LOUIS W. PAULY The political foundations of multilateral economic surveillance Following World War II, the states that built a new world mon- etary order made a novel commitment. As the system designed in principle at the 1944 Bretton Woods Conference evolved in practice, in the words of Robert W. Cox, 'the notion of interna- tional obligation moved ... to a general recognition that meas- ures of national economic policy affect other countries and that such consequences should be taken into account before national policies are adopted." Exchange rates, the economic variables Associate Professor of Political Science, University of Toronto, Toronto, Canada; author of Opening Financial Markets: Banking Politics on the Pacific Rim (1988). Earlier drafts of this chapter were presented at the i99i World Congress of the International Political Science Association, Buenos Aires, and the i991 meeting of the American Political Science Association, Washington, DC. For assistance and constructive comments at various points, I am grateful to Ralph Bryant, Robert Bryce, Philip Cerny, Margaret de Vries, Richard Friman, Stephen Gill, Joseph Gold, Eric Helleiner, C. Randall Henning, Miles Kahler, Peter Katzenstein, Michael Mastanduno, Timothy McKeown, Jacques Polak, Michael Schechter, Robert Solomon, Janice Gross Stein, Susan Strange, David Welch, and Robert Wolfe. My interest in this topic was sparked in 1989 when I spent a year as a visiting fellow at the IMF under the auspices of the International Affairs Fellowship Program of the Council on Foreign Relations. Subsequently, as a guest scholar in the Economic Studies programme of the Brookings Institution, that interest deepened. Research for this paper was supported by a grant (4109I-1308) from the Social Sciences and Humanities Research Council of Canada. Responsibility for the final text is, of course, mine alone. i Robert W. Cox, Production, Power, and World Order (New York: Columbia University Press 1987), 256. The earlier gold exchange system of the 188o-1914 period involved the heroic assumption of an external constraint on domestic policy but created no binding obligation. It is commonly held that the system essentially involved states accepting a single external price constraint and then allowing their domestic money supplies automatically to be affected when payments imbalances arose. In practice, the system never worked so neatly and International Journal XLVII spring 1992