European Banks and the Rise of International Finance after Bretton Woods (1973–1982)

University dissertation from Uppsala : Acta Universitatis Upsaliensis

Abstract: The 1970s is a crucial decade for understanding the modern financial landscape but it is still relatively unexplored in financial history. It was marked by the end of the Bretton Woods regime, the gradual liberalisation of finance, the return of banking crises and two massive energy crises. As archives are now providing new archival evidence, this thesis seeks to analyse a neglected aspect of the 1970s which touches on all of the above-mentioned phenomena: the progressive privatisation of international financial flows to Less Developed Countries (LDCs), especially in Latin America and South-East Asia, and its impact on the European banking sector.After the collapse of the Bretton Woods’ system in 1973 and until the debt crisis of 1982, Western commercial banks assumed an increasing role in transferring huge amounts of dollars accumulated by oil-exporting countries to LDCs through the so-called ‘recycling’ mechanism of the Euromarket. The trend marked a clear break with the past since, until the late 1960s, development finance had mostly been provided by public institutions. This gave commercial banks a new central role in international financial matters.In the short term, the privatisation of credit proved to be a profitable bet and it allowed a renaissance of the banking sector after the regime of Bretton Woods. Besides, these international flows of money provided the basis for the financial globalisation to come. In the longer term, many LDCs became subject to the imperatives of private institutions and prisoners of a ‘debt trap’ throughout the 1980s.We still know little about the attitude of international organisations towards the progressive privatisation of finance and the recycling mechanism and the impact of the oil crisis on the European banking. This thesis will analyse these topics by relying on new archival evidence from the International Monetary Fund (IMF), the Bank for International Settlements (BIS), the Organisation for Economic Cooperation and Development (OECD), the Bank of England, the Banque de France and the archives of several major European commercial banks in France and United Kingdom, notably Société Générale, Crédit Agricole, Barclays Bank, Midland Bank and Lloyds Bank.

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