This book by Professor Catherine Schenck is disappointing without in any sense being a bad book; indeed, in parts it is a good book. It disappoints because the title arouses expectations that the book does not fulfil. The expectations are that there would be discussion of what an “international currency” is, of how and why a currency becomes one, of why the currency “retreats,” and of whether a retreat can be managed. We get only a little of this. Rather we get a detailed, carefully documented and embellished by interesting quotations, description of the international monetary system's evolution in the post-Second World War years, with particular emphasis on the attitudes and policies of various British governments to Britain's exchange rate, balance of payments, and international reserves.

There is discussion of the “international currency” issue in the book's introduction, and regrettably this discussion, while brief (a virtue) is not really helpful. No evidence is given for the statement that, “Politically as well as economically, sterling's international role has helped to define Britain's place in the world” (p. 1). That statement seems to me to set the analysis off on completely the wrong track. Sterling was a currency used well beyond Britain's borders because it had been the currency of what was not merely a major trading nation but for a substantial period the biggest economy in the world, and (to its cost) a major imperial power. Sterling was an international currency, in other words, because of Britain's role, and did not define that role. At times there was concern over the consequences for holders of the sterling balances of one policy course or another; but while there was concern and discussion among policymakers, the evidence that such concern ever influenced policy is slight.

And there are other problems. Many authors have written on why a currency is used in international trade—what determines which currency a country's exports and imports are priced in, what influences the use of a currency in trade between third parties, and so on. None of this literature (for example, Sven Grassman's seminal Exchange Reserves and the Financial Structure of Foreign Trade, Saxon House, Farnborough, 1973) is cited. Discussion of policy is equally unhelpful. The well-known result that a country cannot have a pegged exchange rate, freedom of capital movement, and monetary policy autonomy is cited—but not correctly. Rather it is described as a trilemma among pegged exchange rates, free capital movements, and policy sovereignty. The last is far wider than monetary autonomy, and not the same thing at all.

Then we are told that the Eurodollar market “grew rapidly in response to the increasing fragility of the pegged exchange rate system…” (p. 10) Not only no mention of regulation Q, but also I do not see how exchange rate system fragility can lead anyone to move their bank deposits and other liquid assets overseas but not change the currency in which it is denominated.

In short, the analytical framework used to address the subtitle of the book is not robust. But the body of the book is in considerable contrast. We are given an informative, and otherwise hard to find, exposition of the legal constraints on sterling's international use. The return to convertibility in the post War years is illuminatingly laid out in chapter one, as is, in the subsequent chapter, the growing influence of European integration, both political and economic, on sterling's international use. Indeed, chapters four to eight, Part Two of the book, usefully embed economic history in a political and institutional context. (Chapter 5 on the impact of relations with the United States of America and chapter 6 on the impact on and of the City are particularly interesting.)

Part Three is called “Sterling's Final Retreat, 1970–1992.” This too is interesting, and the emphasis on external influences on U.K. policy prompts reflection. But against that it does seem to go alongside what is surely a downplaying of domestic policy errors—and not just errors of execution from time to time, for everyone makes such mistakes, but rather of persistence in fundamentally misguided, contrary to all evidence, approaches to policy. One cannot claim that a preoccupation with the international role of sterling led to the ignoring of the importance of money and persistence in deluded beliefs about the efficacy of prices and incomes policies.

The concluding paragraph of this book really brings this weakness, this emphasis on the extremely interesting at the expense of the extremely important, to the fore. “The sterling crisis of 1976” certainly revealed how domestic policy incompetence had exposed sterling to “external pressure.” But that pressure was a minor consequence compared to those the British economy experienced—high unemployment, high inflation, disarray in the public finances, and low growth. Although this is a book about sterling, the domestic economy should not have been so downplayed.

But that said, this is in many ways a most interesting book. The analytical framework is awry; but there is much for those interested in this period, and British domestic and international economic policy, to consider.