Response to Chapter 15 of Frieden and Lake -- "The Triad and the Unholy Trinity"

In “The Triad and the Unholy Trinity” Cohen argues that in spite of all its benefits, international monetary cooperation is very difficult to maintain. The instability of such cooperation can be linked to three common values or goals of governments: exchange rate stability, capital mobility, and national policy autonomy. The difficulty with the pursuit of these goals is, in Cohen’s mind, the inability to achieve all of them simultaneously. Achieving one, means sacrificing another. For instance, governments seeking to preserve exchange rate stability “will then be compelled to limit either the movement of capital (via restrictions or taxes) or their own policy autonomy (via some form of multilateral surveillance or joint decision-making)” (FL, 251). Of the three, Cohen suggests that capital mobility is the most difficult to control, thus the end result becomes a competing relationship between exchange rate stability and policy autonomy. This accounts for the ebb and flow of international monetary cooperation. A government may move forward with cooperative measures only to withdraw again in effort to preserve its own autonomy.

Cohen also asserts that policy autonomy cannot be maintained in the absence of international cooperation. On page 246, Cohen says that “the irony is that even without such a commitment most…governments will find their policy autonomy increasingly eroded in the coming decade—in a manner, moreover, that may seem even less appealing to them than formal cooperation.” I understand how this argument stems from the idea of the increasing interdependence of different economies across the globe, yet I am not sure I completely understand the conditions under which a country would see decreasing autonomy in the absence of economic cooperation. It seems that he is saying that governments seeking to maintain their autonomy must strategically sacrifice portions of it to that end.

Cohen’s argument is a very strong statement of the benefits of economic cooperation. In it he sees not only the means by which to increase the stability of exchange rates, but he also seems to suggest that it is a means by which to preserve policy autonomy. I wonder, however, what the limitations to this argument are. Can there be, for instance, cases in which cooperation would lead to a quicker disintegration of policy autonomy than would be achieved through a unilateral economic policy?