- 1 - the International Monetary System : Diffusion and Ambiguity

This essay looks at the dynamics of power and rule setting in the international monetary system. I begin with a brief discussion of the meaning of power in international monetary relations, distinguishing between two critical dimensions of monetary power, autonomy and influence. Major developments have led to a greater diffusion of power in monetary affairs, both among states and between states and societal actors. But the diffusion of power has been mainly in the dimension of autonomy, rather than influence, meaning that leadership in the system has been dispersed rather than relocated – a pattern of change in the geopolitics of finance that might be called leaderless diffusion. The pattern of leaderless diffusion, in turn, is generating greater ambiguity in prevailing governance structures. Rule setting in monetary relations increasingly relies not on negotiations among a few powerful states but, rather, on the evolution of custom and usage among growing numbers of autonomous agents. Impacts on governance structures can be seen at two levels: the individual state and the global system. At the state level, the dispersion of power compels governments to rethink their commitment to national monetary sovereignty. At the systemic level, it compounds the difficulties of bargaining on monetary issues. More and more, formal rules are being superceded by informal norms that emerge, like common law, not from legislation or statutes but from everyday conduct and social convention.