Monetary Theory and Bretton Woods: The Construction of an International Monetary Order PDF
Preview Monetary Theory and Bretton Woods: The Construction of an International Monetary Order
P1:KAE 0521857592pre CUNY485/Cesarano 0521867592 July13,2006 23:30 This page intentionally left blank ii P1:KAE 0521857592pre CUNY485/Cesarano 0521867592 July13,2006 23:30 monetary theory and bretton woods Over the twentieth century, monetary theory played a crucial role in the evolution of the international monetary system. The severe shocks and monetary gyrations of the interwar years interacted with theoreti- caldevelopmentsthatsupersededtherigidrulesofcommoditystandards andledtothefull-fledgedconceptionofmonetarypolicy.Thedefinitive demiseofthegoldstandardthenpavedthewayformonetaryreconstruc- tion. Monetary theory was a decisive factor in the design of the reform proposals, in the Bretton Woods negotiations, and in forging the new monetaryorder.TheBrettonWoodssystem–successfulbutnevertheless short-lived – suffered from latent inconsistencies, both analytical and institutional, that fatally undermined the foundations of the postwar monetary architecture and brought about the epochal transition from commoditymoneytofiatmoney. FilippoCesaranoistheheadoftheHistoricalResearchOfficeoftheBankof Italy.HestudiedattheUniversityofRomeandtheUniversityofChicago and has been a research Fellow at the Netherlands School of Economics andavisitingscholaratUCLA,Harvard,andtheHooverInstitution.Asan economistattheResearchDepartmentoftheBankofItaly,hehasworked inthefieldsofmonetarytheory,internationaleconomics,andthehistory ofeconomicanalysis.HehaspublishedarticlesintheAmericanEconomic Review,HistoryofPoliticalEconomy,theJournalofEconomicBehavior and Organization, and the Journal of International Economics, among others. He has been a member of the advisory board of the European JournaloftheHistoryofEconomicThought. i P1:KAE 0521857592pre CUNY485/Cesarano 0521867592 July13,2006 23:30 ii P1:KAE 0521857592pre CUNY485/Cesarano 0521867592 July13,2006 23:30 historical perspectives on modern economics GeneralEditor:CraufurdD.Goodwin,DukeUniversity Thisseriescontainsoriginalworksthatchallengeandenlightenhistoriansof economics.Fortheprofessionasawhole,itpromotesbetterunderstandingof theoriginandcontentofmoderneconomics. Otherbooksintheseries: William J. Barber Designs within Disorder: Franklin D. Roosevelt, the Economists,andtheShapingofAmericanEconomicPolicy,1933–1945 William J. Barber From New Era to New Deal: Herbert Hoover, the Economists,andAmericanEconomicPolicy,1921–1933 Timothy Davis Ricardo’s Macroeconomics: Money, Trade Cycles, and Growth JerryEvensky AdamSmith’sMoralPhilosophy:AHistoricalandContem- poraryPerspectiveonMarkets,Law,Ethics,andCulture M.JuneFlanders InternationalMonetaryEconomics,1870–1960:Between theClassicalandtheNewClassical J.DanielHammond TheoryandMeasurement:CausalityIssuesinMilton Friedman’sMonetaryEconomics LarsJonung(ed.) TheStockholmSchoolofEconomicsRevisited KyunKim EquilibriumBusinessCycleTheoryinHistoricalPerspective GeraldM.Koot EnglishHistoricalEconomics,1870–1926:TheRiseofEco- nomicHistoryandMercantilism David Laidler Fabricating the Keynesian Revolution: Studies of the Inter- WarLiteratureonMoney,theCycle,andUnemployment Odd Langholm The Legacy of Scholasticism in Economic Thought: AntecedentsofChoiceandPower HarroMaas WilliamStanleyJevonsandtheMakingofModernEconomics PhilipMirowski MoreHeatThanLight:EconomicsasSocialPhysics,Physics asNatureEconomics PhilipMirowski(ed.) NatureImagesinEconomicThought:“MarketsRead inToothandClaw” MaryS.Morgan TheHistoryofEconometricIdeas TakashiNegishi EconomicTheoriesinaNon-WalrasianTradition HeathPearson OriginsofLawandEconomics:TheEconomists’NewScience ofLaw,1830–1930 MalcolmRutherford InstitutionsinEconomics:TheOldandtheNewInsti- tutionalism Esther-MirjamSent TheEvolvingRationalityofRationalExpectations:An AssessmentofThomasSargent’sAchievements YuichiShionoya SchumpeterandtheIdeaofSocialScience JuanGabrielValdes Pinochet’sEconomists:TheChicagoSchoolofEconomics inChile Karen I. Vaughn Austrian Economics in America: The Migration of a Tradition E.RoyWeintraub StabilizingDynamics:ConstructingEconomicKnowledge iii P1:KAE 0521857592pre CUNY485/Cesarano 0521867592 July13,2006 23:30 iv P1:KAE 0521857592pre CUNY485/Cesarano 0521867592 July13,2006 23:30 monetary theory and bretton woods The Construction of an International Monetary Order filippo cesarano BankofItaly v CAMBRIDGEUNIVERSITYPRESS Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo Cambridge University Press The Edinburgh Building, Cambridge CB28RU, UK Published in the United States of America by Cambridge University Press, New York www.cambridge.org Information on this title: www.cambridge.org/9780521867597 © Filippo Cesarano 2006 This publication is in copyright. Subject to statutory exception and to the provision of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published in print format 2006 ISBN-13 978-0-511-24718-7 eBook (NetLibrary) ISBN-10 0-511-24718-4 eBook (NetLibrary) ISBN-13 978-0-521-86759-7 hardback ISBN-10 0-521-86759-2 hardback Cambridge University Press has no responsibility for the persistence or accuracy of urls for external or third-party internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate. P1:KAE 0521857592pre CUNY485/Cesarano 0521867592 July13,2006 23:30 contents Preface page ix Acknowledgments xi 1 introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1 1.1. TheBrettonWoodsEnigma 1 1.2. MonetarySystemsandMonetaryTheory 5 1.3. ABriefOutline 15 2 international monetary equilibrium and the properties of the gold standard. . . . . . . . . . . . . . . . .21 2.1. TheClassicalAdjustmentMechanism 22 2.2. ThePropertiesoftheGoldStandard 31 2.3. CredibilityandtheEvolutionoftheMonetaryStandard 36 3 the international monetary system between the world wars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 3.1. ThePostwarLegacyandtheReturntoGold 44 3.2. TheGreatDepressionandtheEndoftheGoldStandard 53 3.3. ThePropertiesoftheMonetarySystemandtheRoleof MonetaryTheory 61 4 the monetary system in economic analysis: the critique of the gold standard . . . . . . . . . . . . . . . . . . 68 4.1. TheMainstreamandtheEmergenceoftheGold ExchangeStandard 69 4.2. RadicalsandConservatives 83 4.3. TheIrreversibleCrisisoftheCommodityStandard 96 [ vii ] P1:KAE 0521857592pre CUNY485/Cesarano 0521867592 July13,2006 23:30 Contents 5 the great depression: overturning the state of the art . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 5.1. TheEquilibriumHypothesisandtheInternational MonetarySystem 101 5.2. InSearchofaNewMonetaryOrder 112 5.3. TheQuestforSupranationalMonetaryInstitutions 121 6 providing for a new monetary order . . . . . . . . . . . . . 131 6.1. TheReformPlans 133 6.2. TheDiscussionoftheBritishandAmericanProposals 145 6.3. AlternativeModelsofMonetaryOrganizationonthe EveofBrettonWoods 153 7 the bretton woods agreements . . . . . . . . . . . . . . . . . 159 7.1. TheJointStatementandtheOrganizationofthe Conference 160 7.2. ThePost-ConferenceAcademicDebate 169 7.3. TheSignificanceoftheTreatyandItsDemise 183 8 bretton woods and after . . . . . . . . . . . . . . . . . . . . . 188 8.1. TheCrisisofthePostwarMonetaryOrder 190 8.2. TheRoleofTheory 201 8.3. TheInternationalMonetarySysteminPerspective 207 References 217 AuthorIndex 241 Subject Index 245 [ viii ]
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