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The period from 1914 to 1940 is one of the most crucial and enigmatic in modern world history, and in the history of modern U.S. foreign policy. World War I catapulted the United States into international economic and political leadership, yet in the aftermath of the war, despite grandiose Wilsonian plans, the United States quickly lapsed into relative disregard for events abroad: it did not join the League of Nations, disavowed responsibility for European reconstruction, would not participate openly in many international economic conferences, and restored high levels of tariff protection for the domestic market. Only in the late 1930s and 1940s, after twenty years of bitter battles over foreign policy, did the United States move to center stage of world politics and economics: it built the United Nations and a string of regional alliances, underwrote the rebuilding of Western Europe, almost single-handedly constructed a global monetary and financial system, and led the world in commercial liberalization.

The past fifteen years have seen two important developments in the international economic system: the rapid industrialization of many less developed countries (LDCs) and their increasing indebtedness to private financial institutions. Massive bank loans have been used to fund industrial growth in many LDCs; international financial markets have replaced multinational corporations as the Third World's most important source of private foreign capital. In four major borrowing countries—Mexico, Brazil, Algeria, and South Korea—the process of indebted industrialization has its roots in the internationalization of finance, the increasing role of the state, and the use of funds raised on the international capital markets to finance industrial development. The results include rapid expansions of LDC industrial production and LDC exports of manufactured products, as well as the formation of an implicit partnership between private financial institutions and state-capitalist elites in the Third World.

Since 1965 international financial conditions have become a major factor in economics and politics within the less developed countries (LDCs). The impact of international finance on the LDCs provides an excellent opportunity to analyze the relationship between external events and LDC domestic economic and political development. There was in fact great variation in the response of LDC debtors to similar international financial circumstances. Some liberalized their trade and investment policies as they borrowed; others tightened them. Some used borrowed funds productively; others experienced enormous capital flight. The 1982-1984 financial crisis saw the rise of new democratic regimes in some countries and the consolidation of authoritarianism in others.

Since the election of Jimmy Carter, much has been written about a mysterious cabal of international financiers, businessmen, politicians, and theoreticians called the Trilateral Commission. Noting that the most influential members of the present administration—including Messrs. Carter and Mondale—are former members of the Commission, muckraking journalists think they have uncovered yet another conspiracy to take over the world. That most of the capitalist world's most powerful individuals are Trilateralists is certain; yet a thorough analysis shows that the Commission represents something much more concrete than a conspiratorial cartel. To understand the Trilateral Commission, however, we must first review the circumstances leading to its formation in 1973. This article can also be found at the Monthly Review website , where most recent articles are published in full. Click here to purchase a PDF version of this article at the Monthly Review website.