdulrahman al- Rashed, Dr. Abdulmonem Said, Dr. Hamad al-Saloom, Abdulaziz Ben-Salamah, Dr. Ahmed H. Senani, Nancy Sherman, Hassan Wajeeh, Laurie Wilson, and Prodrous Yennes. vii Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. TABLE OF CONTENTS ABSTRACT........................................ ii ACKNOWLEDGMENTS................................... V LIST OF TABLES................................... X ILLUSTRATIONS ................................... xii Chapter I. INTRODUCTION: COMMUNICATION TECHNOLOGY AND THE WORLD SYSTEM........................... 1 Theory and M e t h o d ................... 21 II. POLITICAL ECONOMY OF TRANSBORDER DATA FLOWS: A REVIEW OF LITERATURE............... 23 The Legal and Policy Studies............. 24 Management Studies ....................... 27 International Relations/World System S t u d i e s ............................... 29 S u m m a r y ................................. 48 III. COMMUNICATION AND INTERNATIONAL POLITICAL

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