International Monetary Power

International Monetary Power

edited by DAVID M. ANDREWS
Copyright Date: 2006
Published by: Cornell University Press
Pages: 224
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  • Book Info
    International Monetary Power
    Book Description:

    Most economists and political scientists assume that efficiency, the invisible hand, is the preeminent factor in monetary decisions; questions of power and the role it plays in monetary policy are largely neglected. This pathbreaking book redirects attention to monetary power and provides an original framework for assessing its role in relations between sovereign states.

    At present, states are the critical players in monetary relations; they control the production and distribution of the money supply, including the provision of international liquidity and the availability of payments financing. David M. Andrews and the contributors to this volume understand "power" as the capacity to alter the behavior of other actors, including the policies of other states. International Monetary Power provides a thorough overview of how money is used as a tool to achieve international political aims.

    Contributors: David M. Andrews, Scripps College; Benjamin J. Cohen, University of California, Santa Barbara; Scott Cooper, Brigham Young University; Eric Helleiner, University of Waterloo; C. Randall Henning, American University and the Institute for International Economics; Jonathan Kirshner, Cornell University; Louis W. Pauly, University of Toronto; Andrew Walter, London School of Economics and Political Science

    eISBN: 978-0-8014-6842-1
    Subjects: Political Science

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-v)
    (pp. vi-vi)
    (pp. vii-viii)
  5. Introduction
    (pp. 1-4)

    This volume illuminates the power dimension of international monetary relations: its meaning, its sources, and its practice. Simply put, international monetary power exists when one state’s behavior changes because of its monetary relationship with another state. Monetary statecraft, in turn, refers to the conscious manipulation of monetary relations in order to influence the policies of other states. Both concepts are central to understanding the changing nature of international relations in an increasingly globalized economy.

    These definitions are self-consciously state-centric. Other approaches to the study of monetary power are possible, addressing different aspects of money’s social and political consequences.¹ But in...

  6. Part One Power, Statecraft, and International Monetary Relations

    • CHAPTER ONE Monetary Power and Monetary Statecraft
      (pp. 7-28)
      David M. Andrews

      On October 31, 1956, British and French military forces invaded Egypt, determined to seize the Suez Canal and humiliate Egyptian president Gamal Abdel Nasser, who had nationalized the international waterway some three months earlier. About a week after the invasion, on November 5, the pound sterling came under sustained pressure on international markets. The following day, British officials contacted their U.S. counterparts to request support; they were, instead, told that no help would be forthcoming until Britain conformed to a U.S.-sponsored UN resolution calling for an immediate ceasefire and withdrawal of its forces from Egypt. In addition to the market...

  7. Part Two Monetary Power

    • CHAPTER TWO The Macrofoundations of Monetary Power
      (pp. 31-50)
      Benjamin J. Cohen

      What are the foundations of monetary power? David Andrews (chap. 1 in this volume) distinguishes between two pathways for the exercise of monetary power: the macro-level, linked to the problem of balance-of-payments disequilibrium; and the micro-level, working through the capacity of money to alter actor interests and identities. The purpose of this chapter is to promote a clearer understanding of the sources of power at the macro-level pathway—what we may call the macrofoundations of monetary power. Building in good part on earlier contributions of my own,¹ I argue that the central issue at the macro-level is the distribution of...

    • CHAPTER THREE Domestic Sources of International Monetary Leadership
      (pp. 51-71)
      Andrew Walter

      Currency leaders enjoy various forms of influence and power. The “exorbitant privilege” of currency leaders, above all the ability to finance external deficits by issuing IOUs and thereby to delay adjustment, has in particular received great attention in the literature. But what produces currency leaders? What, in other words, are the sources of this central aspect of international monetary power? In the preceding chapter, Benjamin Cohen outlines the macrofoundations of international monetary power—that is, the general characteristics of states that allow them to delay payment of the continuing costs of adjustment or to deflect the transitional costs thereof. Cohen...

    • CHAPTER FOUR Below the State: Micro-Level Monetary Power
      (pp. 72-90)
      Eric Helleiner

      The study of international monetary relations, whether conducted by economists or political scientists, has typically focused on the macro-level and especially on issues related to balance-of-payments disequilibria between states, as the preceding chapter suggests. These matters are unquestionably important. But the study of international monetary power must go well beyond this to consider a variety of phenomena at the micro-level—that is, issues that concern actors below the level of the state. As David Andrews puts it (chap. 1 in this volume), monetary relations can result in a “rearticulation” of these actors’ interests and a “reconstruction” of their identities. Elsewhere...

    • CHAPTER FIVE Monetary Policy Coordination and Hierarchy
      (pp. 91-114)
      David M. Andrews

      Invoking a metaphor from family therapy, David Lake describes hierarchy as “one of the ‘dead horses’ plaguing the study and practice of international politics. It is a fact of international life, but we refuse to recognize it. Indeed, for much of the last fifty years, we have refused to talk about it, and now, after decades of trying to forget, we have even lost the language to describe it.”¹ In this chapter, I try to recover some of that language, particularly with regard to the study of monetary policy coordination but with more general applications as well.²

      To do so,...

  8. Part Three Monetary Statecraft

    • CHAPTER SIX The Exchange-Rate Weapon and Macroeconomic Conflict
      (pp. 117-138)
      C. Randall Henning

      Monetary statecraft, understood as efforts to influence the policies of other states by manipulating monetary conditions, has been a recurring feature of the global economy since World War II. At critical moments over the last four decades, the United States has exploited the vulnerability of countries in Europe and East Asia to changes in their currencies’ exchange rates vis-à-vis the dollar in an effort to extract policy adjustments from their governments and central banks. More successful in some episodes than in others, this “exchange-rate weapon” has played a central role in international conflicts over balance-of-payments adjustment. This instrument of leverage...

    • CHAPTER SEVEN Currency and Coercion in the Twenty-First Century
      (pp. 139-161)
      Jonathan Kirshner

      Most scholarship on monetary power—and especially those studies that have focused on the manipulation of currency values and monetary arrangements to advance political goals, or what this volume terms monetary statecraft—have emphasized the experiences of the twentieth century, and in particular the years 1914–89, the period between World War I and the end of the Cold War.¹ In the early twenty-first century, however, two conditions, less salient during those seventy-five years, are of dramatically increased significance: globalization and unipolarity. How do these factors affect the prospects for and practice of monetary statecraft? In particular, has financial globalization—...

    • CHAPTER EIGHT The Limits of Monetary Power: Statecraft within Currency Areas
      (pp. 162-183)
      Scott Cooper

      Despite the abundant literature on individual currency areas such as the franc zone and the sterling bloc, there has been a dearth of comparative political analysis of how these areas work. One important exception is Jonathan Kirshner’s analysis of how monetary power is exploited by leading powers within currency areas. He explains the mechanisms of dependence and analyzes the various ways a currency area’s leader is able to gain power at the expense of follower states. He also uses detailed empirical examples to show how leaders have exploited the monetary dependence of followers.¹

      Although Kirshner’s analysis and evidence are generally...

    • CHAPTER NINE Monetary Statecraft in Follower States
      (pp. 184-208)
      Louis W. Pauly

      Common sense suggests that successful leaders need willing followers. Coercion can sometimes be effective, but, as every new parent soon learns, outcomes achieved through self-interested acquiescence tend to be more satisfactory and more enduring than those achieved through the application of brute force. Political theorists typically focus on the concept of legitimacy when they evoke the quality that transforms the raw power of a strong actor into something more acceptable to a relatively weaker one. Only when it is operative, we might even say, is the term leadership really appropriate. The authority relationship thereby invoked ultimately entails a fundamental respect...

  9. INDEX
    (pp. 209-216)