The US would be better off without the global dollar

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Is the author Carnegie Endeem’s senior associate for international peace

There is equitable concern this month that the Trump administration’s “Liberation Day” tariff can reduce the global credibility of the US dollar in chaos in financial markets around the world. However, a more serious discussion of how the global role of the dollar affects the American economy should not be drawn.

The US economy economist should be identified as Dani Rodrick to maintain the role of dollar as the dominant “safe” coin An underlying conflict Between global integration and national sovereignty. He notes that countries that have chosen more global integration must renounce control over their domestic economy, while the countries that prefer to maintain domestic control must limit how open their economies are open to trade and capital flow.

In a hyperglobalized world it creates trade excitement. This is one thing if all countries prefer to give up the same degree control over their domestic economy in favor of globalization. If some big economies prefer to maintain control over their domestic economy, it is very different.

This is because internal and external economic imbalances in each country should always be alignment. When some nations control their external imbalances and restricting capital and trade flow to maintain the optimal domestic situation, they can effectively impose their internal imbalance on their trade partners who maintain less control over their trade and capital accounts. British economist Joan Robinson These are called The “monk-mai neighbor” trade policies and say they will eventually lead to global trade conflict.

For example, when a country suppresses domestic needs to subsidize its own production, the resulting trade surplus in an open global business environment can usually be reversed by market forces. However, it limits its trade and capital accounts and interferes with its currency, the country can prevent this national consistency. In this case its production trade surplus must be absorbed by its partners who use very little control over their trade and capital accounts. What’s more, the part of global production increases than the global demand part, it is more open Trade Partners must reduce.

This is why it is not just coincidence that the United States has a GDP share production with its deep, flexible and orderly financial markets The bottom of the global averageIn contrast to the economy like China with continuous surplus, those who have better production than global average. Industrial policies effectively reconstruct the economy of their more open trade partners in order to restructure the more controlled domestic economy.

It is clear that the recent trade and capital policies of Washington have been incorrect-President Donald Trump on Wednesday announced a 90-day break on “mutual” tariffs in most countries except China. These principles are less likely to be effective in dealing with the causes of US economic imbalances and keep the door open to increase the other subsidy, duty -free variants.

However, recognizing errors in these principles means that the structural problems they want to solve should not be dismissed. The truth remains that the global economic imbalance is real. The challenge is not that the United States should work to correct this imbalance, rather how it should be both effective and durable. The best solution is a more integrated approach to global economic administration, perhaps in the formation of a new customs union with the proposed lines of the Cains in 1944. To join, the countries must recognize the external consequences of their policies and take steps to keep domestic demand and domestic supply in the overall balance.

However, if the world is unable to come to this national agreement, the United States is just as fair to work unilaterally to restore its role in adjusting policy distortions abroad. The most effective way is by imposing control over the US capital account that limits surplus countries’ ability to balance their surplus by gaining US assets. Although it seems to be against the US policy under Trump at first, those who want to increase foreign direct investment, if proper capital controls are done, will have a very impact on direct investment in reality. A less effective way is to control the root causes of trade imbalance with bilateral tariffs, through controlling US trade accounts, a particular way.

Dollar domination in global trade and financing has long been considered as a net advantage for the American economy, but this hypothesis is increasingly challenging. Although it benefits the owners of the global owners of Wall Street and ongoing capital, these benefits spend on American manufacturers and farmers.

In a world where some countries actively operate their external imbalances and do not, and not to others, the role of the US dollar as the primary secure currency has enable the United States to the major of global economic distortions. To address this imbalance, a basic re -evaluation of global trade and capital flow requires a basic re -evaluation of the rules.