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Mad money

Mad money: with an introduction by Benjamin Cohen

With an introduction by Benjamin J. Cohen
Susan Strange
Copyright Date: 2016
Pages: 224
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  • Book Info
    Mad money
    Book Description:

    Mad money is a classic of international relations and international political economy literature. It also has profound modern relevance. First published by Manchester University Press in 1998, the book called for an end to the volatility of international financial markets. Markets had grown, technology had advanced, and regulation had all but disappeared, resulting in financial crises in Asia and in the western world. The book identified that finance now called the tune internationally: governments had been stripped of control, morals had loosened, and income gaps were widening sharply. Susan Strange predicted that this would lead to a long, inevitable financial crisis if it continued unchecked. She was proved right within a decade of the book coming out. This reissue includes a new introduction by Benjamin Cohen of the University of California that contextualises the book, and conveys the value of the work for a modern audience.

    eISBN: 978-1-78499-724-3
    Subjects: Political Science
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Table of Contents

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  1. Front Matter (pp. i-iv)
  2. Table of Contents (pp. v-vi)
  3. Introduction to the new edition of Mad money (pp. vii-xvi)
    Benjamin J. Cohen

    No one doubts the monumental role that Susan Strange played in the development of the modern field of International Political Economy (IPE). Starting in the 1960s, her work inspired generations of scholars to create a distinctive and remarkably robust British school of IPE. At the centre of her professionaloeuvrewas a fascination with the connections between money and politics, starting with her first book,Sterling and British Policy(1971), and continuing with such memorable volumes as Casino Capitalism (1986) andStates and Markets([1988] 1994). Fittingly, it was also the subject of her last book,Mad Money(1998), published...

  4. Acknowledgements (pp. xvii-xvii)
  5. List of abbreviations (pp. xviii-xx)
  6. Chapter 1 The casino image gone mad (pp. 1-21)

    Why mad? Because to my mind it was, and is, ‘wildly foolish’ – the dictionary synonym for ‘mad’ – to let the financial markets run so far ahead, so far beyond the control of state and international authorities. We recognise insanity, or madness in a man or woman, by erratic, unpredictable, irrational behaviour that is potentially damaging to the sufferers themselves or to others. But that is exactly how financial markets have behaved in recent years. They have been erratically manic at one moment, unreasonably depressive at others. The crises that have hit them have been unpredicted and, to most observers, surprising....

  7. Chapter 2 Innovations (pp. 22-42)

    Few informed observers would deny that the global financial system in the 1980s and 1990s has been marked by an especially rapid rate of innovation. Change has been constant, fast and contagious as between markets, operators and institutions. The effects on the system have been so extensive that it is not too much to say that the whole story of the decade can be traced to different forms of innovation.

    The last chapter briefly reviewed some of the main differences between the system as it is today, in the late 1990s, and the system as it was between 1971 and...

  8. Chapter 3 Political underpinnings: the US–Japan axis (pp. 43-59)

    The political foundations for international financial cooperation are weaker today than they were in the 1970s and 1980s. If we have worries about the stability of the international financial system, it is important to understand in what way these foundations are weaker and how this has come about. For, while the pace of technological innovation in finance (as in manufacturing) has accelerated, and while the size and salience of finance in the world economy have greatly increased, the political capability to adjust to these changes has, if anything, declined. This is an aspect of the problem that economists tend to...

  9. Chapter 4 Political underpinnings: disunited Europe (pp. 60-77)

    At least until 2003 – and possibly thereafter – the euro is likely to cause trouble in the currency markets. Even if it starts on time and despite the fudging of the conditions laid down in the Maastricht Treaty, it is going to be an ongoing source of uncertainty. And uncertainty, as we all know, is meat and drink to the markets. How much trouble the markets will cause and how governments will respond are the big unanswered questions.

    The second point is that the uncertainty is political in nature. At the end of the day, it is about the domestic politics...

  10. Chapter 5 Wall Street and other casinos (pp. 78-96)

    History and the media between them have spread the idea far and wide that Wall Street – or perhaps stock exchanges generally – are the weakest point in the international financial system. If there is going to be trouble in the world market economy, that is where it will start.

    Whether this is a correct reading of history and the right conclusion to draw from more recent developments is the question that will be examined in this chapter. What is abundantly clear is that opinions on this question vary widely. At one extreme, there are Jeremiahs who argue that what goes up...

  11. Chapter 6 The debtors (pp. 97-122)

    The debtors and how best to deal with them is surely one of the continuing but unresolved issues for the international financial system. The present chapter will argue that the evolution of that system has changed the nature of the debt problem, but that neither governments nor markets are any nearer a final solution to the question of how to manage transnational debt than they were in the 1980s. Indeed, the evidence suggests that they may be even further away from a sustainable solution. If so, this is a conclusion that throws serious doubt on many optimistic incremental assumptions about...

  12. Chapter 7 Finance and crime (pp. 123-138)

    As noted in chapter 1, one of the big changes in international finance in recent years has been the greatly increased use of the system by organised crime. It would have hardly been possible to design a ‘non-regime’ that was better suited than the global banking system to the needs of drug dealers and other illicit traders who want to conceal from the police the origin of their large illegal profits. The business of money laundering could not have so prospered and grown without the facilities for swift and relatively invisible transnational movements of money. That much is common knowledge....

  13. Chapter 8 Managing mad money – national systems (pp. 139-157)

    There are two reasons for regulating the behaviour of international financial dealers and the conduct of international financial markets. One is to moderate and restrain greed. The other is to moderate and restrain fear. Greed and fear are the two human emotions most evident in the day-to-day behaviour of the international financial system today. Mad money is the result. Either dealers are drawn by greed to take too big risks with their own or, more often, with other people’s money; or they are overcome by fear that the risks they have taken will catch them out. In their rush to...

  14. Chapter 9 Our international guardians (pp. 158-178)

    With national regulators caught – as the last chapter related – in the midst of change brought on by forces of financial innovation and integration beyond their control, attention shifts to the possibilities of internationally negotiated systems of control.

    Finance is not, of course, the only policy area where social and economic problems have outgrown the limits of state authority. Global warming, forestry management, enforcing competition over monopolies, property rights and the political rights of dissidents are some of the others. But financial regulation is certainly one of the most urgent. As noted in chapter 2, two very different international institutions have...

  15. Chapter 10 So what? (pp. 179-191)

    The only honest answer to the question is that we do not – cannot – know the future. We should not be fooled by those who pretend they can tell what it holds in store. All we can do is to reflect upon the recent – and the more distant – past and try to see some of the general trends that have marked the past decade or so. Beyond that, we also can try to figure out some broad scenarios – possible directions in which the future might develop. That is what the planning units of the big firms already do, to guide the...

  16. Bibliography (pp. 192-202)
  17. Index (pp. 203-212)