For orge ged d By By W War ar: : From Great War to Global - - PowerPoint PPT Presentation

Rosella Cappella Zielinski Boston University Paul Poast University of Chicago

For

• rge

ged d By By W War ar: :

From Great War to Global bal Econom nomy

Summary

 Question (s): Much of the post-WWII global economy is

institutionalized: Articles of Agreement; ECSC; GATT.

1.

Why did the major powers think this would work?

2.

From where did they devise design of these institutions?

3.

Why variation in whether some are supranational v intergovernmental?

 Argument: Strains of WWI led to institutional experimentation.  Why it Matters

 History: WWI legacy well recognized, but not in area of economic coop.  IR Theory: International application of Tilly’s famous dictum.  Alliance Politics: Understand how allies achieve capability aggregation

Book Abstract

This new book project is inspired by work on historical institutionalism and seeks to unpack the legacy of allied economic cooperation during World War I. We contend that core features of prominent institutions that operate in the modern global economy

• - from the European Union, to the World Bank and the

International Monetary Fund, and even the World Trade Organization -- were first devised during World War I. The strain

• f war compelled the major powers to experiment with various

forms of institutionalized economic cooperation, including the creation of international organizations possessing supranational

• authority. These wartime institutions then explicitly served as the

blueprints for designing the international institutions that shaped the global economy after 1945.

Outline of Book



Ch 1: Introduction



Ch 2: Theory of Allied Economic Institutional Creation



Ch 3: Money Cooperation

• Initial Non-cooperation
• Boulougne Agreement and British Leadership
• Sovereign-to-Sovereign Loans and American Hegemony
• Immediate Aftermath
• Longer Lesson: WWII Lend-Lease



Ch 4: Material Cooperation

• From IASC to the Wheat Executive
• AMTC and IAP
• Immediate Aftermath
• Longer Lesson: WWII Purchasing Commission



Ch 5: Shaping the Post-War World

• Templates for Implementing Article VII of Lend-Lease: The Bretton Woods and ITO negotiations
• Templates for European Institutions: Forming the European Coal and Steel Community



Ch 6: Conclusion

Outline of Talk

 Motivation  Theory  Evidence  Conclusion

Motivation

Motivation

What is the Legacy of WWI?

Versailles Treaty Russian Revolution Societal Changes

But what about…

Motivation

ECSC Bretton Woods Institutions

Motivation

OUR CLAIM: The design of the international institutions that mark the post-WWII global economic order originated from allied economic cooperation during World War I. The idea of liberal institutionalism is a product of WWI Questions to Explore:

1.

When will co-belligerents coordinate on war resource allocation?

2.

When will co-belligerents create institutions to manage allocation?

3.

When will the institutions be supranational?

4.

What are the post-war legacies of these institutions?

Theory

Goal of States in Coalitions

 Minimize two costs:

1.

sovereignty costs

2.

fighting costs (arming/equipping & deaths)

 Maximize coalitional battlefield performance (win battles)

Outcome Variable

 Resource Acquisition Coordination options to accomplish goals:

1.

No attempted coordination

2.

Attempted Collusion/Cartel

3.

Hegemonic control/distribution

4.

Delegate to supranational body

Explanatory Variable(s)

1.

Availability of Resource:

• Abundant/High
• Scarce/Low

2.

Distribution of Power Among Allies:

• Unequal
• Equal

Resource Availability Low High Equal Unequal

Delegate to Supranational

Distribution of Allied Power

No Attempted Collusion/ Information Cooperation Hegemonic No Attempted Collusion

Resource Availability Low High Equal Unequal

Wheat Executive

Distribution of Allied Power

IASC AMTC None Populating the Cells

Evidence

Case: Purchasing Wheat

 Summary:

• Initially observe attempted collusion/non-coordination
• Eventually switch to supranational institution

 Key Sources:

• Memoir of Jean Monnet
• Memoir of Arthur Salter
• FRUS

Initial Cooperation: IASC

 Inter-Allied Supplies Committee (IASC), formed Aug 1914.  IASC was intergovernmental…and not very effect.

Jean Monnett: “The Committee's responsibilities were limited to supplies for the troops, and did not include wheat, flour, meat, or sugar. Each Government was free to make whatever purchases it thought fit: all it had to do was inform the other of what it was doing or planning” (pg. 53-54).

• By 1916, shortages of wheat to allied powers.
• Partially due to poor crop yields in US and Canada
• But also due to:
• problems in sea transport +
• inability to transport goods from Argentina, India and Australia

Go Supranational

 Monnet: “[British official Arthur] Salter and I thought that the

first test case for Allied co-operation should be wheat, where there had already been a very unsatisfactory attempt at joint

• rganization….For a whole year this divided purchasing system had

been operating in a spirit of competition that encouraged international

• speculation. To put an end to this situation had become vital.

” (57-58).

 Monnet and Salter set up Wheat Executive:

• Three representatives: 1 British, 1 French, 1 Italian
• Body has “full authority to meet Allied needs regarding the

purchase and sharing of those grains subject to inventory, and to arrange for their shipment.”

Evaluate Wheat Executive’s Success: Qualitative Evidence

 How it worked (according to Salter): “ To exchange an Italian cargo in

North America for a British cargo in Australia meant a saving of two thousand miles of steaming. This Wheat Executive now made possible. No longer did empty Italian ships going west for American wheat and empty British ships going east for Australian wheat pass each other in the Mediterranean. ”

 Monnet (in memoir):“The

Wheat Executive, in fact, showed me the first concrete proof that when men are put in a certain situation they see that they have common interests….It is easy to see that the men who thus lived through

• ne of the first experiments in joint action by different countries began to

cherish high hopes, and to grow impatient to apply their experience on a broader front”

 Led directly to AMTC (once US entered)

Evaluate Wheat Executive’s Success: Legacy in WWII

 Model adopted at the outset of WWII: The Anglo-French Coordinating

Committee

• Daladier wrote to Chamberlain, September 20, 1939: “I have no doubt that you

like me are anxious for us to avoid at all costs the mistake that was made in the last war, when our two countries took three years to set up the inter-Allied machinery which ensured us our supplies in 1917 and 1918, and helped to overcome our military difficulties in 1918 - in particular by enabling American troops to be brought to France. ”

• According to US Ambassador to UK (Kennedy): ``With a view to making full

use of the experience gained in the years 1914-1918, the British and French Governments decided from the outset of the war to coordinate in the fullest possible manner the economic war effort of the two countries. Immediate steps were taken at the outbreak of war with this object in view...By this means arrangements have been carried into effect two months after the beginning of hostilities for the organization of a common action by the two countries, which was

• nly achieved during the last conflict at the end of the third year of the

war‘’

Evaluate Wheat Executive’s Success: Legacy in WWII

 Appointed Monnet as Chairman of Committee (Monnet suggested the language to

describe the Chairman position).

 Daladier to Chamberlain, in note appointing Monnet to the role of Chairman of

Anglo-French Coordinating Committee in 1939: “You will note that the Chairman of the Coordinating Committee is to be an Allied official; and while in no way an arbiter, you must use your best efforts to smooth out differences and bring about joint decisions by adopting an Allied rather than a national point of view. ”

 Monnet, reflecting on this mandate, writes in his Memoir,

“For 'Allied' read 'Community' and there is no better definition of the role to be played later by the President of the European Coal and Steel Community's High Authority - which is doubtless no coincidence. ’’

Conclusion

Conclusion

 Question (s): Much of the post-WWII global economy is

institutionalized: Articles of Agreement; ECSC; GATT.

1.

Why did the major powers think this would work?

2.

From where did they devise design of these institutions?

3.

Why variation in whether some are supranational v intergovernmental?

 Argument: Strains of WWI led to institutional experimentation.  Why it Matters

 History: WWI legacy well recognized, but not in area of economic coop.  IR Theory: International application of Tilly’s famous dictum.  Alliance Politics: Understand how allies achieve capability aggregation

THA HANK K YOU OU!

Evaluate Wheat Executive’s Success: Quantitative Evidence

 Wheat Prices as a metric of performance

 Monthly cents per bushel wheat on Chicago Board of Trade

(from FRED)

 Prices meaningful (until US entry) b/c CBT still functioning

market

 Expectation:

 Lack of allied coordination → sharp ↑P (i.e. allies compete).  Wheat executive eliminates competition b/w allies →

lower than expected P increase.

Wheat Executive -> Lower than expected prices?

1.

Create basic wheat price model on data from Aug1914 to Oct1916

 DV = Wheat price in month t  Explanatory Variables = Wheat price in month t-1, Monthly dummy variables

Pricet = β0 + β1Pricet-1 + β2 January + β3 February + … + β12 November + ϵ

2.

Estimate using OLS

3.

Use model to forecast monthly prices for Dec1916 through 1918.

4.

Key months for Wheat Executive: Dec1916 - Mar1917 (pre-US entry)

Price substantially lower than expected