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From Capabilities to Statecraft

From Capabilities to Statecraft

(p.31) Two From Capabilities to Statecraft
Currency Statecraft
Benjamin J. Cohen
University of Chicago Press

Currency statecraft is about the strategic management of a country’s money to advance political objectives in international affairs. This chapter explores what governments may – or may not – do with the capabilities created by currency internationalization. The challenge for policy makers is two-fold. First is the use question: What do they wish to do about their currency power? And second is the utility question: Will their actions be effective? The initial premise is that international moneys have a life cycle, from youth to maturity to (eventually) decline. Each lap of the journey poses its own distinct challenges. At each stage, the supplier has three policy options: to be pro-active in favor of international use; to resist internationalization, or to remain neutral. The use question asks what accounts for the choices that are made over the full extent of a currency’s life cycle. The utility question asks what determines how successful governments may be in realizing their monetary preferences. The use and utility questions set the agenda for the remainder of this book.

Keywords:   currency statecraft, use question, utility question, life cycle, currency internationalization, policy options

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