In This Review

Governing the Global Economy: International Finance and the State
Governing the Global Economy: International Finance and the State
By Ethan B. Kapstein
Harvard University Press, 1994, 224 pp

Despite its broad title, this eminently readable book focuses narrowly on international activities of banks and relations with governments over the past two decades, with heavy emphasis on increasing intergovernmental cooperation in supervision and regulation. It is well told.

There are chapters inter alia on the role of banks in recycling the large Organization of Petroleum Exporting Countries payment surpluses in the mid-1970s and early 1980s, the international debt crisis of the mid-1980s, evolving bank regulation within the European Community as it moved toward a single market, and the dramatic closing of the Luxembourg-based Bank of Credit and Commerce International amid scandal in 1991.

The author's thesis is that the much-vaunted globalization of international finance, far from diminishing the role of governments, enhances their importance. Governments have risen to the challenge, and cooperation among them has increased considerably, at least as far as banks are concerned. As with developments in securities markets, the United States has typically provided the lead.