Global Studies

What are the foundations of monetary power? David Andrews, in his introduction to this volume, distinguishes between two "pathways" for the exercise of monetary power – the macro level, linked to the problem of balance-of-payments disequilibrium; and the micro-level, working through the capacity of money to alter actor interests and identities. The purpose of this chapter is to promote a clearer understanding of the macro-level pathway – what we may call the macrofoundation of monetary power. Building in good part on earlier contributions of my own, I argue that the central issue at the macro-level is the distribution of the burden of adjustment to external imbalance. The macrofoundation of monetary power lies, first and foremost, in a capacity to avoid payments adjustment costs, either by delaying adjustment or by deflecting the burden of adjustment onto others. Ceteris paribus, the greater is a state's capacity to avoid adjustment costs, relative to that of other states, the greater is its power at the macro-level.