Globalization/deglobalization: lessons from liberal monetary orders

Economic globalization never proceeded in a smooth steady trajectory. The current international economy, organized around liberal principles, faces potential problems unleashed by the COVID-19 pandemic. Two popular theoretical approaches offer varying reasons for the survivability of the contemporary order. One stresses the benefits associated with participating in liberal international orders, claiming such arrangements are essentially self-sustaining. The rival view emphasizes the uneven distribution of gains, emphasizing the role of leadership, especially for dampening crises. To examine the support for each argument, I examine the evolution of international monetary arrangements. International monetary orders lie at the heart of liberal international economies; no prior liberal monetary order has proven self-sustaining. Liberal international monetary sub-orders depend upon leadership as much as cooperation for their survival—leaders exert efforts to shape followers' actions so long as the leader draws sufficient benefits to make such efforts worthwhile. The economic disruption caused by the COVID-19 pandemic provides the latest illustration of this point, though these arguments also suggest experiences across issue-areas will vary.

International Monetary Frameworks

In this chapter we turn to representing flows of funds in alternative international monetary frameworks, and what global liquidity these different frameworks provide. We first recall some arguments in favour of and against fixed exchange rate systems. We then introduce two international monetary arrangements of the past which imply fixed exchange rates, namely the gold standard and the Bretton Woods system, and recall why both eventually failed. We then turn to three international monetary frameworks in the context of the current paper standard, i.e. fixed exchange rate systems, flexible exchange rate systems, and the European monetary union. We explain the role of an international lender of last resort and related solutions, and how these allow for more leeway in running fixed exchange rate systems. We also show how banks and central bank balance sheets are affected by international flows of funds and the balance of payments. Finally, we briefly review recent developments of foreign currency reserves, being the key central bank balance sheet position in this context.

Guidelines for Submission to Ethics & International Affairs

The aim of Ethics & International Affairs, the journal of the Carnegie Council on Ethics and International Affairs, is to help close the gap between theory and practice (and between theorists and practitioners) by publishing original essays that integrate rigorous thinking about principles of justice and morality into discussions of practical dilemmas related to current policy developments, global institutional arrangements, and the conduct of important international actors. Theoretical discussions that originate in philosophy, religion, or the social sciences should connect with the interests of journalists, activists, policymakers, and citizens who are primarily concerned with assessing and reforming specific policies, as well as existing rules and institutions such as the United Nations, the World Bank, and the International Monetary Fund; arrangements governing trade, environmental protection, and the use of force; and the International Criminal Court and ad hoc tribunals that address genocide and past societal injustices.Recent issues of Ethics & International Affairs have contained articles on international monetary arrangements, immigration restrictions, the preventive use of force, global health, and climate change.

Developing Just Monetary Arrangements

International monetary arrangements–the practices and rules governing the creation, distribution, and management of money and credit in the world economy–have received little attention from philosophers concerned with international distributive justice. A convincing account of international distributive justice requires a description of how these arrangements should function. International monetary arrangements currently appear to have consequences that are incompatible with a global egalitarian conception of distributive justice.There are at least three categories of questions– relating respectively to money supply, exchange rates, and debt–that can be raised in the international context. First, who should have control over key monetary decisions, such as how much, and on what terms, money and credit are being supplied within each monetary zone? Should this control belong to the citizens of a given monetary zone and their representatives alone? How should the benefits arising from the ability to create money be distributed internationally? Second, should the stability of exchange rates be a goal and, if so, how should the responsibility for maintaining stability be apportioned? When adjustment of exchange rates is required, who should bear the burdens associated with such adjustment? Third, what arrangements should govern the accumulation and discharge of debt in the international setting? In what respects should debt contracted by states be governed by different rules than debt contracted by private agents? What forms of conditionality may be imposed by creditors, such as international institutions, governments, or private lenders, as part of a just framework of international borrowing and repayment? These questions exemplify rather than exhaust the dilemmas that arise with regard to international monetary arrangements. Global egalitarians should imagine the alternative forms that such arrangements can take as elements of a realistic utopia.