------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (September 2008)
David M. Andrews, editor, _Orderly Change: International Monetary
Relations since Bretton Woods_. Ithaca, NY: Cornell University Press,
2008. xii + 245 pp. $50 (cloth), ISBN: 978-0-8014-7399-9.
Reviewed for EH.NET by Lawrence H. Officer, Department of Economics,
University of Illinois at Chicago.
_Orderly Change_ (a wonderful title!) is edited by David M. Andrews,
Associate Professor of Politics and International Relations at Scripps
College. There are nine contributors, including the editor, but a total
of twelve chapters. Four of these chapters, plus an introduction, are
authored by Andrews. Of the other contributors, three are in the United
States, three in Canada, one in the United Kingdom, one in Spain. Looked
at in terms of academic field, six contributors are faculty members in
political science, government, or international relations, one is a
professor of law, and one is in a department of economics and business.
It should not be surprising that the volume has a heavily
political-science orientation. _Orderly Change_ will be of far greater
interest to the historian with a political-economy bent than to the
economic historian with a cliometric orientation.
Unlike many other collections of original essays, the editor not only
attempts to put all chapters within a common framework but also succeeds
in doing so. This framework is respected by all the contributors, who,
moreover, observe the practice of referring to one another?s essays. The
result is a well-integrated volume.
The framework has three components: the Bretton Woods order, the Bretton
Woods system, and orderly change. (Hereafter I will abbreviate Bretton
Woods as BW.) A ?system? in this context is the legal and organizational
framework underlying international monetary relations. Specifically, the
BW _system_ is the adjustable-peg system, which ended in 1973. As
Andrews (p. 4) writes: ?the instrumental commitment to
fixed-but-adjustable exchange rates (however elastically this
undertaking was interpreted) ... formed the heart of the Bretton Woods
system.?
While the switch to floating exchange rates on the part of most major
currencies in 1973 ended the BW system, the BW _order_ continued to
exist. The BW order is ?the broad vision of international economic
relations that inspired the Bretton Woods agreement? (p. 4). The BW
order incorporates two normative propositions: countries should have a
high degree of autonomy in national economic policy, and international
trade should be fostered so that it expands tremendously. To an
economist, of course, it is obvious that these two objectives can just
as well conflict as complement each other.
_Orderly change_ connotes ?changes in practice that were in keeping
with, and in fact promoted adherence to, the underlying principles of
the postwar economic order? (p. 5). Orderly change occurred both during
the BW system, as the system adjusted to changing circumstances, and
after the BW system ended, as flexible exchange rates provided other
mechanisms to foster the BW order.
The entire volume can be described as a diplomatic, institutional, and
personnel history against the economics background. In fact, the volume
can be viewed as a continuation of Richard N. Gardner?s classic work
_Sterling-Dollar Diplomacy_ (Oxford University Press: first edition
1958, second edition 1969). The Andrews book is a nice take on
international monetary history from the end of World War II to the turn
of the twenty-first century. A history of policy and of economic thought
is an additional characteristic of the book. In this context, many of
the contributors deserve praise for adroit use of archival evidence.
Detracting from the otherwise well-integrated nature of the volume is
lack of a common list of references or even chapter lists of references;
all references are in the form of footnotes. Also, the book contains
relatively little economic analysis as such. Much more attention is
devoted to the economic thought of actors. Extremely disappointing in an
otherwise impressive volume is the lack of quantitative techniques or
even quantitative information or reference to econometric or empirical
studies. Another defect is that nothing is written about trade in energy
(oil, OPEC, natural-gas pipelines, ?oil politics?) and no reference to
an ?absorption? interpretation of the U.S. payments deficit (the United
States consuming, broadly defined, more than it produces).
I continue this review by making brief comments about each chapter. In
an essay on ?Bretton Woods, System and Order,? Andrews outlines three
major subsystems of the BW system: the Treasury system (1945-1947),
involving tough terms imposed by the United States for extending
official credit; the Marshall system (1947-1958), reflecting
exchange-rate realignments and positive U.S. support for its Allies; and
the Kennedy system (1960-1971), characterized by exchange-rate stability
and defense of the gold value of the dollar. There is the paradox of
?turbulent transitions? between these ?stable systems.? Andrews also
considers the argument that the current international monetary system is
analogous to the BW system, with East Asia, especially China, taking the
place of Western Europe. The firm (albeit changing) organization of
international monetary affairs in the postwar period, which
characterized the BW system in general, was in contrast to the ad hoc
and fragile nature of the trading (GATT) system.
In another impressive essay, Andrews examines ?Trade and Money in the
Roosevelt Administration,? on the way to the BW Agreement. My one issue
with Andrews concerns his view that the International Trade Organization
treaty failed in Congress because of concessions to the British. Andrews
does not explain why the United States had to make concessions on trade
to the British -- given the disparity in relative power of the two
countries. After all, White?s views greatly dominated those of Keynes in
establishing the International Monetary Fund.
In a later chapter, Andrews explores the origins of the Kennedy system.
He prefers that terminology rather than the conventional term ?heyday of
Bretton Woods.? His analysis makes no reference to the analytical work
of this reviewer and Thomas D. Willett on foreign demand for dollars and
this reviewer?s subsequent econometric study of reserve-asset
preferences in the ?crisis zone? (see references in Lawrence H. Officer,
_Pricing Theory, Financing of International Organisations and Monetary
History_, Routledge, 2007, p. 307).
Perhaps the most intriguing contribution is that of Anastasia Xenias on
?Wartime Financial Diplomacy and the Transition to the Treasury System.?
She concentrates on the U.S. tough financial stance. Very persuasively,
she shows that U.S. policy aimed as much at reducing the economic
strength of the British Empire as at influencing the international
policy of the Soviet Union. The reader is left with an unanswered
question: If the United States had been gentler in terms for lending to
the USSR, could the Cold War have been avoided?
Jeffrey M. Chwieroth examines the roles of the IMF and World Bank during
the Treasury and Marshall systems. New to monetary historians is his
finding that ?it was the IBRD that provided critical balance-of-payments
loans that helped bridge the financing gap in Western Europe prior to
the provision of Marshall Plan aid? (p. 53). Eric Helleiner treats
Canada?s floating rate of 1950-1962. As is common to many chapters, his
viewpoint is a history of policy and of economic thought of
policy-makers -- as well as of private policy-interested groups
(bankers). The Canadian experience is viewed as a forerunner of the
generalized, albeit managed, floating that would occur in the 1970s.
However, the experience is clearly contrary to the movement of
exchange-rate regimes in the opposite direction that also was to occur,
especially formation of the euro area.
The Kennedy Round and other U.S. policies to solve the U.S. payments
imbalance are analyzed by Lucia Coppolaro, who concludes: ?The Kennedy
Round liberalized world trade, but U.S. plans to increase the U.S. trade
surplus were frustrated? (p. 138). In a provocative essay, Wesley W.
Widmaier examines U.S. incomes policies in the context of its commitment
to fixed exchange rates during 1953-1974. The chapter incorporates a
nice history of economic thought, including the views of John Maynard
Keynes. The economist in me would have liked the author also to state
the case against incomes policies (creation of suppressed inflationary
forces, inefficient pattern of relative prices, etc.).
Hubert Zimmerman studies West German monetary policy in the context of
the transition to flexible exchange rates, over 1969-1973. He
concentrates on the domestic, political aspects of exchange-rate policy.
E. Richard Gold provides a chapter on the legal foundations of the U.S.
dollar in 1933-34 and 1971-78. The chapter is disappointing. The author
claims to explore the relationship between private law and individual
beliefs and behavior toward money (in context of the dollar and its
value in terms of, and exchangeability for, gold), but fails to do so
adequately.
Luis W. Pauly focuses on the evolution of IMF surveillance, which began
in 1973. In perhaps the most perceptive comment in the book, he cuts to
the chase as follows: ?Under the surface, however, they [U.S.-France
negotiations] were about what international monetary struggles are
always about -- power and differing perceptions of fairness in the
distribution of adjustment burdens? (p. 198). In a similar vein, he
writes: ?In a world of states, markets channel national power? (p. 202).
So true!!
In the concluding chapter, Andrews, quite appropriately, pays homage to
Richard Gardner?s ?magisterial study of the Anglo-American negotiations
for the economic framework of the postwar world? (p. 211). He then
observes that: ?Trade liberalization actually flourished once the
fixed-rate element of the Bretton Woods system was abandoned, and the
underlying economic order established at Bretton Woods -- composed of
dual commitments to trade liberalization and national economic autonomy
-- endured? (p. 214). However, even while acknowledging that world
trading order has widened and deepened, he is concerned that further
?orderly change? may be difficult to achieve. Reasons include the
?Orwellian features? of Russia and China, the euro rivaling the dollar,
the danger of regional economic blocs (each with its own system and
order?), and the danger that ?monetary relations are unlikely to play
the same supportive role with respect to trade liberalization in the
future that they have in the past? (p. 215).
All in all, _Orderly Change_ is a most impressive integrated collection
of essays. One wishes there were more economics, more quantitative
analysis (the entire volume contains only two tables and three figures),
and at least some quantitative empirical evidence to support the
analysis -- but the volume is what it is. And, for what it is, the
volume makes a clear contribution to knowledge.
Lawrence H. Officer is Professor of Economics at the University of
Illinois at Chicago. He is co-founder and Director of Research at
MeasuringWorth.com, and also a strong supporter of EH.NET. His most
recent books are _Between the Dollar-Sterling Gold Points: Exchange
Rates, Parities and Market Behavior, 1791-1931_ (Cambridge University
Press, paperback reissue 2007) and _Pricing Theory, Financing of
International Organisations and Monetary History_ (Routledge, 2007).
Officer?s next book will be _Two Centuries of Compensation for U.S.
Production Workers in Manufacturing_ (Palgrave Macmillan, 2009).
Copyright (c) 2008 by EH.Net. All rights reserved. This work may be
copied for non-profit educational uses if proper credit is given to the
author and the list. For other permission, please contact the EH.Net
Administrator (administrator at eh.net; Telephone: 513-529-2229). Published
by EH.Net (September 2008). All EH.Net reviews are archived at
http://www.eh.net/BookReview.
-------------- FOOTER TO EH.NET BOOK REVIEW --------------
EH.Net-Review mailing list
EH.Net-Review at eh.net
http://eh.net/mailman/listinfo/eh.net-review
|