Titans or Behemoths: The Multilateral Development Banks, volume 5, by Roy Culpeper (Ottawa: North-South Institute, 1997, xx, 191pp).
Risking Free Trade: The Politics of Trade in Britain, Canada, Mexico, and the United States by Michael Lusztig (Pittsburgh PA: University of Pittsburgh Press, 1996, x, 180pp).
Who Elected the Bankers? Surveillance and Control in the World Economy by Louis W. Pauly (London and Ithaca NY: Cornell University Press, 1997, XIV, 184pp, US$25.00).
The New World Order in International Finance, edited by Geoffrey R.D. Underhill (New York: St Martin's, 1997, XVII, 331pp, US$49.95).
The accelerated integration of the world economy and its impact on citizens, on the ability to govern, and on the present structure of international organizations have led to a plethora of studies in most social science disciplines. Historians point out that capital and trade reached similar levels of integration in the decades leading up to the first world war. However, the speed at which change is taking place today is unprecedented. Several issues have been explored in depth, including the impact of liberalized trade on wages and unemployment of blue collar workers in industrial countries; of freer trade and capital flows on the environment; of capital flows on the ability of states to conduct their own monetary, fiscal, and social policies. There are also analyses of or prescriptions for the national and international regulatory regimes, if any, that are necessary in the new global environment. Regrettably, and as always, there is little communication among scholars of various disciplines.
The books under review here make important contributions to the growing literature and can be read with interest regardless of the disciplinary background of the reader. With some exceptions, annoying jargon is kept to a minimum. Three of the books deal with international lending and finance, but I will begin with the fourth.
Lusztig's exploration of the question of why countries liberalize trade is not particularly interesting to a traditionally trained economist because the answer is obvious. Countries act in that manner because it is in their interest to do so. Most introductory economics textbooks devote a chapter to the benefits of free trade by explaining comparative advantage: if each country produces and exports those products which it produces relatively efficiently, the world and each country will be better off in the sense that the value of output and, therefore, total income (gross domestic product) will increase. However, most of them by-pass the problem of trade liberalization: the way it creates gainers and losers in each country and the unhappiness of workers in those industries which are losing their protection at the prospect of becoming unemployed or of being paid less. The main beneficiaries are consumers and resources employed in the export industries. While in theory the gainers compensate the losers, in reality this does not often happen. The losers are more likely to distrust and therefore attempt to block any move towards free trade. Democratic governments, which have to be re-elected, are sensitive to such pressures. Economists have begun to look seriously at these problems, most promisingly through a transaction cost approach focussing on impediments to the development of efficient markets.(f.1)
Lusztig takes a political science approach, arguing that free trade may be achieved as a by-product of a pursuit of other objectives or a means to their realization. In a sense free trade may be one of the bargaining chips thrown in to achieve something else. He argues that existing theories ignore this possibility.
In Lusztig's model, trade liberalization refers only to policies which remove direct import barriers affecting at least one-third of total trade volume - an arbitrary figure which he does not defend - and which constitute clear departures from past policies and are politically controversial. …