Embedded liberalism

The term embedded liberalism refers to the economic system which dominated worldwide from the end of World War II to the 1970s. The term itself is credited to John Ruggie [Ruggie, John Gerard. 1982. "International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order." "International Organization" 36(2). Also found in Stephen Krasner ed. "International Regimes."] , an American political scientist.

David Harvey [Harvey, David. "A Brief History of Neoliberalism," (Oxford: Oxford University Press, 2005).] argues that at the end of World War II, the primary objective was to develop an economic plan that would not lead to a repeat of the Great Depression during the 1930s. Harvey states:

Harvey notes that under this new system free trade was regulated "under a system of fixed exchange rates anchored by the US dollar's convertibility into gold at a fixed price. Fixed exchange rates were incompatible with free flows of capital." In addition, there was a worldwide acceptance that "the state should focus on full employment, economic growth, and the welfare of its citizens and that state power should be freely deployed, alongside of or, if necessary, intervening in or even substituting for market processes to achieve these ends." He also states that this new system came to be referred to as "embedded liberalism" in order to "signal how market processes and entrepreneurial and corporate activities were surrounded by a web of social and political constraints and a regulatory environment that sometimes restrained but in other instances led the way in economic and industrial strategy." [Harvey, David. "A Brief History of Neoliberalism," p.11.]

Harvey argues that while embedded liberalism led to the surge of economic prosperity which came to define the 1950s and 1960s, the system began to crack beginning in the late sixties.Harvey, David. "A Brief History of Neoliberalism," p.12.] The 1970s were defined by an increased accumulation of capital, unemployment, inflation (or stagflation as it was dubbed), and a variety of fiscal crises. He notes that "the embedded liberalism that had delivered high rates of growth to at least the advanced capitalist countries after 1945 was clearly exhausted and no longer working." A number of theories concerning new systems began to develop, which led to extensive debate between those who advocated "social democracy and central planning on the one hand" and those "concerned with liberating corporate and business power and re-establishing market freedoms on the other.Harvey, David. "A Brief History of Neoliberalism," p.13.] Harvey notes that by 1980, the latter group had emerged as the leader, advocating and creating a global economic system that would become known as neoliberalism.

Notes

References

*Harvey, David. "A Brief History of Neoliberalism." Oxford: Oxford University Press, 2005.