Economic responsibility goes with military strength and an undue share in the costs of peacekeeping. Free riders are perhaps more noticeable in this area than in the economy, where a number of rules in trade, capital movements, payments and the like have been evolved and accepted as legitimate. Free ridership means that disproportionate costs must be borne by responsible nations, which must on occasion take care of the international or system interest at some expense in falling short of immediate goals. This is a departure from the hard nosed school of international relations in political science, represented especially perhaps by Hans Morgenthau and Henry Kissinger, who believe that national interest and the balance of power constitute a stable system. Leadership, moreover, had overtones of the white man's burden, father knows best, the patronizing attitude of the lady of the manor with her Christmas baskets. The requirement, moreover, is for active, and not merely passive responsibility of the German—Japanese variety. With free riders, and the virtually certain emergency of thrusting newcomers, passivity is a recipe for disarray. The danger for world stability is the weakness of the dollar, the loss of dedication of the United States to the international system's interest, and the absence of candidates to fill the resultant vacua.
The explanation of this book is that the 1929 depression was so wide, so deep, and so long because the international economic system was rendered unstable by British inability and U. S. unwillingness to assume responsibility for stabilizing it by discharging five functions:(1) maintaining a relatively open market for distress goods;
(2) providing countercyclical, or at least stable, long term lending;
(3) policing a relatively stable system of exchange rates;
(4) ensuring the coordination of macroeconomic policies;
(5) acting as a lender of last resort by discounting or otherwise providing liquidity in financial crisis.
The monetary history of the last four hundred years has been replete with financial crises. The pattern was that investor optimism increased as economies expanded, the rate of growth of credit increased and economic growth accelerated, and an increasing number of individuals began to invest for short-term capital gains rather than for the returns associated with the productivity of the assets they were acquiring. The increase in the supply of credit and more buoyant economic outlook often led to economic booms as investment spending increased in response to the more optimistic outlook and the greater availability of credit, and as household spending increased as personal wealth surged.