IN WHOSE INTEREST: International Banking and American Foreign Policy by Benjamin J. Cohen

IN WHOSE INTEREST: International Banking and American Foreign Policy

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An inquiry into the actual as well as potential conflict between the private interests of major American banks with international stakes and the public interest, i.e., the federal government's foreign policy priorities. Cohen (international economic relations/Tufts) emphasizes that bankers are not the villains of his piece; nor do they qualify as innocent bystanders. Indeed, from 1960 to 1985, money-center institutions that led the overseas drive produced enormous economic benefits for the US. At the same time, though, Washington has had to take the offshore activities of domestic banks into account when formulating foreign policy. In a wide-ranging survey of the international scene, Cohen makes clear that today's commercial/investment banking problems have antecedents dating back to the Medici. To document his thesis that bankers' interests may impinge on the preferences of foreign policymakers, however, the author focuses on four examples from the recent past: the influx of Arab petrodollars during the 1970's; the freeze of Iranian assets at the start of the hostage crisis; Poland's suppression of the Solidarity movement in 1981; and the emergence of a Latin American debt crisis a year later. Beyond securing protection for their own privacy, Gulf states did not gain undue influence over US foreign policy, Cohen reports. The Polish exposure of American institutions (attributable in part to detente), though, ""seriously compromised"" Washington's efforts to reverse Warsaw's hard line. Conversely, the author rates the involvement of US banks a plus in the confrontation with the ayatollahs; likewise, he notes, the $300 billion worth of ""burrodollar"" obligations that surfaced with Mexico's default gave the US interim leverage south of the border. At best, Cohen concludes, such linkings as exist between international bankers and government officials are hit-or-miss propositions. In this perspective, he offers a detailed program for dealing with what he identifies as the most critical financial issues on the nation's foreign policy agenda--Third World indebtedness, prudent supervision of transnational banking, and effective management of international liquidity. Cohen's graceful and informed work is being published as a Council on Foreign Relations Book. It has earned the accolade.

Pub Date: Oct. 15th, 1986
Publisher: Yale Univ. Press