Money and Power in Bilateral Relations

As a response to the Great Depression in 1931 Germany adopted a policy of exchange control where the movement of foreign currency was subject to government control. This regime served as a defense measure against currency devaluation but it inhibbited international payments among exchange control countries.Trade between them was organized on the basis of bilateral clearing agreements, which centralized both foreign trade and payments at the state level. The book analyzes the clearing system in the case of Germany's relations with Bulgaria, which developed the highest trade dependence on Germany in the 1930s. An almost complete opposition of free trade, bilateral clearing is seen as a mechanism of political power maximization and resource allocation from the periphery to its core. Using Jonathan Kirshner's framework of monetary power the work offers a detailed analysis of the link between international monetary relations and political power. The shift of international trade regime from a Gold Standard and free trade to exchange control and bilateral clearing provided an opportunity for the German government to covertly finance its expenditure in the 1930's and during WWII. As a response to the Great Depression in 1931 Germanyadopted a policy of exchange control where themovement of foreign currency was subject togovernment control. This regime served as a defensemeasure against currency devaluation but itinhibbited international payments among exchangecontrol countries.Trade between them was organized onthe basis of bilateral clearing agreements, whichcentralized both foreign trade and payments at thestate level.The book analyzes the clearing system in the case ofGermany's relations with Bulgaria, which developedthe highest trade dependence on Germany in the 1930s.An almost complete opposition of free trade,bilateral clearing is seen as a mechanism ofpolitical power maximization and resource allocationfrom the periphery to its core. Using JonathanKirshner's framework of monetary power the workoffers a detailed analysis of the link betweeninternational monetary relations and political power.The shift of international trade regime from a GoldStandard and free trade to exchange control andbilateral clearing provided an opportunity for theGerman government to covertly finance its expenditurein the 1930's and during WWII.