Benjamin J.Cohen 249prefer a return to uncoordinated pursuit of national self-interest. For others, however,
it suggests instead the value of consultation and exchanges of information to avoid
misunderstandings about transmission mechanisms and the size and sign of relevant
policy multipliers....
Where, then, does all this discussion come out? None of the five issues that
have been so thoroughly aired in the literature is unimportant; sceptics have been
right to raise and emphasize them. But neither do any of these qualifications appear
to deal a decisive blow to the underlying case for cooperation, which retains its
essential appeal. For this reason most analysts, myself among them, still remain
disposed to view policy cooperation, for all its imperfections, in much the same
light as virtue or motherhood—an inherently good thing. Net gains may be small;
motivations may get distorted; outcomes may not always fulfill expectations.
Nonetheless, despite all the risks the effort does seem justified....
- THE EBB AND FLOW OF POLICY COMMITMENTS
A problem remains, however. To be effective, the collective commitment to
cooperation must appear credible; and to be credible, that commitment must above
all be sustained. Individual governments may play the maverick on occasion (the
time-inconsistency problem); a little cheating at the margins is after all hardly
unexpected, or even unusual, in international relations. But the commitment of
the collectivity must be seen to be enduring: there can be no room for doubt
about the continuing relevance, the seriousness, of the process as such. Otherwise
incentives will indeed be distorted for state and non-state actors alike, and outcomes
could well turn out to be every bit as counterproductive as many analysts fear. As
Peter Kenen has warned, “Sporadic management may be worse than no management
at all.” Yet, as noted at the outset, that is precisely the pattern that policy coordination
has tended to display in practice. The history of international monetary cooperation
is one long lesson in the fickleness of policy fashion.
During the early inter-war period, for example, the central banks of the major
industrial nations publicly committed themselves to a cooperative attempt to restore
something like the pre-World War I gold standard, only to end up in the 1930s
energetically battling one another through futile rounds of competitive devaluations
and escalating capital controls. And similarly during the Bretton Woods era, early
efforts at cooperative institution-building and joint consultations ultimately
terminated in mutual recriminations and the demise of the par-value system. In
the middle 1970s, endeavours to revive some kind of rule-based exchange-rate
regime were overwhelmed by policy disagreements between the Carter
administration in the United States and its counterparts in Europe and Japan, leading
to a record depreciation of the U.S. dollar. At the turn of the decade renewed
attempts at joint stabilization were cut short by the go-it-alone policies of the new
Reagan administration, leading to the record appreciation of the dollar which, in
turn, set the stage for the Plaza Agreement of 1985. The broad picture of monetary
relations in the twentieth century is clearly one of considerable ebbs and flows in
the collective commitment to policy cooperation.