Financial crisis and hegemony: An investigation into the declinist paradigm

This comparative case study explores the relationship between hegemony and international financial stability. In particular, it examines how the U.S. exercises power through financial crisis management and whether hegemony is a necessary and sufficient precondition for stability. This study's purpose is to contribute to the debate surrounding the U.S.'s role in international financial system maintenance by comparing one Bretton Woods with two post-Bretton Woods crises. The study examines data in order to evaluate the four major theories of hegemony positing that the U.S. was responsible for the relatively smooth operation of the postwar financial order. When the 1950s and 1960s were idealized as the golden age of stability, events such as the financial crises of the 1970s and 1990s were then seen as a retreat from hegemonic responsibilities and surrender to multi-polar, unstable and crisis prone systems.; Are periods of hegemony more conducive to crisis prevention, financial openness and system maintenance? Is the conventional literature correct in characterizing the post-Bretton Woods system as one "crisis," "disorder" or "post-hegemonic"? Our findings affirm the main thesis of this study that there is no "sufficient" correlation between the concentration of financial power (hegemony) in the international system and the degree of stability (absence or presence of crises) in the system. The U.S. intervention in 1966 through the imposition of higher reserve requirements conflicted with the need to provide continued stability during a period of growing international liquidity. Against the assumption of international instability as a result of U.S. decline, the 1974 and 1998 crises further confirmed that post-Bretton Woods paradoxically reinforced the same goals as Bretton Woods: (1) promotion of free trade and open finance, (2) intervention in international financial crises to maintain a liberal international order.; There is a gap in the prevailing paradigms precisely because they can't anticipate the kinds of expressions of renewed power and contradictions of crisis management that are present in our three cases. Conventional literature makes broad statements yet cannot account for the specific instances of "contradictions" of state power. This is where this study can make its contribution to the debate on hegemony and global finance.