The Robert S. Strauss Center for International Security and Law welcomed Jonathan Kirshner, Professor at Cornell University, on October 2nd, 2012. Catherine Weaver, Associate Professor of Public Affairs at the LBJ School, introduced Professor Kirshner.

In a lecture titled “American Power after the Financial Crisis,” Professor Kirshner discussed the effects of the recent financial crisis on the international financial system. He argued that the financial crisis has shaken the confidence of the international community in the current international economic system led by United States, which will result in a “new heterogeneity of thought” in international economics. This difference of thought will bring discord and a relative decrease in the power of the United States.

According to Kirshner, the story begins in what he terms the second U.S. post war financial order, which started shortly after the end of the cold war. This period was characterized by a strong belief in the power and wisdom of an unregulated market. This belief was a result of an academic delegitimization of Keynesian economics. This faith in the free market led to deregulation of the U.S. financial system and U.S. efforts to get other states to deregulate their financial systems though actions like removing capital controls. According to Kirshner, the United States pushed for unregulated markets to gain access for the large U.S. financial companies.

Kirshner described how those arguing for deregulation were caught off guard by the Asian Financial Crisis. The IMF and the proponents of deregulation blamed the crisis on poor government policies, while Kirshner argued that the real cause was the unregulated money flow. Kirshner continued to explain that the United States overreached during the resolution of the crisis and doubled down on its free market ideology.

When the great recession hit, the world saw it as the second crisis brought on by overconfidence in an unregulated financial market. Kirshner argued that the weak U.S. regulatory reaction to the crisis has raised questions of the long-term viability of a U.S. led international financial system and the U.S. dollar for the international community. Kirshner explained that other countries are suffering buyer’s remorse for emulating the U.S. shaped economic order. He claims that this will lead other countries to look for new economic systems, which Kirshner believes will bring a reduction in U.S. power. He finished by stating that the future of American power will depend largely on U.S. domestic decisions on how to manage the financial industry.

Jonathan Kirshner sat down with us for an interview the day of his talk:

Jonathan Kirshner is a Professor at Cornell University focused on International Relations and political economy. He is the author of Currency and Coercion: The Political Economy of International Monetary Power (Princeton University Press, 1995) and Appeasing Bankers: Financial Caution on the Road to War (Princeton University Press, 2007.) He is currently director of Cornell University’s Reppy Institute for Peace and Conflict Studies, and the co-editor (with Eric Helleiner) of the multi-disciplinary book series, “Cornell Studies in Money.” Previously he chaired the Economics and National Security Program at the Olin Institute of Strategic Studies at Harvard. A multi-year project at the Olin ENS program led to his edited volume, Globalization and National Security (Routledge, 2006). He has received the Provost’s Award For Distinguished Scholarship, and the Stephen and Margery Russell Distinguished Teaching Award from Cornell University.