No CrossRef data available.
We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
Published online by Cambridge University Press: 01 November 2007
According to theories of evolution, species evolve according to survival imperatives generated by their physical environments. Traits are selected and rejected based on their adaptability to the structures of the physical world in which these species live. Biological differences mirror differences in climate; the acutely developed senses of many species have adapted either for capturing prey or eluding predators, and so forth. So too in economic systems do we observe changes in human behaviour modes and policies that suggest adaptation. With respect to money, scholars continue to look for the most important adaptation mechanisms to explain the evolution of international monetary relations. What was once the preserve of strictly economic analysis has now become open ground for a wider array of social scientific analyses. In only a few short decades the study of monetary relations has developed into a more fully multi- and interdisciplinary enterprise. The four books reviewed here represent some of the latest attempts at constructing a broader social scientific explanation of monetary history. These valuable works complement one another in filling gaps in the literature on a complex and more diverse adaptation of monetary relations. Above all they stand as impressive political economies of monetary relations. Moure and Kettell concentrate on specific cases of monetary policy transformation in the interwar period, while Flandreau et al. and Obstfeld and Taylor cover a broader evolutionary timeline. The value of the contributions lies in several factors.
1 Excellent traditional economic histories are Charles, Kindleberger, A Financial History of Western Europe (London: George Allen & Unwin, 1984)Google Scholar, and Leland, Yeager, International Monetary Relations: Theory, History, and Policy (New York: Harper & Row, 1976)Google Scholar.
2 For example, Gowa, Joanne S., Closing the Gold Window: Domestic Politics and the End of Bretton Woods (Ithaca: Cornell University Press, 1983)Google Scholar; John, Odell, U.S. International Monetary Policy: Markets, Power, and Ideas as Sources of Change (Princeton: Princeton University Press, 1982)Google Scholar; Barry, Eichengreen and Jeffry, Frieden, eds., The Political Economy of European Monetary Unification (Boulder: Westview Press, 1994)Google Scholar; Jeffrey, Frieden and Ernesto, Stein, eds., 2001. The Currency Game: Exchange Rate Politics in Latin America (Washington, DC: Inter-American Development Bank, 2001)Google Scholar; Robert, Keohane and Helen, Milner, Internationalization and Domestic Politics (Cambridge: Cambridge University Press, 1996)Google Scholar; Beth, Simmons, Who Adjusts?: Domestic Sources of Foreign Economic Policy During the Interwar Years (Princeton: Princeton University Press, 1993)Google Scholar; Gallarotti, Giulio M., The Anatomy of an International Monetary Regime: The Classical Gold Standard, 1880–1914 (New York: Oxford University Press, 1995)Google Scholar; Jennifer Sterling-Folker, Theories of International Cooperation and the Primacy of Anarchy: Explaining U.S. International Monetary Policy-Making after Bretton Woods (Albany: SUNY Press, 2002); Barry Eichengreen, Globalizing Capital: A History of the International Monetary System (Princeton: Princeton University Press, 1996); Barry, Eichengreen, Golden Fetters: The Gold Standard and the Great Depression (New York: Oxford University Press, 1992)Google Scholar.
3 While their visions of monetary history suggest a more dynamic or cyclical orientation, in fact their evidence underscores a prevailing secular shift in monetary relations which has developed alongside (and is the direct result of) a secular change in domestic politics. In this respect, they testify to the structural transformation in monetary relations brought about by the emergence of the guardian state. See further Gallarotti, Giulio M., ‘The Advent of the Prosperous Society: The Rise of the Guardian State and Structural Change in the World Economy’, Review of International Political Economy 7, 1 (Spring 2000), 1–52CrossRefGoogle Scholar.
4 The classical gold standard represents the emergence of an international monetary regime that formed from the convergence of domestic monetary practices among those leading states that selected gold as the sole monetary standard in the 1870s. The movement to gold led countries to converge on to trajectories of low inflation, thus promoting a set of stable fixed exchange rates.
5 On the operation of the classical gold standard see Gallarotti, Anatomy of an International Monetary Regime.
6 Of the four analyses, Moure (p. 21) and Flandreau et al. (pp. 3–8) propose the most accurate assessments of the nature and contributions of central bank co-operation under the gold standard.
7 Gregory, T. E., ed., Selected Statutes, Documents & Reports Related to British Banking 1832–1928, Vol. I (New York: Augustus M. Kelly, 1964), 64Google Scholar. If such a rule were practised widely across private banks, then the result would be similar to one where central monetary authorities managed domestic credit to preserve some given exchange rate. In this case, convergent private-sector actions promoted such an outcome.
8 Marc Flandreau, ‘Caveat Emptor: Coping with Sovereign Risk Under the Gold Standard, 1871–1913’, and Mira Wilkins, ‘Conduits for Long-Term Foreign Investment in the Gold Standard Era’. On information and co-ordination under the gold standard see especially Giulio, M. Gallarotti, ‘The Rise of the Classical Gold Standard: The Role of Focal Points and Synergistic Effects in Spontaneous Order’, Humane Studies Review, 13, 3 (Summer 2001), 1–23Google Scholar.
9 Central banks influenced movements in bullion and coins by manipulating the official prices at which they would buy and sell gold.
10 That much sterilisation took place under the gold standard suggests far more monetary discretion than the mythological price-specie-flow system attested to. On discretion, see Bordo, Michael D. and Flandreau, Marc, ‘Core, Periphery, Exchange Rate Regimes and Globalization, in Bordo, Michael D., Taylor, Alan M. and Williamson, Jeffrey G., eds., Globalization in Historical Perspective (Chicago: University of Chicago Press, 2003)CrossRefGoogle Scholar.
11 The guardian state represents a synthesis of welfare imperatives and Keynesian interventionism. As described in Gallarotti, ‘Advent of the Prosperous Society’, it marked a new vision of the relationship between domestic economies and their governments.
12 Of course, this relates more to outcomes in the developed world. The less developed world showed a very different political evolution.
13 See especially Adam, Przeworski and John, Sprague, Paper Stones: A History of Electoral Socialism (Chicago: University of Chicago Press, 1986)Google Scholar.
14 But even here defence of monetary orthodoxy took on a guardian flavour as supporters of pre-war resumption emphasised the macroeconomic costs of inflation on consumers and labour, so that even orthodoxy was perceived as necessitating public justification. Such was hardly the case in pre-war resumptions.
15 In fact, Kettell (pp. 83, 84) reports several cases in which the British government stepped in and lowered interest rates to abate the consequences of deflation in the period of resumption.
16 Kettell's documentation shows far more evidence from specific groups representing labour and capital that they accorded deflation considerable respect as a viable strategy, than from government agencies and politicians that proclaimed such policies as strategies targeted specifically at the interests of labour and capital.
17 Eichengreen's history of the interwar period, Golden Fetters, clearly demonstrates that the propensity of nations to cling to the golden ‘illusion’ (i.e. that unilaterally conceived strategies of resumption could deliver pre-war economic outcomes) made the Great Depression longer and deeper.
18 See especially Ruggie, John G., ‘International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order’, in Krasner, Stephen D., ed., International Regimes (Ithaca: Cornell University Press, 1983)Google Scholar.
19 Corden, W. Max, Economic Policy, Exchange Rates, and the International System (Chicago: University of Chicago Press, 1994)Google Scholar.
20 Obstfeld and Taylor (p. 39) note that after Bretton Woods only a few major states have been able to maintain a peg for more than five years and that they all represent special cases.
21 Kettell's book also looks at the short-lived British experiment of joining the exchange rate mechanism (ERM) in 1990–2 as a means of fighting inflation, and (like the resumption of 1925) as a strategy to encourage the rationalisation of British industry. As with the resumption of 1925, the ERM experiment represented a commitment device (in this case external, however) that would deflect political discontent for deflationary outcomes away from British leaders. This of course recalls his evidence of 1925 regarding attempts to depoliticise monetary decisions that cut against domestic welfare and stabilisation goals, thus vindicating the power of the guardian orientation in British policymaking.
22 This is not to say that guardian politics necessarily produces inferior outcomes more often than desirable outcomes. Indeed, Moure (echoing Eichengreen's Golden Fetters) certainly demonstrates that the Great Depression could have been softened by greater attention to guardian considerations dictating earlier and more significant deviations from the pre-war orthodoxy of the gold standard.
23 An exception to this tendency is Giulio M. Gallarotti, ‘Confronting the Impediments to International Economic Cooperation: Domestic Politics and International Monetary Relations in the G8’, G8 Governance, 10 (June 2004), 1–36, in which various strategies for overcoming domestic obstacles to effective international monetary co-operation are advanced.