Globalizing Capital: A History of the International Monetary System

From Library Journal
Eichengreen (Univ. of California-Berkeley), the author of Golden Fetters: The Gold Standard and the Great Depression, 1918-1939 (Oxford Univ., 1992), uses a detailed history of exchange rate systems to support his theory that the democratization of political processes has presented competing goals to policymakers, making it more difficult for them to commit to fixed rates of exchange. His explanation for the movement toward floating exchange rates is controversial but well argued. The information he cites is current, and he incorporates a discussion of the European Monetary System and its future. Eichengreen's presentation of history is solid, with ample references. General readers will benefit from the glossary of his technical terms. His book will be the most useful to economists, historians, political scientists, and finance professionals.?A.J. Sobczak, formerly at California State Univ., NorthridgeCopyright 1996 Reed Business Information, Inc.


Douglas Irwin, University of Chicago
Eichengreen's purpose is to provide a brief history of the international monetary system. In this, he succeeds magnificently. Globalizing Capital will become a classic.


Choice
"Capital flows in the recent period, unlike those in the earlier one, proved to be incompatible with exchange rate stability. [Eichengreen's] reasons for the difference. . . constitute a unique insight and contribution. . . to the professional literature on a familiar topic."


Review
Capital flows in the recent period, unlike those in the earlier one, proved to be incompatible with exchange rate stability. [Eichengreen's] reasons for the difference. . . constitute a unique insight and contribution. . . to the professional literature on a familiar topic.


Book Description
The importance of the international monetary system is clearly evident in daily news stories about fluctuating currencies and in dramatic events such as the recent reversals in the Mexican economy. It has become increasingly apparent that one cannot understand the international economy without knowing how its monetary system operates. Now Barry Eichengreen presents a brief, lucid book that tells the story of the international financial system over the past 150 years. Globalizing Capital is intended not only for economists but also for a general audience of historians, political scientists, professionals in government and business, and anyone with a broad interest in international economic and political relations. Eichengreen's work demonstrates that insights into the international monetary system and effective principles for governing it can result only if it is seen a historical phenomenon extending from the gold standard period to interwar instability, then to Bretton Woods, and finally to the post-1973 period of fluctuating currencies. Eichengreen analyzes the shift from pegged to floating exchange rates in the 1970s and ascribes that change to the growing capital mobility that has made pegged rates difficult to maintain. However, he shows that capital mobility was also high prior to World War I, yet this did not prevent the maintenance of fixed exchange rates. What was critical for the successful maintenance of fixed exchange rates during that period was the fact that governments were relatively insulated from democratic politics and thus from pressure to trade off exchange rate stability for other goals, such as the reduction of unemployment. Today pegging exchange rates would require very radical reforms of a sort that governments are understandably reluctant to embrace. The implication seems undeniable: floating rates are here to stay.


From the Publisher
The importance of the international monetary system is clearly evident in daily news stories about fluctuating currencies and in dramatic events such as the recent reversals in the Mexican economy. It has become increasingly apparent that one cannot understand the international economy without knowing how its monetary system operates. Now Barry Eichengreen presents a brief, lucid book that tells the story of the international financial system over the past 150 years. Globalizing Capital is intended not only for economists but also for a general audience of historians, political scientists, professionals in government and business, and anyone with a broad interest in international economic and political relations. Eichengreen's work demonstrates that insights into the international monetary system and effective principles for governing it can result only if it is seen a historical phenomenon extending from the gold standard period to interwar instability, then to Bretton Woods, and finally to the post1973 period of fluctuating currencies. Eichengreen analyzes the shift from pegged to floating exchange rates in the 1970s and ascribes that change to the growing capital mobility that has made pegged rates difficult to maintain. However, he shows that capital mobility was also high prior to World War I, yet this did not prevent the maintenance of fixed exchange rates. What was critical for the successful maintenance of fixed exchange rates during that period was the fact that governments were relatively insulated from democratic politics and thus from pressure to trade off exchange rate stability for other goals, such as the reduction of unemployment. Today pegging exchange rates would require very radical reforms of a sort that governments are understandably reluctant to embrace. The implication seems undeniable: floating rates are here to stay.


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Eichengreen's purpose is to provide a brief history of the international monetary system. In this, he succeeds magnificently. Globalizing Capital will become a classic. -- University of Chicago — Douglas Irwin


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