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International regimes, transactions, and change: embedded liberalism in the postwar economic order

Published online by Cambridge University Press:  22 May 2009

John Gerard Ruggie
I have benefited from the comments and suggestions of a large number of friends, colleagues, and fellow travelers, and am particularly indebted to the detailed written remarks of Catherine Gwin, Ernst Haas, Robert Keohane, Stephen Krasner, and Susan Strange, as well as to Albert Fishlow's constructive criticism at the Palm Springs conference. Research for this article was made possible by financial support from the Rockefeller Foundation and the Ira D. Wallach Chair of World Order Studies at Columbia University.


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The prevailing model of international economic regimes is strictly positivistic in its epistemological orientation and stresses the distribution of material power capabilities in its explanatory logic. It is inadequate to account for the current set of international economic regimes and for the differences between past and present regimes. The model elaborated here departs from the prevailing view in two respects, while adhering to it in a third. First, it argues that regimes comprise not simply what actors say and do, but also what they understand and find acceptable within an intersubjective framework of meaning. Second, it argues that in the economic realm such a framework of meaning cannot be deduced from the distribution of material power capabilities, but must be sought in the configuration of state-society relations that is characteristic of the regime-making states. Third, in incorporating these notions into our understanding of the formation and transformation of international economic regimes, the formulation self-consciously strives to remain at the systemic level and to avoid becoming reductionist in attributing cause and effect relations. The article can therefore argue that the prevailing view is deficient on its own terms and must be expanded and modified. Addressing the world of actual international economic regimes, the article argues that the pax Britannica and the pax Americana cannot be equated in any meaningful sense, and that the postwar regimes for money and trade live on notwithstanding premature announcements of their demise.

Copyright © The IO Foundation 1982


1 Young, Oran R., “International Regimes: Problems of Concept Formation,” World Politics, 32 (04 1980)Google Scholar; and Stephen D. Krasner's introduction to this volume.

2 This phrase is taken from Bruce Andrews's application of the linguistic metaphor to the study of foreign policy: The Language of State Action,” International Interactions 6 (11 1979)Google Scholar.

3 Cf. Chomsky, Noam, Current Issues in Linguistic Theory (The Hague: Mouton, 1964)Google Scholar, chap. 1.

4 These are derived from the standard Weberian distinction between Wert- and Zweckrational. Weber, Max, Economy and Society, ed. by Roth, Guenther and Wittich, Claus (Berkeley: University of California Press, 1978), pp. 2426Google Scholar.

5 Discussions of political authority often fuse the very meaning of the concept with one of its specific institutional manifestations, that expressed in super-subordinate relations. But, as demonstrated repeatedly in organization theory and recognized by Weber, authority rests on a form of legitimacy that ultimately can derive only from a community of interests. Chester Barnard has carried this line of reasoning the furthest: “Authority is another name for the willingness and capacity of individuals to submit to the necessities of cooperative systems.” The Functions of the Executive (Cambridge: Harvard University Press, 1968), p. 184Google Scholar. See also the important statement by Blau, Peter, “Critical Remarks on Weber's Theory of Authority,” American Political Science Review 57 (06 1963)Google Scholar. An illustration (though unintended) of how not to think of authority if the concept is to be at all useful in a discussion of international relations is provided by Eckstein, Harry, “Authority Patterns: A Structural Basis for Political Inquiry,” American Political Science Review 67 (12 1973)Google Scholar. More elaborate typologies of forms of authority relations in international regimes may be found in my papers, “International Responses to Technology: Concepts and Trends,” International Organization 29 (Summer 1975)Google Scholar, and “Changing Frameworks of International Collective Behavior: On the Complementarity of Contradictory Tendencies,” in Choucri, Nazli and Robinson, Thomas, eds., Forecasting in International Relations (San Francisco: W. H. Freeman, 1978)Google Scholar.

6 Theory of International Politics (Reading, Mass.: Addison-Wesley, 1979), p. 88Google Scholar.

7 The relevant literature is cited in Keohane, Robert O., “The Theory of Hegemonic Stability and Changes in International Economic Regimes, 1967–1977,” in Holsti, Ole et al. , eds., Change in the International System (Boulder, Col.: Westview Press, 1980)Google Scholar.

8 Nor should it be expected to. As Waltz makes clear, his is a theory intended to predict that certain conditioning and constraining forces will take effect within the international system as a whole depending upon variation in its structure, not to account for such “process-level” outcomes as international regimes. Some of the literature cited by Keohane attempts to do more than this, however, though Keohane himself reaches a conclusion that is not at variance with my own.

9 More accurately, it either assumes social purpose (as in Waltz, Theory of International Politics), or seeks to deduce it from state power (as in Krasner, , “State Power and the Structure of International Trade,”” World Politics 28 [04 1976])Google Scholar.

10 To my knowledge, the case of Dutch supremacy in the world economy has not been addressed in the “hegemonic stability” literature; but see Wallerstein, Immanuel, The Modern World System, vol. 2 (New York: Academic Press, 1980), chap. 2Google Scholar.

11 A brief description may be found in Dormael, Armand Van, Brettoh Woods: Birth of a Monetary System (London: Macmillan, 1978), chap. 1Google Scholar. The classic statement of how it actually worked remains Hirschman, Albert O., National Power and the Structure of Foreign Trade, expanded ed. (Berkeley: University of California Press, 1980)Google Scholar.

12 In this connection, see also Charles Lipson's chapter in this volume.

13 This is not to ignore the possibility that the same developments may have second-order consequences or long-term effects that pose stresses or even contradictions for international economic regimes, a problem which I take up in a later section.

14 The present formulation of this conclusion owes much to Albert Fishlow's commentary on an earlier version at the Palm Springs Conference, for which I am obliged to him.

15 The “hegemonic stability” school effectively demonstrates why this is so. See Keohane, “Theory of Hegemonic Stability.”

16 Boston: Beacon Press, 1944, p. 71. The historical claims are backed up in Polanyi et al., eds., Trade and Markets in the Early Empires (Glencoe, 111.: Free Press, 1957)Google Scholar.

17 Kindleberger, Charles P., The World in Depression, 1929–1939 (Berkeley: University of California Press, 1973), esp. chapsGoogle Scholar. 1 and 14.

18 The Rise of Free Trade in Western Europe, 1820–1875,” Journal of Economic History 35 (03 1975): 2055Google Scholar.

19 Ibid., p. 50.

20 Ibid., p. 51, italics added.

21 Polanyi describes the parallel movements, in the case of Great Britain, of the middle class into the political arena and the state out of the economic arena.

22 The Great Transformation, esp. chaps. 2 and 19–21.

23 Quoted in Dormael, Van, Bretton Woods, p. 41Google Scholar.

24 Quoted in ibid., p. 7.

25 Quoted in ibid., p. 32.

26 Unless otherwise noted, this paragraph is based on League of Nations [Ragnar Nurkse], International Currency Experience: Lessons of the Inter-War Period (League of Nations, Economic, Financial and Transit Department, 1944), chap. 4Google Scholar. (Hereafter referred to as Nurkse.)

27 Note, however, Bloomfield's cautionary remark: “While this picture is broadly accurate, the nature and role of private short-term capital movements before 1914 have usually been oversimplified and their degree of sensitivity to interest rates and exchange rates exaggerated. At the same time these movements have been endowed with a benign character that they did not always possess.” Bloomfield, Arthur I., “Short-Term Capital Movements Under the Pre-1914 Gold Standard,” Princeton Studies in International Finance 11 (1963), p. 34Google Scholar. Bloomfield presents a more complex and balanced picture, which, however, does not contradict the basic generalization.

28 Bloomfield, Arthur I., Monetary Policy Under the International Gold Standard (New York: Federal Reserve Bank of New York, 1959), p. 23Google Scholar. Bloomfield shows that central banks did attempt partially to “sterilize” the effects of gold flows.

29 Nurkse, , International Currency Experience, p. 213Google Scholar.

30 Ibid., p. 230.

31 Ibid., pp. 68–88.

32 For a good global overview of these policy shifts, see Briggs, Asa, “The World Economy: Interdependence and Planning,” in Mowat, C. L., ed., The New Cambridge Modern History, vol. 12 (Cambridge: Cambridge University Press, 1968)Google Scholar.

33 Skidelsky, Robert J. A., “Retreat from Leadership: The Evolution of British Economic Foreign Policy, 1870–1939,” in Rowland, Benjamin M., ed., Balance of Power or Hegemony: The Interwar Monetary System (New York: New York University Press, 1976), p. 163. CfGoogle Scholar.

34 Cleveland, Harold van B., “The International Monetary System in the Interwar Period,” in Rowland, , Balance of Power, p. 57Google Scholar, emphasis added. Note, in addition, that major primaryproducing countries, who may well have borne more than their share of the international adjustment process under the gold standard, by and large did not establish their own central banks until the 1930s–this includes Argentina, Canada, India, New Zealand, and Venezuela. The argument that the adjustment process worked disproportionately on primary–producing countries is made by Triffin, Robert, “National Central Banking and the International Economy,” in Metzler, Lloyd A. et al. , eds., International Monetary Policies (Washington, D.C.: Board of Governors of the Federal Reserve System, 1947)Google Scholar.

35 There is almost no end to the number of dislocating features of the post-World War I international economy that can be adduced as part of the explanation for its institutional failure. Kindleberger, The World in Depression, chap. 1, briefly recounts most of them.

36 Cleveland, , “International Monetary System,” p. 57Google Scholar.

37 “The deflationist's ideal came to be ‘a free economy under a strong government’; but while the phrase on government meant what it said, namely, emergency powers and suspension of public liberties, ‘free economy’ meant in practice the opposite of what it said:… while the inflationary governments condemned by Geneva subordinated the stability of the currency to stability of incomes and employment, the deflationary governments put in power by Geneva used no fewer interventions in order to subordinate the stability of incomes and employment to the stability of the currency.” Polanyi, , The Great Transformation, p. 233Google Scholar. For French skepticism concerning the “dogma of Geneva,” see Judith L. Kooker, “French Financial Diplomacy: The Interwar Years,” in Rowland, Balance of Power.

38 For summary descriptions of the major conferences, see Traynor, Dean E., International Monetary and Financial Conferences in the Interwar Period (Washington, D.C.: Catholic Universities Press of America, 1949)Google Scholar.

39 The most trenchant critique of the moral failure of the League remains that of Edward Carr, Hallett, The Twenty Years' Crisis, 1919–1939 (1939,1946; New York: Harper Torchbooks, 1964)Google Scholar.

40 For example, France decided in 1928 to accept only gold in settlement of the enormous surplus it was accruing; and in 1929 the U.S. “went off on a restrictive monetary frolic of its own'' even though it was in surplus” (Cleveland, “International Monetary System,” p. 6). Four years later, in his inaugural address, President Roosevelt proclaimed the primacy of domestic stabilization, as he did again a few months later when, on the eve of the World Economic Conference of 1933, he took the U.S. off gold.

41 International Currency Experience, p. 230. Note that Nurkse was speaking of “the great majority of countries.” Those who chose bilateralism as an instrument of economic warfare and imperialism were unlikely to be accommodated within any multilateral regime. However, mere state trading or even the participation of centrally planned economies, while posing special problems, were not seen to be insuperable obstacles to multilateralism; see Feis, Herbert, “The Conflict Over Trade Ideologies,” Foreign Affairs 25 (07 1947)Google Scholar, and Mikesell, Raymond F., “The Role of the International Monetary Agreements in a World of Planned Economies,” Journal of Political Economy 55 (12 1947)Google Scholar. I think it is fair to say, though, that reconciling the many variants and depths of state intervention would have been a difficult task in the best of times, which the 1930s of course weren't. We are justified, therefore, in “coding” the interwar period as “no hegemon, no agreement on purpose.”

42 Professor John H. Williams, vice-president of the Federal Reserve Bank of New York, was a leading spokesman for the New York financial community, which resented having lost control over international monetary affairs when authority shifted from the FRBNY to the U.S. Treasury under Secretary Morgenthau. Their plan, which had some support in Congress, called simply for a resurrection of the gold-exchange standard, with the dollar performing the role that sterling had played previously. They opposed the New Deal “gimmickry” of the White Plan, and of course they liked Keynes's Clearing Union even less. See Van Dormael, Bretton Woods, chap. 9.

43 In the case of Britain, the other major actor in the negotiations concerning postwar economic arrangements, opposition from the Left was based on the desire to systematize national economic planning, which would necessarily entail discriminatory instruments for foreign economic policy. Opposition from the Right stemmed from a commitment to imperial preferences and the imperial alternative to a universal economic order. Speaking for many moderates, Hubert Henderson was opposed because he doubted the viability of a “freely working economic system,” that is, of laissez-faire. “To attempt this would be not to learn from experience but to fly in its face. It would be to repeat the mistakes made last time in the name of avoiding them. It would be to invite the same failure, and the same disillusionment; the same economic chaos and the same shock to social and political stability; the same discredit for the international idea.” (Gardner, Richard N., Sterling-Dollar Diplomacy in Current Perspective [New York: Columbia University Press, 1980], chap. 1Google Scholar; the quotation is from a memorandum prepared by Henderson in December 1943, while serving in the British Treasury; reproduced in Gardner, p. 30.)

44 The following account draws heavily on Gardner's classic study, as supplemented by the greater detail on the monetary side presented in Van Dormael.

45 Maier, Charles S., “The Politics of Productivity: Foundations of American International Economic Policy After World War II,” International Organization 31 (Autumn 1977)Google Scholar, and Cox, Robert W., “Labor and Hegemony,” International Organization 31 (Summer 1977)Google Scholar.

46 Interesting in this regard is the role played by Leon Keyserling, appointed in 1949 as the first Keynesian on the Council of Economic Advisers, in helping to undermine the previous “economy-in-defense” policy by providing economic support for the proposed rearmament program contained in NSC-68 (Kaplan, Fred M., “Our Cold-War Policy, Circa '50,” New York Times Magazine, 18 05 1980)Google Scholar. Radicals have implied that “military Keynesianism” was the only kind of Keynesianism acceptable in the U.S. at that time (cf. Block, Fred L., The Origins of International Economic Disorder [Berkeley: University of California Press, 1977], pp. 102–8)Google Scholar. But this interpretation slights the substantial state involvement in the U.S. in the postwar years in infrastructural investment (interstate highways, for example), agricultural price supports, and even in social expenditures, well before the full impact of Keynesian thinking was felt on monetary and fiscal policy in the 1960s.

47 Paraphrased by Dormael, Van, Bretton Woods, p. 103Google Scholar.

48 Cooper, Richard N., “Prolegomena to the Choice of an International Monetary System,” International Organization 29 (Winter 1975), p. 85Google Scholar.

49 The provisions of the ITO Charter became internally so inconsistent that it is difficult to say just what sort of a regime it would have given rise to. See Diebold, William Jr, “The End of the ITO,” Princeton Essays in International Finance 16 (Princeton, N.J., 10 1952)Google Scholar.

50 The following account draws heavily on Gardner, Sterling-Dollar Diplomacy, and on Gerard, and Curzon, Victoria, “The Management of Trade Relations in the GATT,” in Shonfield, Andrew, ed., International Economic Relations of the Western World, 1959–1971, vol. I (London: Oxford University Press for the Royal Institute of International Affairs, 1976)Google Scholar.

51 Viner, Jacob, “Conflicts of Principle in Drafting a Trade Charter,” Foreign Affairs 25 (01 1947), p. 613Google Scholar.

52 In the spring of 1947, the U.S. delegation arrived in Geneva armed with congressional authorization for an overall tariff reduction to 50% of their 1945 levels (which, however, would still have left U.S. tariffs relatively high), in return for elimination of preferences. But, at the same time, the United States entered into preferential trade agreements with Cuba and the Philippines. Though mutual concessions on several important items were made in Geneva, in the end some 70% of existing British preferences remained intact (Gardner, Sterling-Dollar Diplomacy, chap. 17).

53 At the Palm Springs Conference, Peter Kenen argued that this is true more for trade than for money. He maintains that, with the exception of the particulars of the credit arrangement (and the future role of the dollar, which I take up below), the general outlines of Bretton Woods would not have differed appreciably had there not been an American hegemon present. This is so because the basic design rested on a widely shared consensus. However, in trade, Kenen suggests, it is unlikely that nondiscrimination would have been accepted as a guiding principle had it not been for American “muscle.” Keep in mind that even here the U.S. was forced to accept the indefinite continuation of all existing preferential trade agreements.

54 The third panel of the Bretton Woods triptych was the World Bank, which to some extent may also be said to reflect this conjunction of objectives. True, the grandiose concept of an international bank to engage in countercyclical lending and to help stabilize raw materials prices, which both White and Keynes had entertained at one point, was shelved due to opposition on both sides of the Atlantic. Nevertheless, for the first time, international public responsibility was acknowledged for the provision of investment capital, supplementing the market mechanism. For Secretary Morgenthau's strong views on this subject, see Gardner, , Sterling-Dollar Diplomacy, p. 76Google Scholar.

55 Of the 1954 total, 235 existed in Europe. Vries, Margaret G. De and Horsefield, J. Keith, The IMF, 1945–1965, vol. 2 (Washington, D.C.: International Monetary Fund, 1969), chap. 14Google Scholar.

56 Curzon, and Curzon, , “Management of Trade,” pp. 149–50Google Scholar.

57 A notable exception is Waltz, Kenneth N., “The Myth of National Interdependence,” in Kindleberger, Charles P., ed., The International Corporation (Cambridge: MIT Press, 1970)Google Scholar.However, Waltz considers the characteristics of an international division of labor at any given point in time to be a product solely of international polarity. And this, in turn, requires that he consider Great Britain in the 19th century to have been but one among several coequal members of a plural system. He concludes that the international division of labor in the present era has been less extensive in kind and degree than in the pre-World War I setting because o/bipolarity today and multipolarity then.

58 Ricardo, David, Works, ed. by Sraffa, Piero (Cambridge: Cambridge University Press, 1955), 1:13334Google Scholar.

59 The facts are well enough known, but not enough is made of them. For example, I find that much of what I have to say is implied in if not anticipated by the locus classicus of liberal interdependence theorists: Cooper, Richard N., The Economics of Interdependence (1968; New York: Columbia University Press, 1980)Google Scholar. However, Cooper was concerned with telling a different story, so he chose not to take up issues and conclusions that, from the present vantage point, appear more scintillating. To cite but one illustration, Cooper demonstrates a converging cost structure among the industrialized countries. His major concern is to argue that this contributes to the increasing marginal price sensitivity of rapidly growing foreign trade–that is, to interdependence as he defines the term. In passing, he mentions another implication of this convergence, but one “which will not much concern us here.” It is “that international trade becomes less valuable from the viewpoint of increasing economic welfare” (pp. 75–76). This striking departure from the textbook case for free trade, amidst an explosion in world trade, is left unexplored.

60 Blackhurst, Richard, Marian, Nicolas, and Tumlir, Jan, “Trade Liberalization, Protectionism and Interdependence,” GATT Studies in International Trade 5 (11 1977), pp. 1819Google Scholar.

61 Ibid., pp. 10–11, 15–16; and Charles Lipson's article in this volume.

62 Richard Cooper has traced this back to 1938, and finds that ten of thirteen manufacturing sectors show declines in variation among countries, and none shows a sharp increase. Cooper, , Economics of Interdependence, pp. 7478Google Scholar. In a further refinement, Blackhurst, Marian, and Tumlir, “Trade Liberalization,” add that the proportion of imports and exports consisting of intermediate manufactured goods, as opposed to goods destined for final use, is rising rapidly, particularly in the category of engineering products. This reflects, among other things, “the growth in intra-branch specialization, foreign processing and sub-contracting” (pp. 15–16).

63 Helleiner, Gerald K., “Transnational Corporations and Trade Structure: The Role of Intra-Firm Trade,” in Giersch, Herbert, ed., Intra-industry Trade (Tubingen: J. C. B. Mohr, Paul Siebeck, 1979)Google Scholar.

64 For a historical overview, see Dunning, John H., Studies in International Investments (London: Allen & Unwin, 1970)Google Scholar.

65 A recent survey may be found in Spero, Joan Edelman, The Failure of the Franklin National Bank (New York: Columbia University Press, 1980), chap. 2Google Scholar.

66 Economics of Interdependence, p. 68.

67 Ibid., p. 76. Cooper adds that both product differentiation and economies of scale may modify this conclusion, “but several of the countries under consideration have sufficiently large domestic markets to reap most benefits likely to flow from large scale production even without trade.”

68 Kenwood, A. G. and Lougheed, A. L., The Growth of the International Economy, 1820–1960 (London: Allen & Unwin, 1971), chap. 5Google Scholar.

69 For example, in 1913 Great Britain imported 87% of the raw materials it consumed (excluding coal), and virtually as much of its foodstuffs. Moreover, the share of primary products in world trade from 1876–1913 remained steady at about 62%, even though total world trade trebled. And right up to World War I, Germany, Great Britain's main industrial rival, remained a major source of supply of manufactured materials for Great Britain, including chemicals and dyestuffs. Kenwood and Lougheed, Growth of International Economy, chap. 5, and Briggs, , “World Economy,” p. 43Google Scholar.

70 During the fifty years preceding 1914, the Americas received 51% of British portfolio foreign investment (North America 34%, South America 17%); overall, some 69% of British portfolio foreign investment went into transportation, public utilities, and other public works; 12% into extractive industries; and only 4% into manufacturing. Simon, Matthew, “The Pattern of New British Portfolio Foreign Investment, 1865–1914,” in Hall, A. R., ed., The Export of Capital from Britain (London: Methuen, 1968), p. 23Google Scholar; cf. Cairncross, A. K., Home and Foreign Investment, 1870–1913 (Cambridge: Cambridge University Press, 1953)Google Scholar. A broader survey of the various forms of investment from all sources may be found in Kenwood and Lougheed, Growth of International Economy, chap. 2.

71 For trade, see ibid., chap. 5; for investment, Bloomfield, A. I., “Patterns of Fluctuations in International Investment Before 1914,” Princeton Studies in International Finance 21 (1968), esp. pp. 3540Google Scholar. Cooper, (Economics of Interdependence, pp. 151–52)Google Scholar, concerned to show that interdependence in the pre-1914 world economy “was something of an illusion,” argues that despite the freedom of capital to move, “it did not in fact move in sufficient volume even to erase differences in short-term interest rates.” (Emphasis added, to underscore his looking at the pre-1914 world through post-1960 lenses).

72 “The industrialization of Europe and the growth of its population created a steadily growing demand for raw materials and foodstuffs, much of which had to be imported. At the same time, important advances in technical knowledge, especially in transportation and communications, and the existence of underpopulated and land-rich countries in other continents provided the means whereby these demands could be met. The greater part of the foreign investment undertaken during the nineteenth century was concerned with promoting this international specialization between an industrial centre located in Europe (and, later, in the United States) and a periphery of primary producing countries.” Kenwood, and Lougheed, , Growth of International Economy, p. 48Google Scholar.

73 Cooper, , Economics of Interdependence, p. 152Google Scholar.

74 This is generally considered to be the driving force by liberal economists, as exemplified by Cooper, ibid.

75 Marxists have tended to stress this factor; see, for example, Palloix, Christian, “The SelfExpansion of Capital on a World Scale,” Review of Radical Political Economy 9 (Summer 1977)Google Scholar, which is drawn from his larger work, L'internationalisation du capital (Paris: Maspero, 1975)Google Scholar.

76 This is the realists' explanandum, as developed in Waltz, “Myth of National Interdependence,” though most realists, unlike Waltz, would characterize the distribution of power in the pre-1914 world political economy as having been hegemonic. Cf. Gilpin, Robert, U.S. Power and the Multinational Corporation (New York: Basic Books, 1975)Google Scholar.

77 See Polanyi's Great Transformation for one expression of this social-organicist position; for another, from a different location on the political spectrum, see Myrdal, Gunnar, Beyond the Welfare State (New Haven: Yale University Press, 1960)Google Scholar.

78 His article in this volume.

79 Blackhurst, , Marian, , and Tumlir, , “Trade Liberalization,” p. 11Google Scholar.

80 See Lipson's article in this volume, and the references he cites.

81 This is not to suggest that the trade regime has encountered no other difficulties. One of the more serious is surplus capacity, which shows that the apparent ease with which liberalization has been accommodated was also dependent upon unprecedented rates of economic growth.

82 Bairoch, Paul, The Economic Development of the Third World since 1900 (Berkeley: University of California Press, 1975)Google Scholar, chap. 5.

83 Dunning, International Investments, chap. 1. Governmental loans were largely confined to Continental Europe in the 19th century, and were small in comparison with private loans. Today, the situation is reversed in each respect.

84 A good discussion of the role of governments in triggering the expansion of these markets may be found in Strange, Susan, International Monetary Relations, vol. 2Google Scholar of Shonfield, ed., International Economic Relations of the Western World, esp. chap. 6. Strange's primary concern is to show how the Euromarkets transformed from “good servant” to “bad master,” by making difficult the conduct of domestic monetary policy and generally eroding national monetary sovereignty. The good servant role received rather more attention again in the mid to late 1970s, following the enormous payments imbalances produced by oil price increases. More on this general problem below.

85 Benjamin J. Cohen's article in this volume.

86 Robert Triffin, “Jamaica: ‘Major Revision’ or Fiasco,” in Bernstein, Edward M. et al. , “Reflections on Jamaica,” Princeton Essays in International Finance 115 (Princeton, N.J., 1976)Google Scholar, as cited in Cohen, Benjamin J., Organizing the World's Money (New York: Basic Books, 1977), chap. 4, fn. 24Google Scholar; and Graham, Thomas, “Revolution in Trade Politics,” Foreign Policy 36 (Fall 1979), p. 49Google Scholar.

87 Supporters of the hegemonic stability position speak of “burdens of leadership”; critics, of “exorbitant privileges.” The empirical referents are the same.

88 The differential impact on the two regimes is explained largely by the total asymmetry that prevailed in the monetary domain and the relatively more balanced configuration in trade. In the case of money, the U.S. possessed the fungible resources that everyone required, including some two-thirds of the world's monetary gold supply, which it acquired as an unbalanced creditor country before World War II. At the same time, the U.S. saw no situation in which it might become dependent upon the regime as a debtor. The case of trade is inherently somewhat more symmetrical, since the mutual granting of access to markets is the key resource. It is also a domain in which the domestic constraints within the United States differed little from domestic constraints elsewhere.

89 Harry Dexter White and his staff had complete control over the organization of meetings, scheduling of subjects, rules of procedure, and drafting of all official documentation including daily minutes and the Final Act. In addition, White headed the so-called special committee, which resolved ambiguities and elaborated operational details. According to Van Dormael, on whose account I draw here, this committee “prepared for inclusion in the Final Act a number of provisions that were never discussed nor even brought up” (Bretton Woods, pp. 202–3). Even senior members of the American delegation were not always fully aware of what White was up to; Dean Acheson, normally no slouch, expressed confusion, and what he suspected he didn't much care for (ibid., pp. 200–203). In any case, Van Dormael attributes several features of the Fund to these organizational and procedural manipulations, the most important of which was an equation that no one else became aware of until after the fact, between gold and the U.S. dollar. This was in clear violation of the Joint Statement of Principles. Keynes had rejected any special role for the dollar; he favored the monetization of an international unit of account, and he assumed a multiple-currency reserve system. But in the final analysis, the major consequence of White's maneuverings on this issue was simply to give de jure expression to what surely would have occurred de facto and have been sanctified by subsequent practice.

90 At the inaugural meeting of the Boards of Governors of the IMF and IBRD, held in Savannah, Georgia, the United States succeeded in having both institutions located in Washington, which could be expected to amplify day-to-day influence by Congress and the Administration, and in having the Executive Directors be full-time and highly paid officials, which was seen by the British as assuring greater Fund meddling in the affairs of members when they applied for assistance. They were not mistaken. In May 1947, the United States pushed through a meeting of the Executive Directors an “interpretation” of the Articles of Agreement, to the effect that the Fund could “challenge” the representations made by governments that a currency was presently needed for balance-of-payments purposes, and that the Fund had the authority to “postpone or reject the request, or accept it subject to conditions.…” (Reproduced in Horsefield, The IMF, 3: 227, emphasis added.) This interpretation was confirmed by decision of the Executive Directors in 1948. And thus was IMF conditionality born. In a further decision, taken in 1952, conditionality was elaborated to include “policies the member will pursue” to overcome payments deficits. (Ibid., 3: 228.) In the meantime, once the Marshall Plan went into effect, the United States secured further agreement that recipients of Marshall Plan aid could not also draw on the Fund. With the Europeans effectively excluded from the Fund, its only clients were developing countries. And it was during this period, on initiatives by the United States and in response to requests for assistance by developing countries, that the Fund developed its program of “stabilization” measures: exchange depreciation, domestic austerity measures, reduced public spending, rigid conditionality. Total drawings from the Fund dropped to zero in 1950, and did not exceed 1947 levels again until 1956. With respect to liquidity, the provisions of Bretton Woods were modest and proved inadequate. The European Reconstruction Program took care of Europe's needs. But the IMF repeatedly turned aside requests for new measures to increase its own capacity to supply liquidity, maintaining that the real need was for adjustment. The dollar exchange standard emerged as a “solution” to this problem. (Strange, , International Monetary Relations, pp. 9396Google Scholar; Block, Origins of International Economic Disorder, chap. 5; Cooper, Richard, “Prolegomena to the Choice,” p. 86Google Scholar; and Benjamin J. Cohen, in this volume.)

91 In essence, Triffin argued that if the United States corrected its balance of payments deficit, the result would be world deflation because gold production at $35 an ounce could not adequately supply world monetary reserves. But if the United States continued running a deficit, the result would be the collapse of the monetary standard because U.S. foreign liabilities would far exceed its ability to convert dollars into gold on demand. Triffin, Robert, Gold and the Dollar Crisis (New Haven: Yale University Press, 1960)Google Scholar, which was largely a reprint of two journal articles that appeared the year before.

92 Richard Cooper enumerates the pros and cons of these and related issues in “Prolegomena to the Choice,” esp. pp. 80–81.

93 Reported in The New York Times, 5 February 1980. In exploring the reasons for this change, the Times cites a “Washington wit” who “once said that the monetary fund had toppled more governments than Marx and Lenin combined.”

94 14 April 1978, as cited in Krauss, Melvyn B., The New Protectionism: The Welfare State in International Trade (New York: New York University Press, 1978), pp. xix–xxGoogle Scholar.

95 Ibid., p. 36.

96 Krasner, Stephen D., “The Tokyo Round: Particularistic Interests and Prospects for Stability in the Global Trading System,” International Studies Quarterly 23 (12 1979)Google Scholar.

97 Forexample, Article XII calls for quantitativerestrictions, but as time has passed import surcharges have usually been imposed. In an extremely peculiar “non-use” of Article XII, France imposed emergency measures against imports after the 1968 disturbances, while enjoying a strong reserve position and only fearing a potential balance-of-payments problem. France asked for “sympathy and understanding” from its partners in the GATT and got it. The exceptional circumstances were stressed all around, the danger of precedent was flagged, and the measures were approved and soon thereafter discontinued. The case shows, according to Curzon and Curzon, “the complicity which exists between governments when one of them is forced to take unpopular trade measures because it has a domestic problem on its hands” (“Management of Trade,” p. 222). Their characterization of the reaction of others as complicitous captures the very essence of an international regime.

98 Ibid., p. 225.

99 Krasner, , “Tokyo Round,” p. 507Google Scholar. Krasner examines sectoral crosspressures and finds roughly this pattern: little pressure for protectionism where there is high intrasectoral trade, and even less if the sector is highly internationalized; protectionist pressures from import-competing sectors, which, however, may be balanced off by countervailing pressure from export sectors; high protectionist pressure when import competition is largely asymmetrical (pp. 502–7). Lipson, elsewhere in this volume, relates protectionist pressures to the production characteristics of sectors and finds that "sectoral protectionism is most likely in standardized, basic industries, or those with high capital requirements. It is least likely in industries where R” (draft manuscript).

100 Two figures are pertinent here. First, the GATT estimated in the late 1970s that import restrictions already in place or seriously threatened would affect some 3%-5% of world trade–which its Director General took to represent a threat to “the whole fabric of postwar cooperation in international trade policy.” IMF Survey, 12 December 1977, p. 373. The second concerns the declining portion of world trade subject to MFN principles; here it must be pointed out that the overwhelming share of this decline is accounted for by customs unions and free trade areas, which, for better or for worse, have been sanctioned by the GATT. A more fundamental problem could emerge as a result of the Tokyo Round, insofar as the codes for government procurement, subsidies, and safeguards (if the last materializes) will apply only to signatories of each individual code. At this point, however, the long-term significance of this proviso remains unclear.

101 See the literature cited in Lipson's article in this volume.

102 Curzon and Curzon, “Management of Trade,” chap. 3.

103 The fit between hypothesis and real world obviously is not perfect, because factors other than those examined here are also at work in the evolution of the postwar regimes. Moreover, the notion of declining American hegemony itself is very imprecise and, indeed, easy to exaggerate. See, respectively, Keohane, “Theory of Hegemonic Stability,” and Susan Strange, “Still an Extraordinary Power: America's Role in a Global Monetary System” (unpublished ms., n.d.).

104 I am here generalizing from Fred Hirsch's brilliant dissection of the social functions of inflation: “The Ideological Underlay of Inflation,” in Hirsch, Fred and Goldthorpe, John H., eds., The Political Economy of Inflation (Cambridge: Harvard University Press, 1978), esp. p. 278Google Scholar.

105 Hollis, B. Chenery notes this exception in his otherwise optimistic outlook, “Restructuring the World Economy: Round II,” Foreign Affairs 59 (Summer 1981)Google Scholar.

106 Wallich, Henry C., “Why the Euromarket Needs Restraint,” Columbia Journal of World Business 14 (Fall 1979), p. 17Google Scholar. Wallich estimates that the Euromarkets are expanding at two to three times the rate of growth of the domestic markets of major countries (p. 23).

107 Hirsch and Goldthorpe, Political Economy of Inflation, especially the chapters by Hirsch; Goldthorpe, , “The Current Inflation: Towards a Sociological Account,” pp. 186214Google Scholar; and Maier, Charles S., “The Politics of Inflation in the Twentieth Century,” pp. 3772Google Scholar. The following discussion of the monetary regime draws heavily on Hirsch.

108 Ibid., p. 279.

109 Recent enthusiasm for simply discrediting Keynesian management and reverting to earlier monetary and fiscal “discipline” has begun to dampen under the weight of its apparent consequences. For example, in a postmortem of the 1981 summer riots across England, a junior member of the Tory government chose words that could have been taken directly from Polanyi: “This is what happens when you separate economic theory from social policy and pursue the one at the expense of the other.” (Cited by Broder, David S., “Britain Offers a Grim Reminder,” Manchester Guardian Weekly, 26 07 1981, p. 16.)Google Scholar