INDUSTRIES FOR FREE TRADE 355 A similar story is told by changes in relative economic size and pro- ductivity.According to Lake,who uses these two measures in his analysis of international economic structures,the position of the United States was almost identical in 1929 and 1977.This contrasts with its clear predom- inance in 1950.Moreover,in both 1929 and 1977,the U.S.appeared sim- ilarly situated relative to its nearest rivals.In 1929,it led all countries on these two indicators,barely edging out Britain while retaining a substan- tial lead over France and Germany.In 1977,its relative position was com- parable:it was almost even with West Germany,but still outdistanced apan and France. Hence,two strong similarities in the international distribution of eco- nomic power existed in the 192os and 197os.In both,a hegemon was in decline,and in both the relative position of the United States was slightly superior to all others-but,most importantly,was being challenged by several nations.These conditions in the international economic structure have been linked to rising protectionism,and thus might have been ex- pected to engender similar protectionist responses in the two periods. The argument here is not.that the 1gzos and the 197os were alike in all respects.Two important differences,at least,may attenuate the compar- ison.First,the United States was a rising hegemon in the Ig2os and a de- clining one in the 197os.Although hegemonic stability arguments pro- vide no theoretical reason to expect this difference to affect a hegemon's trade policy,the notion of a lag has been introduced to account for this." A rising hegemon may fail to appreciate its own significance,while a de- clining one may fail to understand its weakness and need for closure. This difference may account for dissimilarities between the two periods. But the reason for such a lag is obscure. Second,there was a difference in the monetary systems operating at the two times.In the Igzos,a shift occurred from the controlled flexible exchange-rate system that had been in effect before 1925,to a fixed gold- standard system which was in effect until 1931.In the 197os,the move- ment was in the opposite direction:from a fixed,dollar-gold standard to a managed flexible rate system after 1973.The consequences of these two different systems for trade policy are unclear,however;the effects of dif- ferent exchange-rate systems on trade are not well understood.It has been asserted by some that flexible rates should hinder protectionism be- 2 David Lake,"Beneath the Commerce of Nations,"International Studies Ouarterly 28 (June 1984),Figs.5 and 6,pp.143-70. "I do not agree with Lake's interpretation of these two structures and their differences; see fn.20. >Kindleberger (fn.5);Krasner (fn.5).INDUSTRIES FOR FREE TRADE 355 A similar story is told by changes in relative economic size and pro￾ductivity. According to Lake, who uses these two measures in his analysis of international economic structures, the position of the United States was almost identical in I929 and 1977.'" This contrasts with its clear predom￾inance in 1950. Moreover, in both 1929 and 1977, the U.S. appeared sim￾ilarly situated relative to its nearest rivals. In 1929, it led all countries on these two indicators, barely edging out Britain while retaining a substan￾tial lead over France and Germany. In 1977, its relative position was com￾parable: it was almost even with West Germany, but still outdistanced Japan and France. Hence, two strong similarities in the international distribution of eco￾nomic power existed in the 1920s and 1970s. In both, a hegemon was in decline, and in both the relative position of the United States was slightly superior to all others-but, most importantly, was being challenged by several nations. These conditions in the international economic structure have been linked to rising protectionism, and thus might have been ex￾pected to engender similar protectionist responses in the two periods:~ The argument here is not that the 1920s and the 1970s were alike in all respects. Two important differences, at least, may attenuate the compar￾ison. First, the United States was a rising hegemon in the 1920s and a de￾clining one in the 1970s. Although hegemonic stability arguments pro￾vide no theoretical reason to expect this difference to affect a hegemon's trade policy, the notion of a lag has been introduced to account for this.%% A rising hegemon may fail to appreciate its own significance, while a de￾clining one may fail to understand its weakness and need for closure. This difference may account for dissimilarities between the two periods. But the reason for such a lag is obscure. Second, there was a difference in the monetary systems operating at the two times. In the 1920s, a shift occurred from the controlled flexible exchange-rate system that had been in effect before 1925, to a fixed gold￾standard system which was in effect until 1931. In the I~~OS, the move￾ment was in the opposite direction: from a fixed, dollar-gold standard to a managed flexible rate system after 1973. The consequences of these two different systems for trade policy are unclear, however; the effects of dif￾ferent exchange-rate systems on trade are not well understood. It has been asserted by some that flexible rates should hinder protectionism be- 2o David Lake, "Beneath the Commerce of Nations," International Studies Quarterly 28 (June 1984),Figs. j and 6, pp. 143-70. 'I I do not agree with Lake's interpretation of these two structures and their differences; see fn. 20. "Kindleberger (fn. 5); Krasner (fn. 5)