The hegemony of the dollar has long enraged governments worldwide. In the 1960s, the French complained about the “exorbitant privilege” of the United States. Forty years later, when the global financial crisis wreaked havoc, China requested a change of the dollar. More recently, the president of Brazil, Luiz Inacio Lula da Silva, spoke for many when he asked with mockery: “Who did he decide that the dollar was the currency after the disappearance of the gold standard?” The tacit response was that an American “empire” had prevented the dollar in a prostrated world.
In fact, when President Richard Nixon reduced the dollar bond with gold in 1971, finishing the last vestiges of the gold standard, US officials were fed up with the dollar’s mastery. The role of the currency seemed a burden under the post -war monetary system agreed in Bretton Woods in 1944, from the requirement of turning dollars into gold to the rigidity of the exchange rate that came with its central position, and now, in the midst of the economic tumult of the 1970s, it seemed a danger. The administration, as a senior economist of the White House said at that time, needed to “eliminate” the reserve currency of the dollar. In the heart of the Empire of the dollar, the policy formulators developed plans to degrade the state of Greenback and make it more similar to any other currency.
And yet, the dollar remained king during the 1970s and beyond. The reasons were many, especially that the international community was divided on how to reform the system: the potential alternatives were few and defective; The inertia admitted the status quo. Washington, unable to free himself from the responsibilities of monetary hegemony, realized that being king was not so bad. With floating exchange rates and the missing gold standard, the United States could print dollars and send them all over the world without having to give an ounce of gold in return.
The triumph after Bretton Woods of the dollar was a fundamental point in economic history. Since then, the world has been in a dollar standard, for good and, according to Lula et al, for Ill. Precisely what this domain implies and the powers it grants are the core of two new books. In King dollarPaul Blustein widely analyzes the backback, exploring its history, its competitors and its use as an economic war weapon. In Strangulation pointsEdward Fishman approaches geoeconomy, studying the growing sanctions of roles, largely backed by the domain of the dollar, they have played in the foreign policy of the United States.
Although the officials in the 1970s doubted at the beginning about the domain of the dollar, they soon welcomed the immense geopolitical leverage he offered. Since access to the dollar system was essential for governments and companies around the world, Washington could punish adversaries without firing a bullet when blocking their ability to perform dollars. As Fishman explains, when Iranian students assaulted the United States Embassy in Tehran in 1979, President Jimmy Carter imposed sanctions in the first request of the International Law on Emergency Economic Powers, the 1977 law that provides sanctioning authority until today. Carter’s response included a freezing at about $ 12 billion in Iranian assets, a blow that finally helped to take Tehran to the negotiating table and the hostage crisis to an end. The dollar was no longer only a currency but a weapon that could increase the power of the United States.
In later decades, Washington’s dependence on that weapon has only grown. Policy formulators have adopted sanctions as a reference tool, transforming the foreign policy of the United States and the global economy into the process. This increasingly broad battle is the focus for Fishman, a scholar of the University of Columbia and former government official. Divide the age of the economic war into four phases: the campaign against Iran’s nuclear development; the response to the first incursion of Vladimir Putin in Ukraine; the technological battle with China; and retaliation against the large -scale invasion of Russia of Ukraine in 2022. The economic war is the new normality, and Fishman does not see signs of a reduction in tensions, with the world committed to a “struggle for economic security that replaces the geopolitical map and ends globalization as we know it.”
Strangulation points It is a masterful narrative of the American economic war in the 21st century. While its division into more than 60 chapters, many of only four or five pages, can sometimes make reading, the clear and reflective writing of Fishman intertwines the story. It helps the book be about people as much as politics. In fact, it is a hymn of technocracy. Smart women and men, dedicated to public service, work long hours in state and treasure departments in high -stress situations, supporting exhausting international negotiations, all for relatively low wages. They design innovative solutions for apparently insoliente problems, devising, for example, a price limit in Russian oil to limit Moscow energy income while maintaining Russian production flowing.
One can despair that few of these public servants remain after Elon Musk’s encoders and trollers finish eviscer the bureaucracy. The brain leak in Washington will have disastrous effects for years, if not decades. At a minimum, the economic war approach will become much less strategic and much harder. Fishman already worries that “US economic warriors often shoot from the hip, forced to react to crises without much early planning.”
Although Fishman worked in some of the issues he narrates, he is eliminated from the narrative, there are no indications that he has been in the room, discussing a point or shaking his head disbelief. This approach gives the book an authorized tone as a work of history, but I would like not to be erased so thoroughly. He rarely provides his opinion about what he counts. Fishman concludes that the sanctions against Russia after its annexation of Crimea in 2014 were too weak, thus emboldeing to Putin, and provides some recommendations, such as the establishment of an Economic War Council, but the book asks for more analysis. After all, the United States registration has been decidedly mixed. The butcher shop of Putin continues, the China’s artificial intelligence sector is making a rapid progress, the dishonest regimes in Iran, North Korea and Venezuela remain in power. The reader wonders if the sanctions have fallen short due to strategic errors or design defects, or if they never had the opportunity to achieve anything else.
In the future, the power of the United States economic arsenal depends on a continuous domain in dollars. Fishman does not stop in the matter, although he warns that the erosion of the rule of law or the independence of the Federal Reserve could reduce the popularity of the dollar, possibilities that seem too plausible today.
For a longer meditation in the dollar, readers would do well to resort to Paul Blustein’s King dollarAn attractive story of the paper of the currency during the last century. Against Fishman, Blustein, a veteran economic journalist, does not shy away from expressing his opinions. The dedication establishes the tone: “To my grandchildren, whom I will always love unconditionally, even if they grow so that they like cryptography.”
While much of King dollar It covers a family land, it is an animated distillation of a complex theme. Blustein details the factors that drive the use of currency, the benefits of domain and potential costs, especially that the dollar is stronger against currencies of what would be, reducing the competitiveness of the United States. He argues that the domain of the dollar is worth these disadvantages and that today’s doomsayers are part of a long line of false prophets, from the eminent economist Charles Kindleberger stating that “the dollar is finished as international money” in the 1970s to the forecasts of euro hegemony at the beginning of the century.
In fact, Blustein believes that the forces that support the dollar are quite durable and the weak potential alternatives, which makes its domain “almost impregnable.” Even if the role of the dollar attenuates, it is not too worried. Financial stability could actually increase with more international currencies, he writes, because “a multipolar currency regime would create more shelters to flee during crises.”
Here, I would say Blustein is too optimistic. More shelters to flee can mean more flight; More flight can mean more instability. The volatile capital flows of the great depression made clear the dangers of a multipolar currency world.
But that is probably where we head. Despite Blustein’s trust in the dollar, this time it could really be different. The domain of the currency contains the seeds of its own ruin: it makes the sanctions so powerful that the policy formulators are tempted to use them more and more, which stimulates the search for alternatives and, ultimately, weakens both the sanctions and the domain. The current and potential future objectives of the sanctions are looking for non -dollars to cover their risks.
Finding or developing alternatives to the dollar is not easy; Over time, however, it seems inevitable. In addition, the dollar can be less attractive to allies as dysfunction in Washington intensifies. Although a clear alternative may not arise, a variety of networks and currencies could, including, to the probable horror of Blustein, cryptocurrencies, which already facilitate the evasion of sanctions and now have the primer of the president of the United States.
In the 1970s, the dollar emerged from the debris of Bretton Woods Supreme, despite Washington’s concern to assume that responsibility; Half a century later, the dollar could lose its status, despite Washington’s dependence for leverage. For those concerned with such decline, a fairly gloomy realization can offer some comfort.
The greatest threat to hegemony in dollars, argues Blustein, is that Washington could destroy the underlying pillars to the appeal of the currency: rule of law, application of contracts, government transparency, the unquestionable security of US treasures. If the role of the dollar fades because the United States becomes a basket case, the degraded state of the currency, writes, would be “the slightest of our concerns.” Much more would be wrong that there would be little time to cry the disappearance of King Dollar. We may discover how comforting this logic is before what we expect.
Strangulation points: how the global economy became a gun of war By Edward Fishman, Elliott & Thompson £ 25/Portfolio $ 40, 560 pages
King Dollar: The past and future of the dominant currency of the world By Paul Blustein, Yale £ 25/$ 35, 320 pages
Max Harris studies the history of global economic governance and is the author of ‘Monetary War and Peace: London, Washington, Paris, and the Tripartite Agreement of 1936’ ‘
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