Who Runs the World?

Keynes is widely credited as being the brains behind the economic multinational organisations set up after World War Two. In response to the Great Depression, Keynes had argued for the necessity of government intervention to stabilise the boom and bust cycle of the free market. This held both at a national and an international level. However, when it came time to set up these new institutions, Keynes had less to do with the construction of these entities than he might have wanted.

Richard Peet argues in his book "Unholy Trinity" that the International Monetary Fund (IMF), World Bank and the World Trade Organisation (WTO) were all established on and continue to be driven by a neoclassical influence. The argument that the "Washington Consensus" associated with these organisations is part of a neoclassical agenda is not unique to Peet; what is interesting in his contribution to the literature on this subject is that he traces this neoclassical influence right back to the establishment of these organisations.

In fact, the only thing he identifies as being Keynesian about the organisations is that they are founded on the belief that some kind of government intervention is required in the free market. As others have argued, his book identifies the American government as being the primary agent behind the influence of neoclassicism in these organisations. He goes further and attributes the major financial institutions as being the prime mover behind the American government's espousal of neoclassicism.

The historical argument of the book offers an interesting perspective of how the US government imprinted its influence on the Bretton Woods organisations from their establishment. The world had just come out of a period where the USA had withdrawn from the wider world. Much of the spillover of the Great Depression into the rest of the world was due to this decision. More importantly, the Allies had been staring down the jaws of defeat until the USA had entered the war. The negatives of a US withdrawal from international affairs were only too apparent, so the world was willing to concede the deciding vote in the new organisations in exchange for US involvement.

Peet traces the role of the US government, academic institutions, mutinational financial institutions, particularly investment banks, and press in establishing the hegemonic influence of neoclassicism. Although academic institutions are nominally independent, much of their funding is corporate. Furthermore, economic academics who leave the Ivory Tower, either temporarily or permanently, tend to find a home in government organisations and major financial houses. These same financial houses often own controlling influences over media companies. Peet lays out the academic credentials of the various heads of the two Bretton Woods organisations and it is clear enough that many of them were not only educated at the same institutions but most had worked for investment banks before taking up their positions in these international bodies.

Much emphasis is often laid on the amount of debt owed by poor and middle-income countries to the wealthy ones. But it should not be forgotten that much of these countries' debt are also owed to and traded by major international financial houses. And neoclassical tenets do provide the best guarantee that those debts will be paid as they promote fiscal discipline and the importance of exports. By minimising government spending and maximising export revenues, governments are more likely to be able to pay their debts. However, the other economic effects of such policies are more arguable.

This book does provide interesting insights into how prevailing economic powers use their influence to chart academic discourse. However, what it does neglect is the fact that sometimes this flow goes in both directions. Throughout history, it has often been the thinkers who have envisioned a new way of organising society, both politically and economically, and the rest of society has followed. Even classical theory itself was one of the progenitors of capitalism. There may be feedback effects that serve to entrench theory so as to protect a system once it is established but often it is theory which is the first mover.

As the book mentions, a counter-hegemonic movement has begun in academia and outside of it that opposes the claims of neoclassicism. As the new discourse establishes itself, it too will build a picture of how the world should be organised and should that picture make its way into the real world, it too will spawn interests to feed the theories that brought it into being. One can only hope that the world it builds will be a prettier one for those at the bottom of the pile.