Lawrence Broz 203international relations in which unilateral actions taken for domestic reasons generate
positive spillover effects for other nations.
This argument suggests that a stable international monetary order need not
require implicit or explicit agreement among member states about the characteristics
and requirements of membership; policy divergence and systemic stability are
not logically incompatible. Nor is it necessary that a hegemon exist to provide the
requisite stabilizing functions. While stability does seem to require the existence
of the equilibrating functions identified by Kindleberger, member states can have
divergent objectives if the international externalities of their national-policy choices
are strongly positive. International stability does not mean that all states adopt
identical policies, but policies that through their external effects largely complement
or offset one another.
This chapter, in short, addresses the paradox of how international public goods
are provided when countries are allowed to have different or conflicting policy
preferences. Just as a true application of collective-goods theory undermines the
hegemonic-stability thesis—privileged groups need not be limited to a single state—
so, too, does the logic of the positive-externalities framework. The logic that says
international economic stability results when countries with homogenous preferences
solve the free-rider problem is undone when heterogeneity of preferences is allowed
to enhance the probability of stability. In its place comes the logic of international
stability derived from the sum of the (positive) externalities produced by major
states advancing their uncommon, national interests.... [T]he systemic characteristic
of stability can be the consequence of the individual actions of major states, taken
for domestic political reasons. Thus international stability can arise even if national
preferences vary significantly and even if no dominant stabilizer sets out to produce
this result, if the externalities of individual state behavior are allowed to be positive
as well as negative.
The following section applies this logic to the archetypal case of international
monetary order: the era of the classical gold standard. The evidence supports two
main predictions. First, the degree to which individual nations accepted the principles
of the gold standard varied dramatically. These differences, in turn, are shown to
have resulted from the fact that members did not share the same political and
economic objectives—a function of distinct domestic socioeconomic conditions.
The comparative portion of this chapter is devoted to identifying the monetary
preferences of major states in the system—Great Britain, France, Germany after
unification—and linking these policy preferences to each nation’s unique social,
economic, and political structures. Second, the evidence conforms to the expectation
that the pursuit of national interests can have beneficial global spillovers; that
nations pushing their self-interests can have strongly positive externalities that
facilitate the production of international public goods. Here, the focus is on the
global effects of each nation’s policy choices. Overall the evidence supports the
dual claims that national (individual) as opposed to international (collective) interests
motivated state behavior during the era of the gold standard and that the global
result was a fixed exchange-rate regime that operated smoothly for several decades.
This chapter’s conclusion summarizes the findings and briefly extends the argument
to the Bretton Woods system and the European Monetary System.