Continuity and Change in the International Monetary System: The Dollar Standard and Capital Mobility

Addressing the issue of continuity and change in the international monetary system, this article makes two points. First, the dollar standard — as defined by Keynes — did not have to wait until the end of Bretton Woods to be born. It finds its roots in the 1920s and is still with us after a century. While most commentators content themselves with the statement that the dollar officially became fiat money in 1971–3, I make the less obvious point that, in substance, the transition occurred much earlier, and document the multiple monetary and intervention techniques used to maintain the dollar standard in existence. Second, as widely recognized, the main element differentiating Bretton Woods from its successor is the demise of capital controls. I argue that stability requires that some form of control is reintroduced, particularly if the international monetary system evolves in a multipolar direction.