HBS PROFESSOR EXPLAINS SOCIAL AND LEGAL EVOLUTION OF INTERNATIONAL FINANCIAL SYSTEM

Capital Rules
Harvard University Press

BOSTON - The rise of global financial markets in the last decades of the twentieth century was premised on one fundamental idea: that capital ought to flow across country borders with minimal restriction and regulation. In Capital Rules: The Construction of Global Finance (Harvard University Press), an intellectual, legal, and political history of financial globalization, Harvard Business School Associate Professor Rawi Abdelal shows that capital movements have not always experienced the freedom they do today. Transactions routinely executed by bankers, managers, and investors during the 1990s – trading foreign stocks and bonds, borrowing in foreign currencies – had been illegal in many countries only decades, and sometimes just a year or two, earlier.

How and why did the world shift from an orthodoxy of free capital movements in 1914 to an orthodoxy of capital controls in 1944 and then back again by 1994? How have such standards of appropriate behavior been codified and transmitted internationally?

Contrary to conventional accounts, Abdelal argues that neither the U.S. Treasury nor Wall Street bankers have preferred or promoted multilateral, liberal rules for global finance. Instead, European policy makers conceived and promoted the liberal rules that compose the international financial architecture. Whereas U.S. policy makers have tended to embrace unilateral, ad hoc globalization, French and European policy makers have promoted a rule-based, “managed” globalization. This contest over the character of globalization continues today.

“This book addresses one of the most significant shifts in the organization of the international economy – the lowering of national border level controls to the entry and exit of capital – and explains how and why states renounced this powerful lever of national control over their economies,” said Professor Suzanne Berger, Massachusetts Institute of Technology. “In place of the standard explanations, Abdelal develops a sociological argument about the construction of norms and their spread across institutions. Beautifully and engagingly written with brio and clarity, Capital Rules is a brilliant work that will become a mainstay of political economy literatures.”

“Capital Rules marks a major contribution to scholarship across fields,” said Mark Blyth, associate professor at The John Hopkins University. “Abdelal presents a new and powerful revisionist history of international monetary arrangements that stresses the contingency of events – which has been noted, but not in such detail, before – and the role of the most unexpected actors – which has not been noted before.”

About the Author
Rawi Abdelal is an associate professor at Harvard Business School in the Business, Government, and International Economy Unit. His primary expertise is international political economy, and he is a faculty associate of Harvard's Davis Center for Russian and Eurasian Studies and Weatherhead Center for International Affairs. Abdelal's first book, National Purpose in the World Economy, won the 2002 Shulman Prize as the outstanding book on the international relations of Eastern Europe and the former Soviet Union. He is currently at work on Light, Heat, and Power, a book that explores the relationships among political leadership, state-building, foreign investment, and geopolitics in the Russian energy sector.

About Harvard Business School
Founded in 1908 as part of Harvard University, Harvard Business School (www.hbs.edu) is located in Boston and offers full-time programs leading to the MBA and doctoral degrees, as well as more than 40 Executive Education programs. With a faculty of more than 200 distinguished scholars, the School is dedicated to educating leaders who make a difference in the world. Its core focus is to shape the practice of business, build enduring knowledge, and effectively communicate important ideas. Harvard Business School is the world’s largest producer of business cases, a method of teaching pioneered by the School in the 1920s.