A History of International Monetary Diplomacy, 1867 to the Present

The Rise of the Guardian State and Economic Sovereignty in a Globalizing World

Giulio M. Gallarotti

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781317554967
• Edition: 1
• Topic: Economia
• Subtopic: Politica monetaria

This book is about how the rise of democracy has transformed economics over the past 150 years. As voting was expanded to the masses in the late 19th century, political leaders faced emergent pressures to deliver prosperity to their newly enfranchised populations. This led to the rise of the guardian state: a state whose prime directive was to protect economic growth and employment. Domestic economic goals now became sacrosanct, and if that meant a failure on the international stage to construct solutions to problems in monetary relations, so be it.

The book traces the history of international monetary diplomacy during this long period to show how the guardian state has manifested itself, and how it has shaped the course of international monetary relations. Each of the most important international monetary conferences in history is scrutinized with respect to how nations sought to protect the prosperity within their national economies. The historical narratives give a bird's-eye view into how domestic political priorities have intruded on and shaped economic relations among nations.

The book clearly demonstrates the advantages of an interdisciplinary understanding of how politics shapes economics. It will be invaluable reading for scholars and students of international economics, politics and economic history.

1The rise of the guardian state and structural change in the global political economy

All economic systems are in some important way endogenous, that is, economic relations are embedded in some greater constellation of social relations.¹ Hence, understanding the nature of and changes in economic relations cannot be done in full measure by studying the economic outcomes in and of themselves alone. High growth may be as much a result of “a will to grow” than of technological shocks, human capital formation or cyclical changes in inventories. While the proximate cause may be deficit spending, a high disposition toward growth (because a society’s values are directed toward maintaining employment) may in fact be the catalyst for government spending. Such values may also throw economic outcomes into a more inflationary path. Economic outcomes are just one dimension of social outcomes, which in turn are driven by prevailing beliefs and ideas about what particular goals societies aspire to and/or the thought processes which condition behavior among the mass of economic actors in those societies. Within the greater study of social science, both sociologists and political scientists have elaborately discussed the link between ideas and economic actions. The idea of looking at the relationship between economics and ideas goes as far back as the Marxian link between prevailing class ideologies and the economic landscape. Sociologists such as Parsons and Smelser (1984) have explored this nexus as the integration of social and economic theory. Political scientists Krasner (1983) and Haas (1992) have talked about epistemic communities and regimes: that is, actual outcomes are explained by rules or norms which decision-makers and larger groups of individuals adhere to. Economists have explored the microeconomic foundations of macroeconomics by assessing the broader economic manifestations of decision-making under uncertainty, adaptive behavior, self-fulfilling forecasts and rational expectations.² In terms of economic outcomes, significant discussion of the link between ideologies and economics has come under the rubric of the cultural foundations of economic growth and development.³

Ideas, alone, however, are insufficient to determine economic outcomes. They require the help of politics. Ideas invariably impact the operation of political markets, which themselves reinforce the influence of prevailing economic ideologies. While ideologies can carry autonomous influence, they must ultimately be politically reinforced if they are to significantly shape policy and, consequently, outcomes. If politicians do not face incentives to translate prevailing ideas into law or policy, then the ideas themselves will cast no institutional shadow and therefore have less of an impact on economic outcomes. Fundamentally, there must be no serious impediments to the supply of...