Barry Eichengreen 229operations in that currency. Thus a country running payments surpluses sufficiently
large to threaten the fund’s ability to supply its currency might face restrictions
on foreign customers’ ability to purchase its exports. But the scarce currency
clause had been drafted by the United States not with the principle of symmetry
in mind, but in order to deal with problems of immediate postwar adjustment—
specifically, the prospective dollar shortage. With the development of the Marshall
Plan, the dollar shortage never achieved the severity anticipated by the authors of
the scarce currency clause, and the provision was never invoked.
If the “Joint Statement by Experts on the Establishment of an International
Monetary Fund,” made public in April 1944, bore the imprint of the U.S.
delegation to Bretton Woods, to a surprising extent it also embodied important
elements of the British negotiating position. It is curious from the perspective
of hegemonic stability theory that a war-battered economy—Britain—heavily
dependent on the dominant economic power—America—for capital goods,
financial capital, and export markets was able to extract significant concessions
in the design of the international monetary system. Britain was ably represented
in the negotiations. But even more important, the United States also required
an international agreement and wished to secure it even while hostilities in
Europe prevented enemy nations from taking part in negotiations and minimized
the involvement of the allies on whose territory the war was fought. The United
States therefore had little opportunity to play off countries against one another
or to brand as renegades any that disputed the advisability of its design. As
the Western world’s second largest economy, Britain symbolized, if it did not
actually represent, the other nations of the world and was able to advance
their case more effectively than if they had attempted more actively to do so
themselves.
What conclusions regarding the applicability of hegemonic stability theory to
the genesis of international monetary systems follow from the evidence of these
three cases? In the two clearest instances of hegemony—the United Kingdom in
the second half of the nineteenth century and the United States following World
War II—the leading economic power significantly influenced the form of the
international monetary system, by example in the first instance and by negotiation
in the second. But the evidence also underscores the fact that the hegemon has
been incapable of dictating the form of the monetary system. In the first instance,
British example did nothing to prevent significant modifications in the form of
the gold standard adopted abroad. In the second, the exceptional dominance of
the U.S. economy was unable to eliminate the need to compromise with other
countries in the design of the monetary system.
THE OPERATION OF MONETARY SYSTEMS
AND THE THEORY OF HEGEMONIC STABILITY
It is necessary to consider not only the genesis of monetary systems, but also how
the theory of hegemonic stability applies to the operation of such systems. I consider
adjustment, liquidity, and the lender-of-last-resort function in turn.