from Greenberg Center for Geoeconomic Studies

Financial Statecraft

The Role of Financial Markets in American Foreign Policy

Foreign policy analyses written by CFR fellows and published by the trade presses, academic presses, or the Council on Foreign Relations Press.

Read an excerpt of Financial Statecraft.

As trade flows expanded and trade agreements proliferated after World War II, governments—most notably the United States—came increasingly to use their power over imports and exports to influence the behavior of other countries. But trade is not the only way in which nations interact economically. Over the past two decades, another form of economic exchange has risen to a level of vastly greater significance and political concern: the purchase and sale of financial assets across borders. Nearly $2 trillion worth of currency now moves cross-border every day, roughly 90 percent of which is accounted for by financial flows unrelated to trade in goods and services—a stunning inversion of the figures in 1970. The time is ripe to ask fundamental questions about what Benn Steil and Robert Litan have coined as "financial statecraft," or those aspects of economic statecraft directed at influencing international capital flows. How has the American government practiced financial statecraft? How effective have these efforts been? How can they be made more effective? The authors provide penetrating and incisive answers in this timely and stimulating book.

More on:

Financial Markets

United States

A Council on Foreign Relations Book

More on:

Financial Markets

United States

Reviews and Endorsements

Named one of the "Best Business Books of 2006" by Library Journal

From the 'Who Dunnit?' to the 'When Should We Intervene?' questions of financial crises, this important new book is valuable reading for serious students and practitioners of financial policy.

Glenn Hubbard, Dean of Columbia Business School and former Chairman of Council of Economic Advisers

Financial Statecraft should be required reading for those who conduct U.S. foreign policy as well as everyone who cares about it. A lot of people are struggling to define America's role in the world in the twenty-first century, but no comprehensive analysis of the opportunities and risks will now be complete without reference to this insightful book.

Jeffrey E. Garten, Juan Trippe Professor of International Trade, Finance, and Business at the Yale School of Management, former undersecretary of commerce for international trade

Financial statecraft is much practiced, little analyzed. This fine book discusses what it is, how it has been applied by the United States, what its (often severe) limitations are, and what its potential is. Altogether, an excellent exposition of a complicated subject for scholars, journalists, and policymakers alike.

Richard N. Cooper, Boas Professor of International Economics, Harvard University

Benn Steil and Robert Litan have written the first book devoted to financial statecraft, and it is essential reading for anyone interested in the critical issue of influencing the international capital flows that make an integrated global economy function. As one who was directly involved in a variety of the issues so thoughtfully and creatively discussed in Financial Statecraft, I can say without equivocation that Steil and Litan have performed a signal service in helping us better understand the tools of financial statecraft and the best ways to employ them for the benefit of the United States and the world economy.

Stuart Eizenstat, former U.S. Ambassador to the EU and Deputy Secretary of Treasury

Benn Steil and Robert Litan, two economists at the Council on Foreign Relations and the Brookings Institution respectively, have combed history for nuggets such as these to create a highly readable account of an important...subject: how international capital flows have been and are still used as instruments of foreign policy. While much ink has been spilled elsewhere on dissecting the effectiveness of trade and aid in foreign affairs, Financial Statecraft focuses on the less-studied world of capital flows, financial sanctions, foreign debt underwriting and currency unions.

Read The Economist review.

The increasing use of 'financial statecraft' by American policymakers and the less-than-spectacular result is the subject of this new book from Benn Steil, Director of International Economics at the Council on Foreign Relations and Editor of International Finance, and Robert E. Litan, Vice President of Research and Policy at the Kauffman Foundation and a senior fellow at the Brookings Institution ... Policymakers, researchers, and global executives will come away from this book with a new perspective on the economics of foreign policy in the modern world.

Sean Silverthorne, Working Knowledge: The Harvard Business School Newsletter

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