IDEAS home Printed from
   My bibliography  Save this paper

Interstate Cooperation and the Hidden Face of Power: The Case of European Money


  • Lloyd Gruber


Why do international regimes like the European Union, NAFTA, and the WTO exist? The conventional wisdom says it is because they provide positive-sum benefits, facilitating collectively desirable equilibria that their member states could never hope to obtain -- at least not as efficiently -- on the basis of unstructured intergovernmental bargaining and negotiation. Focusing on the politically turbulent history of the European Monetary System (EMS), this paper points the way toward a more balanced, albeit less sanguine, theoretical perspective on the forces propelling interstate cooperation and institution building. Although most scholars see institutions as efficient, Pareto-improving responses to collective-action problems, this is not, the EMS experience suggests, the only logical possibility. To the contrary, the evidence presented here suggests that two of the EMS regime's largest signatories -- Italy and the United Kingdom -- joined because (and only because) their neighbors -- France and Germany – were in a position to create their own monetary system and “go it alone.” Recognizing that the pre-EMS floating exchange rate status quo was no longer a viable alternative, authorities in Italy and the UK decided they were better off cooperating with their French and German partners, the EMS regime’s ultimate beneficiaries, than not cooperating. But while the prospect of mutual gain is what drove their partners to cooperate, they – the Italians and the British – cooperated simply to avoid being left behind. Although the EMS is widely regarded as a paradigmatic case of states working together to achieve collective gains, the article thus makes a case that at least two EMS entrants would have preferred the original “non-cooperative” status quo, and so would never have joined (at least not voluntarily) had it remained a feasible option. What is needed, the article concludes, is a broader, more nuanced way of thinking about the relationship between state power and voluntary cooperation.

Suggested Citation

  • Lloyd Gruber, 1999. "Interstate Cooperation and the Hidden Face of Power: The Case of European Money," Working Papers 9921, Harris School of Public Policy Studies, University of Chicago.
  • Handle: RePEc:har:wpaper:9921

    Download full text from publisher

    File URL:
    Download Restriction: no


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:har:wpaper:9921. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Eleanor Cartelli). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.