Principles Governing the Global Economy

Abstract

The main principles underlying the organisation of the global economy pre-date the Second World War, but mostly as ideas or policies, enshrined in domestic law, in international instruments of limited scope or in aborted attempts at designing far-reaching ones. The Second World War reset the approach to the global economy, either by taking such principles from a bilateral to a global level or by formulating new ones.

Trade liberalization required a managed monetary system, capable of providing stability without hampering the movement of desired investment. Access to new markets, both for goods and capitals, was premised on the end of colonial empires. Yet, the decolonization process and the related development movement brought new challenges to the liberalization effort, including renewed calls for resource and regulatory sovereignty in newly independent and developing countries, as well as the reshaping of the international economic order arising from the war, in a manner that would reflect the special situation of such countries. The legal principles designed by the end of the Second World War thus came to be fundamentally challenged by the very process – decolonization and development – that, initially, had been seen as a condition for their full operation.

In this broad context, this chapter analyses the three separate legal regimes (trade, monetary and financial relations, foreign direct investment) through which what has been called ‘embedded liberalism’ has found expression since the mid twentieth century, with fluctuations, until the present day. This examination provides the basis for a concise contemporary assessment and outlook offered by way of conclusion.