《国际政治经济学》文献资料（Political Economy of Money and Finance：Monetary System and Exchange Rate）The Study of Money

Review Article The Study of Money By JONATHAN KIRSHNER* Benjamin J.Cohen.The Geograpby ofMoney.Ithaca,N.Y.:Cornell University Press,1998,229 pp. Susan Strange.Mad Money:When Markets Outgrow Governments.Ann Arbor: University of Michigan Press,1998,212 pp. MOTammaoi the study of international political economy(IPE).By contrast,for most of the past two centuries,money,as John Stuart Mill argued(and like a good baseball umpire),was only noticeable when it failed.This was cer- tainly the case during the dramatic expansion of the international econ- omy following the Second World War,and it was reflected in the concurrent development of the subdiscipline of IPE.The real economy -trade,especially liberalization,integration,and strategy-dominated the agenda,while monetary politics tended to pop up when its more se- vere pathologies-sterling crises,the collapse of Bretton Woods,the dol- lar cycle-threatened to disrupt the smooth functioning of world trade. At the dawn of the twenty-first century,however,these roles have re- versed.Money leads and the real economy must follow.From an eco- nomic perspective,this has an Alice-in-Wonderland quality to it: money,once the handmaiden of the modern economy,has become its mistress.For students of IPE,this presents a fundamental and profound question:in what way are politics affected by this change? Two excellent books,The Geograpby of Money,by Benjamin Cohen, and Mad Money,by Susan Strange,will frame,support,and serve as the point of departure for scholars addressing this vital question.The vol- umes,by two of the most accomplished and distinguished experts on I thank Rawi Abdelal,Eric Helleiner,Charles Kindleberger,Karl Mueller,two anonymous refer- ees,and the editors at World Politics for helpful comments and suggestions. World Politics 52 (April 2000),407-36

World Politics 52 (April 2000), 407–36 Review Article The Study of Money By JONATHAN KIRSHNER* Benjamin J. Cohen. The Geography of Money. Ithaca, N.Y.: Cornell University Press, 1998, 229 pp. Susan Strange. Mad Money: When Markets Outgrow Governments. Ann Arbor: University of Michigan Press, 1998, 212 pp. MONETARY phenomena now define the contours of the con￾temporary global economy. This is new, and it has transformed the study of international political economy (IPE). By contrast, for most of the past two centuries, money, as John Stuart Mill argued (and like a good baseball umpire), was only noticeable when it failed. This was cer￾tainly the case during the dramatic expansion of the international econ￾omy following the Second World War, and it was reflected in the concurrent development of the subdiscipline of IPE. The real economy —trade, especially liberalization, integration, and strategy—dominated the agenda, while monetary politics tended to pop up when its more se￾vere pathologies—sterling crises, the collapse of Bretton Woods, the dol￾lar cycle—threatened to disrupt the smooth functioning of world trade. At the dawn of the twenty-first century, however, these roles have re￾versed. Money leads and the real economy must follow. From an eco￾nomic perspective, this has an Alice-in-Wonderland quality to it: money, once the handmaiden of the modern economy, has become its mistress. For students of IPE, this presents a fundamental and profound question: in what way are politics affected by this change? Two excellent books, The Geography of Money, by Benjamin Cohen, and Mad Money, by Susan Strange, will frame, support, and serve as the point of departure for scholars addressing this vital question. The vol￾umes, by two of the most accomplished and distinguished experts on * I thank Rawi Abdelal, Eric Helleiner, Charles Kindleberger, Karl Mueller, two anonymous refer￾ees, and the editors at World Politics for helpful comments and suggestions

408 WORLD POLITICS the IPE of money,also establish landmarks around which competing schools of thought will organize.Cohen,the thoughtful liberal,trusts markets but understands that monetary phenomena have inescapably political consequences.Strange,the skeptical Keynesian,recognizes the indispensable power and efficiency of markets but sees a monetary order reeling from political conflict and ubiquitous market failure. From these distinct perspectives,each author provides a new roadmap for navigating the international political space transformed by the ascendance of money.They also remind us why so many of the great economists,including Ricardo,Marx,Marshall,Keynes,Schum- peter,Myrdal,and Hayek,dedicated much of their efforts to the study of monetary phenomena.Deceptively theoretical debates about money-its definition,management,and idiosyncrasies-are typically rooted in fundamental conceptions of politics and society. Ultimately,however,and perhaps necessarily,these books raise more questions than they answer.But they do suggest a direction for the most promising avenues of investigation-toward the study of the unique interconnections between the ideas,material interests,and in- stitutions associated with the management of money.Those relation- ships are profoundly consequential for politics and demand the renewed attention of contemporary scholars of international relations and political economy.Cohen,and more explicitly Strange,clearly ac- knowledge the importance of ideas in monetary affairs.Cohen reminds the reader that money derives its very value from shared social conven- tions,indeed,"has no meaning at all except with reference to the mu- tual confidence that makes its use possible"(p.11).Strange is even more pointed,asserting that the basic differences between competing economic theories are"not technical but political"(p.190). But while the role of ideas is an important implicit foundation of these volumes,neither takes on the issue in a systematic way,largely be- cause each has a dominant theme.These themes,refected in their re- spective titles,provide the nominal touchstone for their analyses.This article,therefore,proceeds in two parts.The first part considers Geog- rapby and Mad Money on their own terms,concentrating on the themes stressed by the authors.The second part of the article then explores what is left implicit by these volumes-the need for a renewed atten- tion to ideology and politics in explaining monetary phenomena. This latter part of the article first shows how ideas can play a unique role in shaping monetary phenomena.It then argues that this matters because those ideas can mask distributional conflicts.Fundamentally political struggles about money,that is,are routinely cloaked in eco-

the IPE of money, also establish landmarks around which competing schools of thought will organize. Cohen, the thoughtful liberal, trusts markets but understands that monetary phenomena have inescapably political consequences. Strange, the skeptical Keynesian, recognizes the indispensable power and efficiency of markets but sees a monetary order reeling from political conflict and ubiquitous market failure. From these distinct perspectives, each author provides a new roadmap for navigating the international political space transformed by the ascendance of money. They also remind us why so many of the great economists, including Ricardo, Marx, Marshall, Keynes, Schum￾peter, Myrdal, and Hayek, dedicated much of their efforts to the study of monetary phenomena. Deceptively theoretical debates about money—its definition, management, and idiosyncrasies—are typically rooted in fundamental conceptions of politics and society. Ultimately, however, and perhaps necessarily, these books raise more questions than they answer. But they do suggest a direction for the most promising avenues of investigation—toward the study of the unique interconnections between the ideas, material interests, and in￾stitutions associated with the management of money. Those relation￾ships are profoundly consequential for politics and demand the renewed attention of contemporary scholars of international relations and political economy. Cohen, and more explicitly Strange, clearly ac￾knowledge the importance of ideas in monetary affairs. Cohen reminds the reader that money derives its very value from shared social conven￾tions, indeed, “has no meaning at all except with reference to the mu￾tual confidence that makes its use possible” (p. 11). Strange is even more pointed, asserting that the basic differences between competing economic theories are “not technical but political” (p. 190). But while the role of ideas is an important implicit foundation of these volumes, neither takes on the issue in a systematic way, largely be￾cause each has a dominant theme. These themes, reflected in their re￾spective titles, provide the nominal touchstone for their analyses. This article, therefore, proceeds in two parts. The first part considers Geog￾raphy and Mad Money on their own terms, concentrating on the themes stressed by the authors. The second part of the article then explores what is left implicit by these volumes—the need for a renewed atten￾tion to ideology and politics in explaining monetary phenomena. This latter part of the article first shows how ideas can play a unique role in shaping monetary phenomena. It then argues that this matters because those ideas can mask distributional conflicts. Fundamentally political struggles about money, that is, are routinely cloaked in eco- 408 WORLD POLITICS

STUDY OF MONEY 409 nomic terms,often throwing students of politics off the scent.This dis- cussion then concludes with two illustrations of macroeconomic poli- cies-the pursuit of low inflation and the deregulation of capital flows-that have been shaped by ideas that are of greater political than economic consequence. THE NEW GEOGRAPHY As Cohen notes in his preface,he traces his interest in the geography of money to his first professional publication.Even more broadly,Geog- rapby can be seen as the most recent and arguably the culmination of a series of important books by Cohen,including The Future of Sterling as an International Currency,Organizing the World's Money,and In Whose Interest?International Banking and American Foreign Policy.Each of these books negotiated the terrain between economics and politics as it also explored crucial issues relating to international money and finance. Thus Geograpby breaks new ground while also tying together argu- ments and analytical themes that have characterized Cohen's writing throughout his career. Cohen's premise is straightforward.While the global financial revo- lution is often characterized as undermining state authority in general and national control over money in particular,"the geography of money is far more complex than we generally assume"(p.1).Cohen quickly establishes a clear thematic foil:the myth of one nation,one money, that is,the idea that within their own borders,states are their own monetary masters.This has never been true,he argues,and is less and decreasingly an approximation of reality now than at any other time in recent history.Cross-border currency competition is a fact of life and is continuously eroding the power of governments.And this matters,be- cause "international relations,political as well as economic,are being dramatically reshaped by the increasing interpenetration of national monetary spaces"(p.3). To comprehend the meaning of these changes,Cohen argues,we must understand the geography of money.The most important factor driving change in that geography is the shift in power from states to markets.This shift,however,is not a transformation from state su- premacy to decentralized globalization.Rather,it is a change in the na- Benjamin J.Cohen,"The Euro-Dollar,the Common Market,and Currency Unification,"Journal of Finance 17 (December 1963),esp.613-15.In this paper Cohen argued,among other things,that the existence of the euro-dollar market was an important reason why the members of the European Economic Community had not developed a common currency

nomic terms, often throwing students of politics off the scent. This dis￾cussion then concludes with two illustrations of macroeconomic poli￾cies—the pursuit of low inflation and the deregulation of capital flows—that have been shaped by ideas that are of greater political than economic consequence. THE NEW GEOGRAPHY As Cohen notes in his preface, he traces his interest in the geography of money to his first professional publication.1 Even more broadly, Geog￾raphy can be seen as the most recent and arguably the culmination of a series of important books by Cohen, including The Future of Sterling as an International Currency, Organizing the World’s Money, and In Whose Interest? International Banking and American Foreign Policy. Each of these books negotiated the terrain between economics and politics as it also explored crucial issues relating to international money and finance. Thus Geography breaks new ground while also tying together argu￾ments and analytical themes that have characterized Cohen’s writing throughout his career. Cohen’s premise is straightforward. While the global financial revo￾lution is often characterized as undermining state authority in general and national control over money in particular, “the geography of money is far more complex than we generally assume” (p. 1). Cohen quickly establishes a clear thematic foil: the myth of one nation, one money, that is, the idea that within their own borders, states are their own monetary masters. This has never been true, he argues, and is less and decreasingly an approximation of reality now than at any other time in recent history. Cross-border currency competition is a fact of life and is continuously eroding the power of governments. And this matters, be￾cause “international relations, political as well as economic, are being dramatically reshaped by the increasing interpenetration of national monetary spaces” (p. 3). To comprehend the meaning of these changes, Cohen argues, we must understand the geography of money. The most important factor driving change in that geography is the shift in power from states to markets. This shift, however, is not a transformation from state su￾premacy to decentralized globalization. Rather, it is a change in the na￾STUDY OF MONEY 409 1 Benjamin J. Cohen, “The Euro-Dollar, the Common Market, and Currency Unification,” Journal of Finance 17 (December 1963), esp. 613–15. In this paper Cohen argued, among other things, that the existence of the euro-dollar market was an important reason why the members of the European Economic Community had not developed a common currency

410 WORLD POLITICS ture of state power.While at one time states could be considered the monopoly producers of currency within their borders,they have now been reduced to(still powerful)oligopolists.They retain the capacity to shape the market but also find themselves constrained by competitors. With his foil,the one nation,one money myth,and his question,the political and economic consequences of increased interpenetration of international monetary spaces,Cohen proceeds with his argument sys- tematically and effectively.First,looking back,Geograpby explores the old-fashioned world of territorial money from a historical perspective. While there was always sovereign coinage,Cohen notes,the conceptu- alization of money in territorial terms did not come about until the nineteenth century.Before then foreign coins circulated with little con- cern for national boundaries.But leaders overseeing the consolidation of the nation-state in the nineteenth century used money as in instru- ment of state building,2 and the establishment of national money as “legal tender'”drove out foreign(currency）competition. In retrospect,then,the century from 1870 to 1970 was an atypical interlude in which states enjoyed a near monopoly in currency affairs. This monopoly gave states power vis-a-vis other societal actors in four ways.First,it provided a powerful political symbol,which is one reason why newly independent states today continue to establish distinct cur- rencies despite their reduced economic significance.Second is the op- portunity for seigniorage,which can be an important source of revenue for states and,importantly,the opportunity for which is inversely re- lated to the ability of subjects to substitute into another currency.States that control their money can also practice macroeconomic management by manipulating the money supply and the exchange rate-important policy tools,especially in the short run.Finally,by issuing their own currency,states gain power in a negative sense:they avoid dependence on some other source.For these reasons states continue to support the Westphalian conception of one nation,one money,even though today “it is no more than a myth”(p.46). Not only is the Westphalian conception of money a myth,but Cohen illustrates that it was an oversimplification even during its hey- day.While states had more control over their currencies from 1870 to 1970,they nevertheless routinely chose to abdicate some of that sover- eignty,in two ways-either by subordinating or by sharing their mon- etary sovereignty.States routinely subordinated their sovereignty, 2On this point,see Eric Helleiner,"Historicizing Territorial Currencies:Money Space and the Na- tion-State in North America,"Political Geograpby 18(March 1999)

ture of state power. While at one time states could be considered the monopoly producers of currency within their borders, they have now been reduced to (still powerful) oligopolists. They retain the capacity to shape the market but also find themselves constrained by competitors. With his foil, the one nation, one money myth, and his question, the political and economic consequences of increased interpenetration of international monetary spaces, Cohen proceeds with his argument sys￾tematically and effectively. First, looking back, Geography explores the old-fashioned world of territorial money from a historical perspective. While there was always sovereign coinage, Cohen notes, the conceptu￾alization of money in territorial terms did not come about until the nineteenth century. Before then foreign coins circulated with little con￾cern for national boundaries. But leaders overseeing the consolidation of the nation-state in the nineteenth century used money as in instru￾ment of state building,2 and the establishment of national money as “legal tender” drove out foreign (currency) competition. In retrospect, then, the century from 1870 to 1970 was an atypical interlude in which states enjoyed a near monopoly in currency affairs. This monopoly gave states power vis-à-vis other societal actors in four ways. First, it provided a powerful political symbol, which is one reason why newly independent states today continue to establish distinct cur￾rencies despite their reduced economic significance. Second is the op￾portunity for seigniorage, which can be an important source of revenue for states and, importantly, the opportunity for which is inversely re￾lated to the ability of subjects to substitute into another currency. States that control their money can also practice macroeconomic management by manipulating the money supply and the exchange rate—important policy tools, especially in the short run. Finally, by issuing their own currency, states gain power in a negative sense: they avoid dependence on some other source. For these reasons states continue to support the Westphalian conception of one nation, one money, even though today “it is no more than a myth” (p. 46). Not only is the Westphalian conception of money a myth, but Cohen illustrates that it was an oversimplification even during its hey￾day. While states had more control over their currencies from 1870 to 1970, they nevertheless routinely chose to abdicate some of that sover￾eignty, in two ways—either by subordinating or by sharing their mon￾etary sovereignty. States routinely subordinated their sovereignty, 410 WORLD POLITICS 2 On this point, see Eric Helleiner, “Historicizing Territorial Currencies: Money Space and the Na￾tion-State in North America,” Political Geography 18 (March 1999)

STUDY OF MONEY 411 choosing policies that range from wholesale abandonment through the adoption of a currency board to the more modest participation in a monetary bloc.States have also chosen to share their monetary sover- eignty by forming currency unions,trading some of the benefits of a monopoly over money in exchange for improved autonomy vis-a-vis the outside world,making more efficient use of money(in its classic economic roles)within the monetary union,and forming a broader po- litical symbol.While Cohen's account of these exceptions to the West- phalian myth are interesting in their own right,they are also of increased practical significance,as all states must now weigh their op- tions in the face of reduced monetary sovereignty. Cohen next offers a rich empirical examination that provides the bridge between the first half of the book,which sets out the argument, and the following three chapters,which explore its implications.Look- ing at the contemporary global economy,he attempts to assess the ex- tent of currency internationalization and currency substitution, providing support for the assertion that one nation,one money is a myth."The picture that emerges from this survey is one of intense competition as well as distinct hierarchy among the world's many cur- rencies"(p.93).Cohen then considers this hierarchy and introduces a new typology,the"Currency Pyramid,"to classify the role of different currencies and to help visualize a new landscape in which most curren- cies face rivals but few are used internationally.Featuring seven cate- gories,ranging from top and patrician currencies all the way down to quasi and pseudo currencies,this typology can be seen as an effort to update Strange's classic descriptions of thirty years ago.3 Having established his empirical claim and sketched the new geog- raphy of money,Cohen offers three chapters that consider the political implications of the new world:these are the core of what will be the book's most lasting contributions.The first,"A New Structure of Power,"revisits the four elements of power-symbolism,seigniorage, management,and insulation-that states derived from issuing currency during the Westphalian era.He asks,"What happens to structures of power when currencies are no longer territorial?"(p.119).Two themes dictate what is new for each of the four elements.First,the changes will be defined by the new relationships between state and market,not be- tween states.States that are sensitive to market sentiment will be able to retain aspects of the four elements.Second,while all states will find themselves increasingly constrained by the market,those at the bottom Susan Strange,"The Politics of International Currencies,"World Politics 23(January 1971)

choosing policies that range from wholesale abandonment through the adoption of a currency board to the more modest participation in a monetary bloc. States have also chosen to share their monetary sover￾eignty by forming currency unions, trading some of the benefits of a monopoly over money in exchange for improved autonomy vis-à-vis the outside world, making more efficient use of money (in its classic economic roles) within the monetary union, and forming a broader po￾litical symbol. While Cohen’s account of these exceptions to the West￾phalian myth are interesting in their own right, they are also of increased practical significance, as all states must now weigh their op￾tions in the face of reduced monetary sovereignty. Cohen next offers a rich empirical examination that provides the bridge between the first half of the book, which sets out the argument, and the following three chapters, which explore its implications. Look￾ing at the contemporary global economy, he attempts to assess the ex￾tent of currency internationalization and currency substitution, providing support for the assertion that one nation, one money is a myth. “The picture that emerges from this survey is one of intense competition as well as distinct hierarchy among the world’s many cur￾rencies” (p. 93). Cohen then considers this hierarchy and introduces a new typology, the “Currency Pyramid,” to classify the role of different currencies and to help visualize a new landscape in which most curren￾cies face rivals but few are used internationally. Featuring seven cate￾gories, ranging from top and patrician currencies all the way down to quasi and pseudo currencies, this typology can be seen as an effort to update Strange’s classic descriptions of thirty years ago.3 Having established his empirical claim and sketched the new geog￾raphy of money, Cohen offers three chapters that consider the political implications of the new world: these are the core of what will be the book’s most lasting contributions. The first, “A New Structure of Power,” revisits the four elements of power—symbolism, seigniorage, management, and insulation—that states derived from issuing currency during the Westphalian era. He asks, “What happens to structures of power when currencies are no longer territorial?” (p. 119). Two themes dictate what is new for each of the four elements. First, the changes will be defined by the new relationships between state and market, not be￾tween states. States that are sensitive to market sentiment will be able to retain aspects of the four elements. Second, while all states will find themselves increasingly constrained by the market, those at the bottom STUDY OF MONEY 411 3 Susan Strange, “The Politics of International Currencies,” World Politics 23 ( January 1971)

412 WORLD POLITICS of the pyramid will have fewer options than those at the top.Thus, states will be able to retain the political symbolism to be derived from issuing their own currencies,so long as they manage those issues in an appropriate fashion.Indeed good management,yielding a"strong cur- rency,"can"enhance a government's reputation"(p.121).Similarly,the prospects for macroeconomic management will depend increasingly on "how official policies interact with market preferences"(p.125).With regard to seigniorage and insulation,the emphasis is on asymmetry: those at the top of the pyramid will find their positions enhanced(so long as they do not drift too far from market preferences),while those at the bottom will lose out.The biggest changes,however,as Cohen re- minds us,are not about the differences between states but rather con- cern the fact that governments in general will have less power in relation to other social actors than they had in the distant past.The big winners politically are those private social actors who can choose their preferred transaction network. Chapter 7,"Governance Transformed,"considers this very question: the role of the state,especially vis-a-vis private actors,in the new mon- etary landscape.Here Cohen attempts to seize the middle ground. While states are weaker than they once were,they are surely not pow- erless.His main point is that"the shift in the structure of power gener- ated by cross-border currency competition has not so much diminished as transformed the role of the state in money's newly deterritorialized geography.Governance is now uneasily shared between the public and private sectors"(p.131).Privileged elements in the private sector now have an easier exit option,and governments are under pressure not to provoke such exit.But Cohen argues that this is only part of the pic- ture,because it restricts itself to the demand side of the equation.Gov- ernments,as the providers of currency,represent the vital supply side,a role that has not been eliminated by the transformation.Rather,gov- ernments have been transformed from monopolists to oligopolists. "States,once largely supreme in their own territories,have now become something like competing firms in an oligopolistic industry"(p.138). And as oligopolists,governments can act to preserve and promote the market share for their products.Governance,once provided by states, is now in the hands of the market forces that shape the strategies states must pursue in the context of their oligopolistic competition. Cohen the liberal economist has confidence in the efficiency of mar- ket governance,but Cohen the political scientist raises grave doubts about two aspects of the new geography of money.First,there is the problem of equity:some actors will get much more voice in the new

of the pyramid will have fewer options than those at the top. Thus, states will be able to retain the political symbolism to be derived from issuing their own currencies, so long as they manage those issues in an appropriate fashion. Indeed good management, yielding a “strong cur￾rency,” can “enhance a government’s reputation” (p. 121). Similarly, the prospects for macroeconomic management will depend increasingly on “how official policies interact with market preferences” (p. 125). With regard to seigniorage and insulation, the emphasis is on asymmetry: those at the top of the pyramid will find their positions enhanced (so long as they do not drift too far from market preferences), while those at the bottom will lose out. The biggest changes, however, as Cohen re￾minds us, are not about the differences between states but rather con￾cern the fact that governments in general will have less power in relation to other social actors than they had in the distant past. The big winners politically are those private social actors who can choose their preferred transaction network. Chapter 7, “Governance Transformed,” considers this very question: the role of the state, especially vis-à-vis private actors, in the new mon￾etary landscape. Here Cohen attempts to seize the middle ground. While states are weaker than they once were, they are surely not pow￾erless. His main point is that “the shift in the structure of power gener￾ated by cross-border currency competition has not so much diminished as transformed the role of the state in money’s newly deterritorialized geography. Governance is now uneasily shared between the public and private sectors” (p. 131). Privileged elements in the private sector now have an easier exit option, and governments are under pressure not to provoke such exit. But Cohen argues that this is only part of the pic￾ture, because it restricts itself to the demand side of the equation. Gov￾ernments, as the providers of currency, represent the vital supply side, a role that has not been eliminated by the transformation. Rather, gov￾ernments have been transformed from monopolists to oligopolists. “States, once largely supreme in their own territories, have now become something like competing firms in an oligopolistic industry” (p. 138). And as oligopolists, governments can act to preserve and promote the market share for their products. Governance, once provided by states, is now in the hands of the market forces that shape the strategies states must pursue in the context of their oligopolistic competition. Cohen the liberal economist has confidence in the efficiency of mar￾ket governance, but Cohen the political scientist raises grave doubts about two aspects of the new geography of money. First, there is the problem of equity: some actors will get much more voice in the new 412 WORLD POLITICS

STUDY OF MONEY 413 system,in particular,the wealthiest segments of society.Second,there is a crisis of accountability:however much politicians may be objects of scorn,at the very least they could be held accountable for their actions. Market forces,by contrast,"are neither elected nor politically account- able”(p.148). These crucial questions of equity and accountability are not,how- ever,the focus of the final chapter,"Can Public Policy Cope."For this reason,of the three grand chapters that close this book,this one is dis- appointing in that it does not fulfill the agenda raised by what came be- fore it.Cohen asserts,accurately,that there are"no easy solutions."The bottom line ultimately is that "governments must learn how to manage their oligopolistic rivalry,not make futile attempts to evade or suppress it"(p.151).Cohen then shifts gears and provides an overview of the new monetary landscape,emphasizing that neither a reassertion of state power nor a complete denationalization of money is likely to occur.Rather,exploring each level of the currency pyramid,including the euro,the yen,and the bottom dwellers,he concludes that the world is likely to continue to look pretty much the way it does now:with the gentle erosion of the still dominant dollar tempered increasingly not by competition from the euro or the yen but by the power of markets. CAN THE MIDDLE HOLD? Cohen's treatment of money,though politically sensitive and sophisti- cated,nevertheless represents the economistic pillar of the IPE main- stream.For this branch of the subfield,and especially with regard to the study of money,the use of market metaphors and the assumption of market efficiency must be carefully scrutinized. The use of economic metaphor is one of Cohen's key contributions. Between Westphalia and globalization,he argues,there is a middle ground of oligopoly-an attractive and novel conceptualization that would appear to strike a clear middle ground between two opposing schools.Issuers of currency can easily be cast as traditional oligopolists. +Cohen notes,for example,that the extent to which the yen is used as an international currency is essentially a policy choice and that both the Europeans and the Japanese manage their currencies with an eye toward avoiding confrontation with the United States(pp.161,164).He also assesses monetary geography in its most basic form,sustaining monetary alliances,and finds that economic theory,such as the theory of optimal currency areas,has little explanatory power.Rather,political factors such as power and ideology explain which monetary unions succeed and which fail (pp.82,84-85,87,91). See also the cases discussed in Cohen,"Beyond EMU:The Problem of Sustainability,"Economics and Politics 5(July 1993).He also traces the drive for EMU to political motives,but it should be noted that he reviewed the convergence criteria without a discussion of their possible distributional implications (Geograpby of Money,74,77)

system, in particular, the wealthiest segments of society. Second, there is a crisis of accountability: however much politicians may be objects of scorn, at the very least they could be held accountable for their actions. Market forces, by contrast, “are neither elected nor politically account￾able” (p. 148). These crucial questions of equity and accountability are not, how￾ever, the focus of the final chapter, “Can Public Policy Cope.” For this reason, of the three grand chapters that close this book, this one is dis￾appointing in that it does not fulfill the agenda raised by what came be￾fore it. Cohen asserts, accurately, that there are “no easy solutions.” The bottom line ultimately is that “governments must learn how to manage their oligopolistic rivalry, not make futile attempts to evade or suppress it” (p. 151). Cohen then shifts gears and provides an overview of the new monetary landscape, emphasizing that neither a reassertion of state power nor a complete denationalization of money is likely to occur. Rather, exploring each level of the currency pyramid, including the euro, the yen, and the bottom dwellers, he concludes that the world is likely to continue to look pretty much the way it does now: with the gentle erosion of the still dominant dollar tempered increasingly not by competition from the euro or the yen but by the power of markets. CAN THE MIDDLE HOLD? Cohen’s treatment of money, though politically sensitive and sophisti￾cated,4 nevertheless represents the economistic pillar of the IPE main￾stream. For this branch of the subfield, and especially with regard to the study of money, the use of market metaphors and the assumption of market efficiency must be carefully scrutinized. The use of economic metaphor is one of Cohen’s key contributions. Between Westphalia and globalization, he argues, there is a middle ground of oligopoly—an attractive and novel conceptualization that would appear to strike a clear middle ground between two opposing schools. Issuers of currency can easily be cast as traditional oligopolists. STUDY OF MONEY 413 4 Cohen notes, for example, that the extent to which the yen is used as an international currency is essentially a policy choice and that both the Europeans and the Japanese manage their currencies with an eye toward avoiding confrontation with the United States (pp. 161, 164). He also assesses monetary geography in its most basic form, sustaining monetary alliances, and finds that economic theory, such as the theory of optimal currency areas, has little explanatory power. Rather, political factors such as power and ideology explain which monetary unions succeed and which fail (pp. 82, 84–85, 87, 91). See also the cases discussed in Cohen, “Beyond EMU: The Problem of Sustainability,” Economics and Politics 5 ( July 1993). He also traces the drive for EMU to political motives, but it should be noted that he reviewed the convergence criteria without a discussion of their possible distributional implications (Geography of Money, 74, 77)

414 WORLD POLITICS Operating as they do in a world of interdependence and uncertainty, they must focus on promoting their brand name and assuring the mar- ket share for their product. But are the dollar,yen,and euro like Boeing,Coke,and Kodak?In at least one crucial way,the answer is no.It is not the obvious difference between public and private that undermines the analogy but rather the difference between the real and monetary sides of the economy.Boe- ing,for example,has orders and contracts that will take years to fulfill. It also has physical plants and equipment,technical know-how,and a small number of identifiable competitors.Entry and exit for producers and consumers in the aerospace industry,while certainly possible,is a relatively slow process.Thus,if Boeing has a bad quarter or even a few bad quarters,it may lose some of its market share.But it will lose only so much.There will be no "flight from Boeing"(as it were),even if it faced a great crisis,as might occur if one of its planes were found to have a design flaw. But currencies are different.Ultimately,they are worth,well,what people think they are worth.And if confidence wavers,people can get rid of that asset and almost immediately acquire any of dozens of alter- native assets.Further,those very actions may be self-fulfillingcreating expectations of further flight and a "rational"erosion of confidence. Cohen himself is quite explicit about the ephemeral nature of a cur- rency's attractiveness(p.97,and also pp.10-13)-it is attractive as long as it conforms to those policies that the market finds attractive.As Cohen notes,reputation,which comes at"considerable cost and effort," is crucial (p.141). But this raises a fundamental point.While the international use of currency may look like an oligopoly(concentrated use in a few brands), this does not mean that the producers enjoy oligopolistic power.What distinguishes oligopolists from other actors in a market economy is that they are not mere"price takers."Rather,they can affect the market and the price for their good-in a much more limited fashion than monop- olists,to be sure,but still to an extent that distinguishes them sharply from the textbook firm.But in currency affairs exit is so easy and the extent to which states are adhering to market preferences is so trans- parent that issuing states in fact may have very little leeway to act as oli- gopolists. Cohen's own arguments make this clear.Efforts to protect a cur- rency's reputation will be successful if they "make significant conces- sions to market sentiment"(p.122).This is true even for states at the very top of the currency pyramid.Cohen had argued that such states

Operating as they do in a world of interdependence and uncertainty, they must focus on promoting their brand name and assuring the mar￾ket share for their product. But are the dollar, yen, and euro like Boeing, Coke, and Kodak? In at least one crucial way, the answer is no. It is not the obvious difference between public and private that undermines the analogy but rather the difference between the real and monetary sides of the economy. Boe￾ing, for example, has orders and contracts that will take years to fulfill. It also has physical plants and equipment, technical know-how, and a small number of identifiable competitors. Entry and exit for producers and consumers in the aerospace industry, while certainly possible, is a relatively slow process. Thus, if Boeing has a bad quarter or even a few bad quarters, it may lose some of its market share. But it will lose only so much. There will be no “flight from Boeing” (as it were), even if it faced a great crisis, as might occur if one of its planes were found to have a design flaw. But currencies are different. Ultimately, they are worth, well, what people think they are worth. And if confidence wavers, people can get rid of that asset and almost immediately acquire any of dozens of alter￾native assets. Further, those very actions may be self-fulfilling—creating expectations of further flight and a “rational” erosion of confidence. Cohen himself is quite explicit about the ephemeral nature of a cur￾rency’s attractiveness (p. 97, and also pp. 10–13)—it is attractive as long as it conforms to those policies that the market finds attractive. As Cohen notes, reputation, which comes at “considerable cost and effort,” is crucial (p. 141). But this raises a fundamental point. While the international use of currency may look like an oligopoly (concentrated use in a few brands), this does not mean that the producers enjoy oligopolistic power. What distinguishes oligopolists from other actors in a market economy is that they are not mere “price takers.” Rather, they can affect the market and the price for their good—in a much more limited fashion than monop￾olists, to be sure, but still to an extent that distinguishes them sharply from the textbook firm. But in currency affairs exit is so easy and the extent to which states are adhering to market preferences is so trans￾parent that issuing states in fact may have very little leeway to act as oli￾gopolists. Cohen’s own arguments make this clear. Efforts to protect a cur￾rency’s reputation will be successful if they “make significant conces￾sions to market sentiment” (p. 122). This is true even for states at the very top of the currency pyramid. Cohen had argued that such states 414 WORLD POLITICS

STUDY OF MONEY 415 could still reap the political benefits afforded by national money,such as seigniorage and the ability to practice macroeconomic management;in both cases such autonomy is circumscribed by the need to"retain com- petitive superiority in the marketplace"and by"how official policies interact with market preferences"(pp.123,135).Thus Cohen's oli- gopolists may face the constraints of perfect competition.5 This is critical for Cohen's analysis,because if the wiggle room of the oligopolist is eliminated,then we must confront the possibility that we are de facto in the purely globalized world where states have no power and markets rule.While Cohen raises political concerns about markets (equity and accountability,as mentioned above),he still holds to a fun- damental faith that unfettered market forces will yield optimal out- comes.Smaller states,for example,may achieve "a much healthier economic performance"if they "in effect submit their national sover- eignty,at least in part,to the strict discipline of the marketplace" p.126). But what if laissez-faire is suboptimal when it comes to international money?This,one of the fundamental divergences between Cohen and Strange,remains an unresolved question;it will be addressed at length below.Cohen does offer at least one good deductive reason to suspect that unregulated money is not a good idea.He notes,for example,that one technique of bolstering a currency's reputation is to raise interest rates.But in a world of oligopolistic competition,where reputation is relative,this may lead to competitive interest-rate increases-for polit- ical reasons,rather than for economic ones.The result-suboptimally high interest rates having no economic justification-would slow global economic activity. The prospect of flaws in the functioning of the international macro- economy is the weak link of Cohen's analysis and,by extension,of the study of money from this perspective in the IPE field as a whole.Cohen explicitly embraces the market,and quite pointedly so,explaining that as state power erodes,we are left not with anarchy but with governance by the market.Indeed,responding directly to the assertion by Strange that states have been replaced by anarchy,Cohen answers that"nothing s Cohen recognizes this,explaining that autonomy is likely to erode even for the most powerful states and noting that public policy will have to conform increasingly with what markets want(pp.130, 133).His faith in market efficiency masks the tension between these observations and his oligopoly analogy. For an illustration of the potentially disastrous consequences of interest-rate competition,derived in part from a concern with market reputation,see Barry Eichengreen,Golden Fetters:The Gold Stan- dard and the Great Depression (Oxford:Oxford University Press,1992).See also Jonathan Kirshner, "Disinflation,Structural Change,and Distribution,"Review of Radical Political Economics 30(March 1998)

could still reap the political benefits afforded by national money, such as seigniorage and the ability to practice macroeconomic management; in both cases such autonomy is circumscribed by the need to “retain com￾petitive superiority in the marketplace” and by “how official policies interact with market preferences” (pp. 123, 135). Thus Cohen’s oli￾gopolists may face the constraints of perfect competition.5 This is critical for Cohen’s analysis, because if the wiggle room of the oligopolist is eliminated, then we must confront the possibility that we are de facto in the purely globalized world where states have no power and markets rule. While Cohen raises political concerns about markets (equity and accountability, as mentioned above), he still holds to a fun￾damental faith that unfettered market forces will yield optimal out￾comes. Smaller states, for example, may achieve “a much healthier economic performance” if they “in effect submit their national sover￾eignty, at least in part, to the strict discipline of the marketplace” (p. 126). But what if laissez-faire is suboptimal when it comes to international money? This, one of the fundamental divergences between Cohen and Strange, remains an unresolved question; it will be addressed at length below. Cohen does offer at least one good deductive reason to suspect that unregulated money is not a good idea. He notes, for example, that one technique of bolstering a currency’s reputation is to raise interest rates. But in a world of oligopolistic competition, where reputation is relative, this may lead to competitive interest-rate increases—for polit￾ical reasons, rather than for economic ones.6 The result—suboptimally high interest rates having no economic justification—would slow global economic activity. The prospect of flaws in the functioning of the international macro￾economy is the weak link of Cohen’s analysis and, by extension, of the study of money from this perspective in the IPE field as a whole. Cohen explicitly embraces the market, and quite pointedly so, explaining that as state power erodes, we are left not with anarchy but with governance by the market. Indeed, responding directly to the assertion by Strange that states have been replaced by anarchy, Cohen answers that “nothing STUDY OF MONEY 415 5 Cohen recognizes this, explaining that autonomy is likely to erode even for the most powerful states and noting that public policy will have to conform increasingly with what markets want (pp. 130, 133). His faith in market efficiency masks the tension between these observations and his oligopoly analogy. 6 For an illustration of the potentially disastrous consequences of interest-rate competition, derived in part from a concern with market reputation, see Barry Eichengreen, Golden Fetters: The Gold Stan￾dard and the Great Depression (Oxford: Oxford University Press, 1992). See also Jonathan Kirshner, “Disinflation, Structural Change, and Distribution,” Review of Radical Political Economics 30 (March 1998)

416 WORLD POLITICS could be more mistaken"(p.142).The market,like the state,according to Cohen,is a socially constructed system of authority.Thus,govern- ments have been replaced "not by anarchy but by the invisible hand of competition"(p.146).7 For scholars raised on a steady diet of IR theory,this will be the one awkward moment of the book.For while markets may be socially con- structed,once formed they do create an anarchic environment-that is, an environment that lacks central authority.In its purest form,while "the market"is the result of the sum of actions taken by individual ac- tors,those actions combine to create constraints on each one that no single actor can affect.It is this very market analogy and the appeal to anarchy that was the foundation of Kenneth Waltz's defense of sys- temic theorizing in international politics.Additionally,the implicit ap- peal to Adam Smith in this argument is also problematic,because Smith did not believe that all monetary matters should be left to the market.He supported,for example,regulations to control interest rates.9 Thus,despite Cohen's thoughtful ruminations on the nature of "gov- ernance,"it is hard to avoid the conclusion that as state power erodes, we are left increasingly to anarchic (though not necessarily chaotic) market forces.As noted,Cohen sees political consequences flowing from this change;such an arrangement,he states,faces a"crisis of le- gitimacy"(p.147).But ultimately,a basic faith in the market underpins Geograpby and that branch of the subfield which it ably represents. A MAD,MAD WORLD Susan Strange's Mad Money,like Cohen's volume,is a major statement that integrates the accumulated knowledge of a foremost scholar of the IPE of money.But beyond that,the similarities end.Even as Cohen re- fines themes and applies them in different contexts,Geograpby nonetheless reflects more continuity than change.Mad Money,by con- trast,completes a transition in Strange's work.Her early efforts,such 7In a parallel argument to his oligopoly metaphor,Cohen argues,with an appeal to Alfred Mar- shall,that governance that emerges from the market reflects the outcome of both demand and supply- side forces.But,following Marshall,it is the shape of the curves that is determinant.If the demand curve takes the shape of a flat line (is infinitely elastic),then supply has no voice in determining the equilibrium price. Waltz,Theory of International Politics(New York:Random House,1979).Interestingly,an out- standing application of systemic theorizing that illustrates the consequences of anarchy can be found in Benjamin Cohen,The Question of Imperialism(New York:Basic Books,1973). Smith,The Wealth of Nations(1776;Chicago:University of Chicago Press,1976),379-80

could be more mistaken” (p. 142). The market, like the state, according to Cohen, is a socially constructed system of authority. Thus, govern￾ments have been replaced “not by anarchy but by the invisible hand of competition” (p. 146).7 For scholars raised on a steady diet of IR theory, this will be the one awkward moment of the book. For while markets may be socially con￾structed, once formed they do create an anarchic environment—that is, an environment that lacks central authority. In its purest form, while “the market” is the result of the sum of actions taken by individual ac￾tors, those actions combine to create constraints on each one that no single actor can affect. It is this very market analogy and the appeal to anarchy that was the foundation of Kenneth Waltz’s defense of sys￾temic theorizing in international politics.8 Additionally, the implicit ap￾peal to Adam Smith in this argument is also problematic, because Smith did not believe that all monetary matters should be left to the market. He supported, for example, regulations to control interest rates.9 Thus, despite Cohen’s thoughtful ruminations on the nature of “gov￾ernance,” it is hard to avoid the conclusion that as state power erodes, we are left increasingly to anarchic (though not necessarily chaotic) market forces. As noted, Cohen sees political consequences flowing from this change; such an arrangement, he states, faces a “crisis of le￾gitimacy” (p. 147). But ultimately, a basic faith in the market underpins Geography and that branch of the subfield which it ably represents. A MAD, MAD WORLD Susan Strange’s Mad Money, like Cohen’s volume, is a major statement that integrates the accumulated knowledge of a foremost scholar of the IPE of money. But beyond that, the similarities end. Even as Cohen re- fines themes and applies them in different contexts, Geography nonetheless reflects more continuity than change. Mad Money, by con￾trast, completes a transition in Strange’s work. Her early efforts, such 416 WORLD POLITICS 7 In a parallel argument to his oligopoly metaphor, Cohen argues, with an appeal to Alfred Mar￾shall, that governance that emerges from the market reflects the outcome of both demand and supply￾side forces. But, following Marshall, it is the shape of the curves that is determinant. If the demand curve takes the shape of a flat line (is infinitely elastic), then supply has no voice in determining the equilibrium price. 8 Waltz, Theory of International Politics (New York: Random House, 1979). Interestingly, an out￾standing application of systemic theorizing that illustrates the consequences of anarchy can be found in Benjamin Cohen, The Question of Imperialism (New York: Basic Books, 1973). 9 Smith, The Wealth of Nations (1776; Chicago: University of Chicago Press, 1976), 379–80