The Debtor-Hegemon : A Structural Power Approach to Adjustment

Abstract

This thesis centers on the balance-of-payments disequilibrium at the heart of the current financial crisis. It asks why efforts by US and Asian policymakers to adjust to these imbalances have been unsuccessful, and proposes a power-based analytical framework to engange this question. As adjustment requires policy changes that are costly in both economic and political terms, it is subject to intense political contest between the involved parties. Accordingly, explaining outcomes, i.e. how adjustment happens and who bears the costs involved, requires a conceptualization of relative power. This analysis employs Susan Strange's notion of 'structural' power to illustrate how states exert influence by shaping the framework in which others must operate. Analytical comparison between adjustment in 1977-78 and the current situation highlights how the power accruing to the US by the international position of the dollar has previously allowed it to powerfully shape the outcome of such events. An identifyable weakening of the dollars position in the US-East Asia context contrained US officials in the latter episode, which, it is argued here, forms part of the explanation for why adjustment has not come about.