Financial Statecraft: The Role of Financial Markets in American Foreign Policy [Hardcover]

Dr. Benn Steil (Author), Professor Robert E. Litan (Author)

Book Description

Publication Date: January 31, 2006

As trade flows expanded and trade agreements proliferated after World War II, governments—most notably the United States—came increasingly to use their power over imports and exports to influence the behavior of other countries. But trade is not the only way in which nations interact economically. Over the past two decades, another form of economic exchange has risen to a level of vastly greater significance and political concern: the purchase and sale of financial assets across borders. Nearly $2 trillion worth of currency now moves cross-border every day, roughly 90 percent of which is accounted for by financial flows unrelated to trade in goods and services—a stunning inversion of the figures in 1970. The time is ripe to ask fundamental questions about what Benn Steil and Robert Litan have coined as “financial statecraft,” or those aspects of economic statecraft directed at influencing international capital flows. How precisely has the American government practiced financial statecraft? How effective have these efforts been? And how can they be made more effective? The authors provide penetrating and incisive answers in this timely and stimulating book.

Editorial Reviews

Review

"From the ''Who Dunnit?'' to the ''When Should We Intervene?'' questions of financial crises, this important new book is valuable reading for serious students and practitioners of financial policy."—Glenn Hubbard, Dean of Columbia Business School and former Chairman of Council of Economic Advisers

(Glenn Hubbard )

“Financial Statecraft should be required reading for those who conduct U.S. foreign policy as well as everyone who cares about it. A lot of people are struggling to define America’s role in the world in the twenty-first century, but no comprehensive analysis of the opportunities and risks will now be complete without reference to this insightful book.”—Jeffrey E. Garten, Juan Trippe Professor of International Trade, Finance, and Business at the Yale School of Management, former undersecretary of commerce for international trade

(Jeffrey E. Garten )

"Financial statecraft is much practiced, little analyzed. This fine book discusses what it is, how it has been applied by the United States, what its (often severe) limitations are, and what its potential is. Altogether, an excellent exposition of a complicated subject for scholars, journalists, and policy-makers alike."—Richard N. Cooper, Boas Professor of International Economics, Harvard University

(Richard N. Cooper )

"Benn Steil and Robert Litan have written the first book devoted to financial statecraft, and it is essential reading for anyone interested in the critical issue of influencing the international capital flows that make an integrated global economy function.  As one who was directly involved in a variety of the issues so thoughtfully and creatively discussed in Financial Statecraft, I can say without equivocation that Steil and Litan have performed a signal service in helping us better understand the tools of financial statecraft and the best ways to employ them for the benefit of the United States and the world economy.”—Stuart Eizenstat, former US Ambassador to the EU and Deputy Secretary of Treasury

(Stuart Eizenstat )

“This is a useful, accessible book for lay readers seeking an understanding of the important role that capital flows play in … foreign policy.”—The Economist

(The Economist )

From the Publisher

Selected as one of the Best Business Books of 2006 by Library Journal

See all Editorial Reviews

Product Details

• Hardcover: 224 pages
• Publisher: Yale University Press (January 31, 2006)
• Language: English
• ISBN-10: 030010975X
• ISBN-13: 978-0300109757
• Product Dimensions: 9.3 x 6.4 x 0.9 inches
• Shipping Weight: 1 pounds (View shipping rates and policies)
• Average Customer Review: 2.7 out of 5 stars  See all reviews (3 customer reviews)
• Amazon Best Sellers Rank: #1,878,963 in Books (See Top 100 in Books)

Customer Reviews

Most Helpful Customer Reviews

19 of 24 people found the following review helpful:

2.0 out of 5 stars Too little on actual financial statecraft, May 6, 2006

By 

Jodi "Jodi" - See all my reviews

This review is from: Financial Statecraft: The Role of Financial Markets in American Foreign Policy (Hardcover)

I must respectfully disagree with the esteemed reviewers of this book listed above. I expected so much more from a book with such a fine pedigree (Brookings and the US Council on Foreign Relations).

The topic of how states use financial instruments towards their foreign policy goals is an area which certainly requires more understanding. As such, I expected this book to be an in-depth study of the various ways states have used such tools, and how the authors expect such tools to be used in the future. I thus expected analyses of topics such as how states respond to currency crises of allies and enemies and how states use counterfeiting of enemies' currencies as foreign policy (i.e. as Iran is alleged to do with the US dollar). I also expected a study of how states manipulate access to important currencies (as when the US cut Panama off from receiving dollars as part of an effort to topple Noreiga) and how they have sought to manipulate the foreign financial press (as is alleged to have happened during the classical Gold Standard era).

Some of these topics did receive mention. The issue of how the US should respond to allies' crises received good coverage, especially regarding South Korea. There was also one paragraph acknowledging that countries have counterfeited others' currencies, and a brief discussion of petro-dollar recycling. Moreover, I found the chapter on how interest groups have attempted to restrict access to US capital markets to further other goals very illuminating, and there was a nice summary of anti-terrorism finance legislation. Overall, I found the first half of the book very enlightening.

Unfortunately, the other half of the book dealt predominantly with the authors' assertions that dollarization should be the way forward for developing countries to prevent currency crises, and in particular, that the US should encourage this and absorb some of the costs. The issues of whether countries should use floating, dirty float, pegged or dollarized exchange rates is an important one. However, I did not pick up this book to read about the authors' assertions about dollarization--I picked it up to read about financial statecraft.

Financial statecraft will only grow in importance, and as the authors note, it is critical that policymakers understand how it functions and what tools are at their disposal. This book only discusses financial statecraft primarily in its first 80 pages (and scattered in some places in the latter part of the book as well). I feel eighty pages was just too little to adequately examine financial statecraft. Instead, the reader is unfortunately left with a quick gloss-over of only a few aspects of such an important and under-analyzed topic.

2 of 2 people found the following review helpful:

5.0 out of 5 stars A brilliant guide to understanding economics in politics, March 1, 2009

By 

Pessoa - See all my reviews

This review is from: Financial Statecraft: The Role of Financial Markets in American Foreign Policy (Council on Foreign Relations/Brookings Institution Books) (Paperback)

"Financial Statecraft" is the best book you'll ever find on the role of economics in foreign policy. Impeccably researched and well written.

0 of 19 people found the following review helpful:

1.0 out of 5 stars TERRIBLE, January 20, 2007

By 

gobin AL (New York) - See all my reviews

This review is from: Financial Statecraft: The Role of Financial Markets in American Foreign Policy (Hardcover)

Very naive - these guys need to work harder before publising. Some terrible naive comments - reads like a bad essay at university and perhaps even high school. waste of money... Terrible stuff a shame that anyone published this.