19913
The Domestic Politics of
International Monetary Order:
The Gold Standard
LAWRENCE BROZ
In the late nineteenth and early twentieth centuries, the world’s
principal economies were tied together by the classical gold
standard. The stability of this international monetary system
depended on the accommodating policies of the major financial
powers. Lawrence Broz argues that these policies, in turn, rested
on domestic societal foundations. He surveys the British, French,
and German experiences, showing the domestic coalitional bases
of support for their contributions to the operation of the gold
standard.An international monetary regime is a set of clearly defined principles, rules, and
conventions that regulate and harmonize the economic policies of member nations.
From the perspective of international political economy, such a regime is something
of an international public good. When a sufficient number of governments commit
credibly to a set of international monetary rules, the result is that goods, services,
and capital can flow across borders relatively unimpeded by currency concerns,
creating joint-welfare gains and promoting technical efficiency. From a perspective
of comparative politics, however, a smoothly functioning monetary regime is far
from a natural state of affairs. Adherence to a common set of monetary rules and
conventions requires a certain degree of macroeconomic-policy cooperation among
member governments, despite potentially vast differences in the domestic constraints
confronting policy makers. The overriding political obstacle in the way of establishing
and maintaining a multilateral commitment to a common set of exchange-rate rules
is that national politicians face heterogeneous domestic electorates and organized
constituencies, not homogenous global ones. According to this view, the paradox is
not the difficulty of designing a stable international monetary regime in a world of
opportunistic but like-minded national governments, but that such systems, composed
of an extremely diverse group of nation-states, have ever existed, let alone operated
relatively smoothly for extended periods of time.
The literature on international political economy offers several solutions. One
focuses on the existence of a dominant economic power in the world economy, a