In This Review

The Political Economy of Policy Coordination: International Adjustment Since 1945
The Political Economy of Policy Coordination: International Adjustment Since 1945
By Michael C. Webb
Cornell University Press, 1995, 269 pp.

A history of post--World War II international cooperation on macroeconomic policy in the major market economies. The book advances two related theses. First, the form of cooperation has changed as the structure of the world economy has evolved, especially as the mobility of financial capital has increased. Second, allowing for this development, cooperation in framing macroeconomic policy was as intense in the 1980s and 1990s as in the 1950s and 1960s, in some respects even more so since it came to bear more directly on monetary and fiscal policies, which had traditionally been domestic policy domains. In particular, the claim that cooperation has declined with the alleged decline of the leading economy, the United States, is simply wrong. The author finds no sign that in recent years the United States has been less active in pressing other countries to alter their policies, or that it has had notably less success (to be sure, it has often been unsuccessful, but that was also true 40 years ago).

Webb is correct in both theses. He offers informed and informative discussions of cooperative efforts from the Marshall Plan to the Clinton administration, taking the reader through European and Japanese balance-of-payments support in the 1960s and the post-1973 period of floating exchange rates. He does not, however, sufficiently emphasize the extent to which a commitment to fixed exchange rates, such as was exercised until the early 1970s, can compel monetary authorities to align their actions, even without formal policy coordination. Also, Webb's focus is on the coordination of policy instruments rather than the attainment of objectives; he offers no evaluation of cooperation in terms of what really matters--the growth and distribution of real incomes.