Hegemonic Stability Theories of the International Monetary System

Specialists in international relations have argued that international regimes operate smoothly and exhibit stability only when dominated by a single, exceptionally powerful national economy. In particular, this "theory of hegemonic stability" has been applied to the international monetary system. The maintenance of the Bretton Woods System for a quarter of a century up to 1972 is ascribed to the singular power of the United States in the postwar world, while the persistence of the classical gold standard is similarly ascribed to Britain's dominance of 19th-century financial markets. In contrast, the instability of the interwar gold-exchange standard is attributed to the absence of a hegemonic power. This paper assesses the applicability of hegemonic stability theory to international monetary relations, approaching the question from both theoretical and empirical vantage points. Theory is of some help in understanding the relatively smooth operation of the classical gold standard and the early Bretton Woods System as well as some of the difficulties of the interwar years. Much of the evidence, however, proves to be difficult to reconcile with the hegemonic stability interpretation.