International Monetary Power

4. Below the State: Micro-Level Monetary Power

The study of international monetary relations, whether conducted by economists or political scientists, has typically focused on the macro-level and especially on issues related to balance-of-payments disequilibria between states, as the preceding chapter suggests. These matters are unquestionably important. But the study of international monetary power must go well beyond this to consider a variety of phenomena at the micro-level—that is, issues that concern actors below the level of the state. As David Andrews puts it (chap. 1 in this volume), monetary relations can result in a “rearticulation” of these actors’ interests and a “reconstruction” of their identities. Elsewhere I have argued that such transformations are significant in themselves;1 but they can also influence power relations between states—the subject of this book. They therefore demand the close attention of even those scholars not normally inclined to look “below the state.” This chapter has three purposes: to outline some of the micro-level mechanisms by which monetary power is or can be exercised, to introduce a case study that illustrates some of these mechanisms, and to reflect on what sort of theoretical framework might best elucidate the indirect and sometimes even unintentional avenues of influence that these mechanisms entail. In addressing these three areas of concern, I touch on some macro-level mechanisms whereby monetary power can be exercised , with remarks on the capacity of states to extract wealth from one another and to impose their macroeconomic preferences abroad. My focus, however, is not on these matters but on micro-level aspects of monetary relations between states. I            Below the State: Micro-Level Monetary Power Eric Helleiner For their support, I am grateful to the Social Sciences and Humanities Research Council of Canada and the Canada Research Chair program. I also thank Jeffrey Chwieroth, Randy Germain, Joseph Jupille, Kathleen McNamara, Thomas Willett, and all the participants in this volume, particularly David Andrews , for their helpful comments. 1. Eric Helleiner, The Making of National Money: Territorial Currencies in Historical Perspective (Ithaca: Cornell University Press, 2003). 72 therefore draw attention to the means by which states are sometimes able to shape the institutions of financial regulation beyond their jurisdiction; the ways in which some states play a privileged role in international financial crisis management; and, more broadly, the capacity of international monetary relations to influence economic geography and even social identities. The theoretical discussion that I undertake concerns structural power, a concept addressed by a number of authors who have commented on international monetary affairs but especially by Susan Strange. The importance of examining structural power, I argue, is that it widens our sense of how monetary power is exercised and what it can accomplish. I therefore begin my remarks with a critical review and reconsideration of this literature. I then turn to its past applications to the study of international monetary relations and suggest how these might be expanded. I conclude with a look at informal dollarization outside the United States as a demonstration of the points that I am making. Structural Power and International Relations Theory What exactly is structural power? A number of leading thinkers who have written about international relations have made reference to the significance of structural forms of power, especially with reference to the international monetary realm.Three in particular bear mentioning. Benjamin Cohen was the first to discuss the concept in the context of international monetary relations, when in his 1977 seminal work Organizing the World’s Money he made a distinction between what he called “process power” and “structure power” in international monetary relations.2 In her various writings from the early 1980s onward, Susan Strange picked up this distinction between two kinds of monetary power, arguing that “structural power” was becoming more important than what she called “relational power.”3 The concept of structural power also made an appearance in Jonathan Kirshner’s important 1995 work Currency and Coercion, where he argued that dominant states derive both “overt” and “structural” power from the currency blocs they lead. He echoed Strange’s view of the importance of the latter, arguing that “the opportunity for structural benefits . . . is what motivates states to create monetary systems.”4 2. Benjamin Cohen, Organizing the World’s Money (New York: Basic Books, 1977), 53–77. 3. See especially Susan Strange, “Still an Extraordinary Power:America’s Role in a Global Monetary System,” in The Political Economy of International and Domestic Monetary Relations, ed. Raymond E. Lombra...