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International political economy and the international monetary system

Published online by Cambridge University Press:  22 May 2009

David A. Baldwin
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Type
Review Essays
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International Organization , Volume 32 , Issue 2 , Spring 1978 , pp. 497 - 512
Copyright
Copyright © The IO Foundation 1978

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References

1 On the need to view the international monetary system in evolutionary terms, see Triffm, Robert, Our International Monetary System: Yesterday, Today, and Tomorrow (New York: Random House, 1968)Google Scholar.

2 Pp. ix–x.

3 P. 3.

4 “Introduction,” pp. 1–9; and “Attributes of National Monies and the Interdependence of National Monetary Policies,” pp. 111–26.

5 “Alternative Exchange Rate Systems and the Interdependence of Monetary Policies,” pp. 13–33.

6 “Implications of the Euro-dollar for Monetary Policy and the U.S. Balance-of-Payments Deficit,” pp. 139–51.

7 “Concluding Observations,” pp. 316–20.

8 P. 2.

9 P. 329.

10 Happily, there is an increasing number of exceptions to this statement. See, for example, Brenner, Michael J., The Politics of International Monetary Reform—The Exchange Crisis (Cambridge, Mass.: Ballinger, 1976)Google Scholar; Bergsten, C. Fred, The Dilemmas of the Dollar: The Economics and Politics of United States International Monetary Policy (New York: New York University Press, 1976)Google Scholar; Keohane, Robert O. and Nye, Joseph S., “World Politics and the International Economic System,” in The Future of the International Economic Order: An Agenda for Research, Bergsten, C. Fred, ed., (Lexington, Mass.: Lexington, 1973), pp. 115–79Google Scholar; Russell, Robert W., “Transgovernmental Interaction in the International Monetary System, 1960–1972,” International Organization Vol. 27 (Autumn 1973): 431–64CrossRefGoogle Scholar; and Keohane, Robert O. and Nye, Joseph S., Power and Interdependence (Boston: Little, Brown, 1977)Google Scholar.

11 De Cecco, p. 13. De Cecco objects to labeling List an “arch-protectionist” because it makes List sound more like a propagandist than a scholar (p. 12). De Cecco would probably approve of Robert Gilpin's recent efforts to restore the scholarly respectability of mercantilism. See Gilpin, Robert, U.S. Power and the Multinational Corporation (New York: Basic Books, 1975)CrossRefGoogle Scholar; and Gilpin, Robert, “The Political Economy of the Multinational Corporation: Three Contrasting Perspectives,” American Political Science Review, Vol. 70 (03 1976): 184–91CrossRefGoogle Scholar.

12 This list could be extended to include more recent scholars such as Klaus Knorr, William Diebold, Percy Bidwell, and Albert Hirschman, each of whom made major contributions to the field during the 1940s and 1950s. These lists are meant to be illustrative, not exhaustive.

13 P. 316.

14 Pp. 316–17.

15 De Cecco, p. 12.

16 Johnson, p. 317.

17 Triffin, Robert, “Jamaica: ‘;Major Revision’ or Fiasco?” Reflections on Jamaica, Essays in International Finance, No. 115 (Princeton University; 04 1976), p. 49Google Scholar.

18 For a discussion of the nature of the intellectual process in coordination, which explicitly mentions the monetary role of gold, see Schelling, Thomas C., The Strategy of Conflict (Cambridge: Harvard University Press, 1960), pp. 92–94Google Scholar. On perceptions and international monetary issues see alsoKeohane, and Nye, , Power and Interdependence, p. 67Google Scholar.

19 On bargaining theory in general and the commitment in particular see Schelling, esp. pp. 21–38.

20 See Schelling's, section entitled, “Bargaining Power: The Power to Bind Oneself,” pp. 22–28Google Scholar. “When national representatives go to international negotiations knowing that there is a wide range of potential agreement within which the outcome will depend on bargaining, they seem often to create a bargaining position by public statements, statements calculated to arouse a public opinion that permits no concessions to be made. If a binding public opinion can be cultivated and made evident to the other side, the initial position can thereby be made visible, ‘final.’” (p. 28).

21 Ibid., p. 5.

22 Mikesell, Raymond F., “The Role of the International Monetary Agreements in a World of Planned Economy,” The Journal of Political Economy, Vol. 55 (12 1947): 512CrossRefGoogle Scholar.

23 Triffin, , “Jamaica” p. 48Google Scholar.

24 On this point see Tew, Brian, The International Monetary Fund: Its Present Role and Future Prospects, Essays in International Finance, No. 36 (Princeton University, 1961)Google Scholar; Gardner, Richard N., Sterling-Dollar Diplomacy (Oxford: Oxford University Press, 1956)Google Scholar; Nurkse, Ragnar, Conditions of International Monetary Equilibrium, Essays in International Finance, No. 4 (Princeton University, 1945)Google Scholar; and Strange, Susan, “IMF: Monetary Managers,” The Anatomy of Influence: Decision Making in International Organization, Cox, Robert W. and Jacobson, Harold K., eds., (New Haven: Yale University Press, 1973), pp. 263–97Google Scholar. Keohane and Nye view the international monetary issue area as “well defined” and “clearly bounded.” They define it as “the cluster of issues seen as relevant by policy makers to decisions about what kind of international arrangements should exist on exchange rates, reserve assets, and control of international capital movements, along with issues seen as relevant to adjustment, liquidity, and confidence within a given regime or nonregime.” Power and Interdependence, pp. 65–86, 98. Since US policy makers have consistently viewed foreign investment and commercial policy as relevant—indeed, essential—to decisions about international monetary affairs, it seems odd that Keohane and Nye did not pay more attention to them. Their discussion of the actual and intended workings of the Bretton Woods monetary regime contains scarcely any references to the World Bank, the proposed ITO, GATT, trade policy, or foreign investment problems. Excessive reliance on Annual Reports of the US Treasury Department may have led to confusion between the issues perceived by the Treasury Department and the issues perceived by the US Government as a whole. Reliance on the Department of State Bulletin and/or the reports of the National Advisory Council on International Monetary and Financial Problems would probably have led to more emphasis on foreign investment and commercial policy in their discussion of international monetary regimes.

25 Gardner, p. 383.

26 Triffin, , Our International Monetary System, pp. 29–49Google Scholar.

27 Gardner, pp. 287–305.

28 Cooper, Richard N., “Prolegomena to the Choice of an International Monetary System,” International Organization Vol. 29 (Winter 1975): 86CrossRefGoogle Scholar.

29 Strange, p. 270.

30 Tew, p. 8.

31 Some hope this this will happen is found in a recent comment by Fritz Machlup: “What were the basic faults of the Bretton Woods system? Before answering this question, one ought to distinguish between the system as its designers meant it to function and the system that actually developed as a result of the practices of the monetary authorities of the member countries.” “Between Outline and Outcome the Reform was Lost,” Reflections on Jamaica, p. 30. Unfortunately, having noted the desirability of making the distinction, Machlup proceeds not to make it.

32 On this point see Halm, George N., The International Monetary Fund and Flexibility of Exchange Rates, Essays in International Finance, No. 83 (Princeton University, 1971), pp. 3–6Google Scholar.

33 Writing a few months after the close of the Bretton Woods Conference, Ragnar Nurkse observed that “if the machinery of the Fund is to operate successfully, there should be some more or less generally accepted notion as to what constitutes ‘equilibrium’ or ‘disequilibrium’ in regard to exchange rates.” (p. 2).

34 Mikesell, p. 503.

35 Ibid., p. 504.

36 Johnson, p. 319. For more on the significance of governmental management of economies, see Baldwin, David A., Economic Development and American Foreign Policy (Chicago: University of Chicago Press, 1966), pp. 25–27Google Scholar; Harrison, Anthony, The Framework of Economic Activity: The International Economy and the Rise of the State (New York: St. Martin's Press, 1967)CrossRefGoogle Scholar; and Mikesell, Raymond F., ed., U.S. Private and Government Investment Abroad (Eugene, Ore.: University of Oregon, 1962), pp. 377–79Google Scholar.

37 The question of whether to use the term “floating exchange rates” or “flexible exchange rates” is tricky. The opponents of the “par value” or “adjustable peg” system wanted to emphasize its rigidity and therefore were prone to pose “flexible exchange rates” as the alternative. Defenders of the adjustable peg, however, wanted to emphasize its flexibility and therefore used the term “floating exchange rates” to refer to more flexible alternatives. The difficulty arises because flexibility of exchange rates is a matter of degree, and the precise point at which the rate begins to “float” is a matter of judgment. We shall use the term “floating exchange rates” loosely to refer to any exchange rate system with significantly more flexibility than the Bretton Woods par value system. For purposes of this essay such usage should be acceptable.

38 “The Case for Flexible Exchange Rates,” Essays in Positive Economics (Chicago: University of Chicago Press, 1953), pp. 157–203Google Scholar.

39 P. 4.

40 P. 318.

41 Hamada, p. 31.

42 Verbit, pp. 302–04.

43 On this point see Nurkse, pp. 21–22.

44 “World Politics and the International Economic System,” pp. 124–25.

45 Those who contend that the US was disadvantaged by its “top dog” or “key currency” position in the 1960s may well be right. The point here is that the burden of proof rests with those who purport to find exceptions to general rules. The general rule in this case is that system disruptions, i.e., revolutions, are usually started by underdogs rather than top dogs. (Since writing this footnote, I have read Keohane and Nye, Power and Interdependence. They not only provide convincing evidence that the US was disadvantaged by the monetary system of the 1960s, they even call into question the general rule. In the international system, at least, system disruption may be initiated by unhappy top dogs as often as it is by underdogs.)

46 P. 14.

47 P. 18.

48 P. 322.

49 “Jamaica,” p. 48.

50 De Cecco, p. 38.

51 Nurkse, pp. 1–24.