Geography Reference
In-Depth Information
Under American leadership, the world economy both broadened and deepened. The
market-oriented ideas championed by Reagan and Thatcher in the 1980s were taken up by the
Clinton administration and spread worldwide. The advanced economies continued to move in
the direction of open trade and the removal of the remaining barriers to the flow of money and
capital. Middle-tier developing countries in Asia, Latin America, and the former commun-
ist world also emphasized trade and financial liberalization and became more integrated into
global markets. The Asian financial crisis that began in 1997 exposed the degree to which
emerging market countries had opened up their financial systems to international investment.
A policy debate followed in East Asia and elsewhere about the dangers of unregulated and
highly integrated financial markets, but the general orientation of governments toward market
integration continued. New technologies in communication and computing facilitated finan-
cial and economic exchange and integration. Policies of financial and public sector deregula-
tion and privatization drew countries more fully into the world economy. The constituencies
favoring free markets and international integration had triumphed. 24 The result was the neo-
liberal “Washington consensus,” which by the end of the 1990s had become the organizing
idea for the post-Cold War world economy. 25
In fact, during the 1990s, trade and investment expanded across the developed and de-
veloping world and emerging countries became more fully integrated into the larger system.
The democratic world itself expanded, with countries making the transition from socialist
and authoritarian pasts. At the same time, the great powers remained at peace. Japan and
Western Europe stayed tied to the United States, and China and Russia were moving closer
to rather than further away from the United States. A decade after the end of the Cold War,
the world was not divided into warring camps or antagonistic regional blocs. In critical re-
spects, it was a one-world system in which the United States and the organizational logic of
the Cold War-era Western order remained at its center. While there was much debate wheth-
er the United States had a grand strategy after the Cold War, the Clinton administration did
have a liberal orientation—a strategy of multilateral management of a market-oriented glob-
alizing world system. 26
In the background, the stability and character of the U.S.-led post-Cold War order was
reinforced by America's commanding power position—advantages that gave it the ability to
exercise hegemonic leadership. There were several aspects to these power advantages. One
was simply its preeminence in global power capabilities. The United States was the largest
economy in the world at the beginning of the 1990s—and it continued to outpace the oth-
er advanced economies during the decade. These economic advantages were partly due to
the relative weakness of the other traditional great powers—Russia collapsed, the European
Union grew slowly, and Japan entered a decade of economic stagnation.
Also, behind the scenes, the reserve position of the U.S. dollar gave Washington a special
status as an economic power—rights of seigniorage, which meant that it could run deficits,
 
 
 
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