The primary objective of this volume is an integrated analysis of the economic and political factors that together determine international economic arrangements. The international economic order of the first postwar generation has eroded badly, if not totally collapsed. The search for replacements is well under way, but has not progressed far.

Until August 1971, the United States categorically rejected any notion of devaluing the dollar and championed an international monetary system based on fixed but adjustable exchange rates. From August 1971 through February 1973, the United States aggressively sought massive devaluation of the dollar, and since early 1973, it has actively promoted the adoption of highly flexible exchange rates.

Edward Hallet Carr observed that “the science of economics presupposes a given political order, and cannot be profitably studied in isolation from politics.” Throughout history, the larger configurations of world politics and state interests have in large measure determined the framework of the international economy. Succeeding imperial and hegemonic powers have sought to organize and maintain the international economy in terms of their economic and security interests.

The international monetary system—the rules and conventions that govern financial relations between countries—is an important component of international relations. When monetary relations go well, other relations have a better chance of going well; when they go badly, other areas are likely to suffer too. Monetary relations have a pervasive influence on both domestic and international economic developments, and history is strewn with examples of monetary failure leading subsequently to economic and political upheaval. Recent years have seen considerable turmoil in international monetary relations, and a marked deterioration in relations between Europe, Japan, and America. Ideally, monetary relations should be inconspicuous, part of the background in a well-functioning system, taken for granted. Once they become visible and uncertain, something is wrong.

In the 21 years since the conclusion of the Second World War, a complicated, piecemeal framework of trading arrangements under various international organizations has been created. Now there is concern, internationally and domestically, as to whether this framework is a durable basis for expanded world trade.

At the present time, the political popularity of foreign assistance, both bilateral and multilateral, has reached a low point in the United States. The lack of enthusiasm is epitomized by the vote of the House of Representatives in January 1974 against the United States's pledge of $550 million to support the International Development Association (IDA), the soft-loan subsidiary of the World Bank (even though that vote was subsequently reversed). Total US commitments of official development assistance have declined from 0.59 percent of GNP in 1963 to 0.29 percent in 1972.

Writing about alternative international regimes to deal with direct foreign investment (DFI) may seem to be somewhat like discussing a perpetual motion machine: most people would like one for their own purposes; no one has ever built one; and discussions about their construction often take on a certain air of unreality. In contrast to the issue areas of money, trade, and aid, there is no important set of international institutions concentrating primarily on DFI. Numerous bilateral agreements and multilateral arrangements regulate or facilitate, in one way or another, the activities of private investors, but these have not been systematized into a coherent structure. Negotiations for new agreements do not take place within a large and semiformal international arrangement, such as the General Agreement on Tariffs and Trade (GATT), and no large international institution, such as the World Bank in the aid field, exists primarily to give direction to activities in this area.

This essay presents a framework for viewing North-South economic relations which, it is hoped, will facilitate positive analysis and will contribute toward normative prescriptions regarding the desirable trend of North-South economic relations in the future. The primary point of departure is the viewpoint of the South as it faces the whole range of its relationships with the North.

Traditionally, examinations of the international relations of the less developed countries (LDCs) have focused on influences that can be attributed generally as originating in the developed countries (DCs). In fact, relatively few scholarly analyses of inter-LDC relations have been undertaken. Since South-South relations have grown appreciably in recent years, however, it is important that a framework for studying these relations be developed, and this framework must include an awareness of the significance of the international economic system

Conceived modestly, the idea of East-West interdependence offers a convenient framework for exploring the intersection of politics with economics, of national economic goals with international economic relations, and, ultimately, of East-West efforts to increase economic cooperation with Western efforts to restructure international economic institutions. By interdependence we do not mean to imply a decisive set of arrangements, capable of impinging on the most fundamental economic and political choices of the other party. Rather, we have in mind a lesser level of mutual dependence in which both or all parties view cooperation as a useful but not a decisive means for pursuing some or all of their essential economic goals. More simply, we use the term because, better than any other, it underscores the difference between an economic relationship imposed by political confrontation, and reflected in economic warfare and autarky, and an economic relationship benefiting from the easing of political tension, evident in a common recognition of gains, political as well as economic, to be had from cooperation.

International organizations, it is sometimes said, are always designed to prevent the last war. An analogous problem besets economic institutions. The inability of some existing international economic organizations to deal with the current problems in their domains is all too apparent. Two of the institutional pillars of the postwar Bretton Woods system, the International Monetary Fund (IMF) and the General Agreement on Tariffs and Trade. (GATT), were shaken in 1971 and are still suffering from severe malaise. The political and economic conditions that led to their formation at the end of the Second World War have changed, calling into question the political and intellectual foundation upon which they were constructed. In the aftermath of the 1973 energy crisis, meetings of the United Nations Economic and Social Council (ECOSOC) and a special session of the General Assembly have been the scene of demands by poor countries for a new economic order, but the meaning of the phrase has been ambiguous and the formula has impeded rather than promoted agreement.