Hegemons of a lesser God: the Bank of France and monetary leadership under the classical gold standard

Abstract

ABSTRACT Conventional theories of international hegemony all agree on the fact that the stabilizing functions of hegemons (i.e. nations that use their power to maintain orderly relations in a given issue-area) are positively correlated with their power. The public goods logic upon which this vision is founded posits that as any potential leader becomes more powerful in a given issue area, it will increasingly see its own welfare as synonymous with order in the entire constellation of relations within the issue area itself, and consequently have an incentive to provide the necessary public goods (i.e. the components of stability) to bring such order about. Monetary relations under the classical gold standard (1880–1914), however, demonstrated an entirely different set of circumstances. The principal financial actor of the period (the Bank of England) showed little interest in stabilizing monetary relations during that period. It was in fact the Bank of France, a secondary monetary power, which acted much more robustly as monetary leader under the gold standard in protecting convertibility in gold-club nations. But rather than emanating from a perception of strength, such leadership functions in fact emanated from a sense of financial vulnerability. Hence, monetary leadership under the gold standard significantly tilts conventional hegemonic stability theory in that it reveals relative weakness as a catalyst for stabilizing behavior. Moreover, the stabilization functions of the Bank of France were marshaled for the purpose of keeping France in a secondary financial position to Britain, as a front line status would have placed France in the forefront as an international financial shock absorber, which the Bank sought to avoid for the sake of stability in French finance. In revealing a tendency to relent from enhancing a relative position in financial status, this case also cuts against common tenets of hegemonic stability theory. This article suggests that secondary powers can effectively serve the leadership functions traditionally ascribed to hegemons. Such functions can be carried out both directly (as stabilizers) and indirectly (as facilitators of cooperation).