The Global Economic Order
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The Global Economic Order

The International Law and Politics of the Financial and Monetary System

Elli Louka

Exploring in depth the institutions that underpin the global economy, this study provides invaluable insights into why a minimum economic order has endured for so long and why states are unwilling to establish a maximum order, a global safety net for all. The author investigates how debt – a critical component of states’ economic infrastructure – leads to debilitating crises, and how these crises undermine the economic autonomy and political independence of states. 
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Chapter 7: From World War I to World War II

Elli Louka

Abstract

After World War I states vied to bring back economic normalcy by returning to the gold standard. That proved to be a quixotic exercise as their gold reserves were too small to support all the money they had printed during the war. As a result, states obsessed with amassing gold by undervaluing their currencies and increasing their exports. Other states with overvalued currencies retaliated by raising trade barriers. Another issue that hung over states during this period was the reparation payments owed by Germany to France and the UK for its instigation of World War I. The UK and France needed the money from these reparation payments to pay back their debt to the United States as they had borrowed heavily from it to finance the war. These chaotic economic conditions, infused by the spirit of revenge and retaliation, were further exacerbated by the Great Depression. As traditional diplomacy failed, war became the way of score-settling among states.

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