Interest Groups And The Adjustment Of U.S. Exchange Rate Policy

As one of the most important parts of macroeconomic policy under openconditions, exchange rate policy is originally one important issue of internationaleconomics. Nonetheless, these pure economic analyses do not take the politicalfactors into account so that they have significant shortcomings. In fact, exchange ratepolicy in essence is one kind of policy for income redistribution. On the one hand, itproduces the effect of income redistribution among different domestic interest groups.In response to the change of their interests, winners and losers will wield theireconomic and political resources to seek affect the authorities’ exchange rate policy.These actions will not end until it moves towards one new interest equilibrium. Onthe other hand, one big power’s exchange rate policy has significant spillover effectwhich will produce another income redistribution effect among different interestgroups at home and abroad. Similarly, the relevant winners and losers will takeenough efforts to maximize their own interests. Hence, exchange rate policy is notonly one economic issue, but a political one; it is not only one political economicissue, but one international political economic issue.Based on these lines, the dissertation studies the adjustment of U.S. exchange ratepolicy since the Bretton Woods system from the interest group perspective, usingmultiple methods such as theoretical and empirical analyses, logic and historicalanalyses, overall and case analyses. The key issues include the decision mechanismand its characteristics of U.S. exchange rate policy; interest groups in the making andadjustment of U.S. exchange rate policy; interest groups under the Bretton Woodssystem and the adjustment of U.S. exchange rate policy; the behavior of interestgroups under the flexible exchange rate system and the adjustment of U.S. exchangerate policy; and the activities of interest groups and U.S. Exchange rate diplomacy on China. The aims of the dissertation are to resolve three issues: First, probing into thedecision mechanism, political and economic characteristics and, the adjustment logicsof U.S. exchange rate policy. Second, thinking about U.S. monetary politics andexchange rate diplomacy. Finally, reflecting on the spillover effect of U.S. exchangerate policy and the corresponding strategies and countermeasures for the peripheralcountries.Apart from the Introduction, the dissertation consist six chapters. Chapter One isThe Decision Mechanism and Its Characteristics of U.S. Exchange Rate Policy. Inthis chapter, the author uses structure-function theory in political theory and systemtheory to frame the general process of governmental policymaking and decision inwhich initial conditions, policy input, policy decision, policy output, political systemand, international political and economic pattern are six key factors. Following these,this chapter generalizes the nature of American political system as “power sharingbased on institutional agency” in brevity. The author then gives three main politicaland economic characteristics in the process of U.S. exchange rate policy decision.Firstly, the Congress as the country’s legislative institution has the oversightauthorities over the government’s exchange rate policy. Secondly, the asymmetricalcooperation between the Treasury as one administrative branch and the Fed as oneindependent branch is the most important impetus for U.S. exchange rate policydecision. Thirdly, as one of the main aspects of American political and economicareas, domestic multiple economic interest groups are playing more and moreimportant role in the government’s exchange rate policy. Finally, the externalrestraints on U.S. exchange rate policy from foreign governments and their privateeconomic interest groups are increasing. In the last part of Chapter One, the authorlists three main adjustment logics in U.S. exchange rate policy. To begin with, thetiming of the Congress choosing to force the Treasury and the Fed to adjust theirexchange rate policy depends on the pressures from different interest groups at homeand abroad facing the Congressmen. Furthermore, the decision makers accept one double-level game strategy, i.e., they need not only take domestic interest groups’views into account, but consider the possible reaction from foreigners. Finally,whether interest groups have the willing and capacity to make the policymakersadjust their exchange rate policy, and to what extent they can do so are the function ofmultiple factors.Chapter Two is Interest Groups in the Making and Adjustment of U.S. ExchangeRate Policy. In this part, the author gives her own definition of interest group basedon the predecessors’ understandings, namely, the interest group is one organization orentity whose members have definite recognition and demands for common interestsand the one whose aim is to promote the common interests of its members. Inaddition, the chapter analyzes the evolution of interest group theory. Based on this,the author studies the relevant interest groups and their preferences for U.S. exchangerate policy. What’s more, this chapter thinks over interest groups’ collective actiondilemmas surrounding the exchange rate policy. In the last part, the author uses thedetailed data to analyze main resources and tactics deployed by interest groups toinfluence U.S. government’s exchange rate policy.Chapter Three is Interest Groups under the Bretton Woods System and theAdjustment of U.S. Exchange Rate Policy. At the beginning, the dissertation probesinto five factors which contribute to the silence of American interest groups in theearly stage of the Bretton Woods: the specialty of international monetary policy area;the insulation nature of the decision arena of international monetary policymaking;the orientation of the propaganda campaign conducted by the Treasury; the dilemmasof collective action; the relative closeness of American economy to the outside world.Additionally, this chapter analyzes the interest group politics surrounding threedifferent capital control programs: IET, VFCR, and FDIP. Finally, the authorresearches on the behavior of different interest groups at home and abroad from1968through1973and the adjustment of U.S. exchange rate policy in the Nixonadministration. Chapter Four is Interest Groups under the Post-Bretton Woods System and theAdjustment of U.S. Exchange Rate Policy. This chapter mainly analyzes four aspects:First, analyzes the effect of the first bout of strong dollar policy on U.S. domesticinterest groups and their subsequent intensive lobbying activities. Second, studies thecollective silence of U.S. domestic interest groups during the second bout of strongdollar policy. Third, researches the quiet influence of American financial communityon U.S. exchange rate policy. Finally, probes into the behaviors and roles of foreigninterest groups in the adjustment process of U.S. exchange rate policy.Chapter Five is Interest Groups and American Exchange Rate Diplomacy onChina. In this part, the author firstly looks back the origin of American exchange ratediplomacy on China, viz the underestimated Renminbi and the charge of China’scurrency manipulation. And then the chapter studies main private economic interestgroups in American exchange rate diplomacy on China, in which there are alliedlobbying activities from protectionist interest groups and the united resistantbehaviors of anti-protectionist pro-Sino economic interest groups-China Lobby. In thethird part, the author analyzes the Chinese government’s reaction to Americanpressure and its impact on American government. Finally, the author comparesdifferent capacities of China and Japan under the dollar standard in addressingpressures of exchange rate diplomacy from the United States, from which we canfigure out the short plate of American exchange rate diplomacy on China.Chapter Six is Conclusion and Prospects. This chapter briefly summarizes themain conclusions of the previous five chapters and gives the preliminary prospects forthe future research.