How can interdependent nations maintain fixed or managed exchange rates in open capital markets? Policymakers often find the answer in economic cooperation. Such a regime, however, did exist under the classical gold standard (1880-1914) without cooperation. This seeming paradox can be explained by a highly stable adjustment mechanism under the gold standard. While modern policymakers have relied on cooperation to make up for the lack of such a stable adjustment mechanism today, effective cooperation (i.e., substantive policies which address fundamental problems) and compliance have nonetheless been impeded by domestic political forces. These forces represent a myriad of domestic political actors (interest groups, the public, parties, technocrats) and processes (legislation, bureaucracy, elections) which elevate parochial economic interests over and above, and therefore often serve as roadblocks to, substantive diplomatic agreements that would address fundamental multilateral economic problems. Orchestrating viable schemes of cooperation and compliance will depend critically on the ability of policymakers to limit these domestic political distortions. The implications for G8 diplomacy are compelling. If negotiations are going to deliver the kinds of economic stability and performance desired, nations will have to increasingly infuse their diplomacy with a greater understanding of how domestic politics can condition international economic relations.