Summary
Summary Weeks 1-3 Cohen - Currency and Monetary power
- Course
- POLI 445 (POLI445)
- Institution
- McGill University (Mcgillu)
A summary and note page of the important points from the readings
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State power:-ability to pressure or coerce others into conforming to your desired behaviour
-also ability to form will into actions, resist outside pressure, free to act independently.
-in a given area, autonomy is necessary to exert influence on others, policy makers must be
insulated and free of external influence.
-in monetary realm because of wide interdependence and connectivity autonomy comes into
balance of payments issues as: being able to put the burden of adjustment on others and avoid it
yourself.
-defines two kinds of Balance of Payments (BoP) powers: to delay and to deflect. Each
corresponds to a different kind of adjustment burden. The continuing cost of adjustment is first
burden, costs of new payments equilibrium after change has taken place. Delay is power to
postpone these costs by delaying the process of adjustment. Second burden is transitional cost of
adjustment, the cost of the change itself. Deflect is power to deflect costs of the change onto
others.
Two faces of influence:
-first is deliberate attempt to exploit opportunities for advantage.
-second is inadvertent, working through market processes to create dependence and rearticulate
interests. Ideas of nonintentional uses of power.
-two modes in exercise of monetary influence: passive results as part of adjustment process,
active is active influence directed at specific countries and goals.
-market driven influence second face, first face is government.
Monetary power, autonomy and influence:
-other traditional forms of power secondary, resources less determinant
-interactions important, dependencies
-interdependence is usually asymmetrical, who needs the other more? leads to power
-discussing Strange's distinction of relational power: power of A over B and structural power:
A's capacity to shape system, determine framework of int. economy.
structure of a state's power in the monetary system:
-autonomy, the ability to avoid the burden of adjustment required by payments imbalances.
-this autonomy creates the potential for influence either active or passive which can develop into
the ability to delay or deflect.
Issuers of international currency:
-possess major positions of power, powerful currency means powerful state
-four main benefits: 1. seignoirage: generated whenever foreigners acquire and hold significant
amounts of domestic money, or financial claims denominated in the domestic money, in
exchange for traded goods and services. 2. Macroeconomic flexibility: cross-border use can relax
constraints of balance of payments on domestic monetary and fiscal policy. The more can
finance payment deficits with own currency the easier for policy makers meet spending
objectives. 3. Reputation: soft-power, elevates state to higher reputation, prestige. International
use as a sign of status and rank. 4. leverage: power through its control of access to financial
resources. Hard power.
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