(Page 19 of 32) - La Regle du Jeu: France and the Paradox of Managed Globalization authored by Abdelal, Rawi. and Meunier, Sophie.

evolution of the international financial architecture is, from the perspectives of the
conventional wisdom and twentieth‐century economic history, downright astonishing.
Yet France and the French sought to organize European and global financial markets
according to the emergent doctrine of managed globalization in much the same ways.
“There is a paradox,” observes Lamy, “of the French role in globalization.  There is an
obvious difference between the traditional French view on the freedom of capital
movements and the fact that French policy makers played crucial roles in promoting the
liberalization of capital in the EC, OECD, and IMF.”

Liberal Europe, Capacious Commission

The European economy envisioned by the authors and negotiators of the Treaty

of Rome was not unconditionally liberal. Goods, services, and people were supposed to
flow freely. Capital, however, was not, except, according to the Treaty of Rome, “to the
extent necessary to ensure the proper functioning of the Common Market,” and without
jeopardizing the internal and external financial stability of members.

The

conditionality of the obligation to liberalize capital was, in part, a reflection of the
widespread consensus among policy makers around the world that capital flows ought
to be controlled in order to avoid financial crises.

This consensus, which drew upon the lessons that European and American

policy makers believed were evident from the financial chaos of the interwar years, was,
along with fixed exchange rates, the very basis of the post‐war international monetary
system. The conditionality of capital liberalization in the Treaty also reflected
bargaining among Europe’s founding members. Germany had been alone in pushing
for capital liberalization, whereas France, Italy, and the Netherlands had argued against
codifying such an obligation.

The legal implication of the Treaty’s wording was that members’ obligations to

liberalize capital could only be redefined by a new Treaty or by directives issued by the
European Commission, and approved unanimously by the Council, that would, in
essence, define what members agreed to constitute “the extent necessary” for the
common market.

The Commission began to define and expand members’ obligations

to liberalize capital with two directives in 1960 and 1962, but little progress was made.
Members were obliged to liberalize only those transactions deemed essential to the
functioning of the common market, and that turned out to be a short list indeed.

Quoted in Abdelal, Capital Rules, p. 13.

See the discussion in Age F. P. Bakker, The Liberalization of Capital Movements in Europe

(Dordrecht: Kluwer, 1996), pp. 42‐43.

Article 69 of the Treaty specified this role for the Commission. See Tommaso Padoa‐

Schioppa, “Capital Mobility: Why is the Treaty Not Implemented?” in his The Road to Monetary
Union in Europe: The Emperor, the Kings, and the Genies (New York: Oxford University Press, 1994),
p. 27.