Monetary Nationalism:
A Bad Idea at Home and Abroad
by Benn Steil and Manuel Hinds
Steil and Hinds focus on globalization, or “integration into the global marketplace for goods and capital.” Upon reviewing the history and significance of global expanding economic interaction, the authors provide a compelling historic case for discrediting arguments for monetary nationalism. Beginning with references to ancient documents that paved the way for ethical and efficient global trade, the authors show in great detail that early economies thrived with privately managed money well before government mandates or national currencies. Archeological evidence makes clear that ancient governments took control of local money creation not to facilitate commerce, but to extract revenues.
Meticulously demonstrated is the idea that monetary nationalism, with its many damages to trust and coexistence in international trade—the constant fluctuations of one currency against another, the erratic nature of exchange rates as they move without a fixed standard, failed promises and the devastating debt inherent to fiat monies, contractual tension and inevitable economic war—are the primary threats to globalization and progress in trade today. Equally defended is the fact that any arguments against globalization are actually arguments about the nature of the market itself. Grounded in failed or infeasible philosophies which cry any number of ills—unfair wealth distribution, a dissolving of national distinction in turning to a global commodity, or that since problems still exist in the market internationally government management of a national currency is essential—these are attacks against economic freedom and realities of market activity, and nothing more.
What is clarified by Steil and Hinds robustly is that this nationalism goes hand in hand with the kind of protectionism that has wrought economic disaster repeatedly in the past as governments attempted to politicize money and marginalize competitors (think war, tyranny, and genocide). Good money allows for good investments, and there is no investment made unless there is mutual benefit for involved parties. This principle extends to deals between countries. Currency as “a central instrument of integration,” when privately managed and valued, has the potential to create unprecedented unity and growth that government planners simply cannot achieve with their tariffs, quotas and prohibitions. The authors emphasize the impossibility for governments to reach all their stated financial objectives, and that attempting to use a monetary structure that relies on a false dichotomy of “our interests vs. their interests” will result in us jeopardizing our relationships with other nations every single time. We are retarding our advancement as a civilization in going back to the inefficiency of the earliest centuries, when trade and investment beyond a small geographical location was risky and impossible for most, because the value of their national currencies in other areas was unreliable and constantly changing.
Though these gentlemen are critical of current monetary policy, they acknowledge that to implement a more sensible standard like gold as a means of shifting to a more globalization-friendly path would be ineffective at this time (however, there is some thought given to possibilities for making the use of precious metals in a technological age standard practice once again). With politically obese central banks and fiscally passive leaders that would never bow to the demands of an international code of value, there is nothing short of a monopoly of government and its favorite businessmen over the destiny of our money. The authors conclude that if central banks do not resist the urges of “fiscally reckless legislators” private agencies could very well take over the job of maintain stable value for the countries’ currency (it would not be the first or last time the private sector offered to turn a government failure into an economic success).
Their critique completes by imploring us to consider how the future of the dollar rests on our willingness to acknowledge its dependency on the faith of foreign countries, and that without the accountability in restoring sound money and abandoning of misguided nationalism in currency, the central bank’s only legitimate undertakings to defend our “sovereignty” will lose meaning.
Student debaters will find that this resource has unique applications for any discussion regarding the global economy, the classical liberal/early American approach to money, international conflict resolution, or military/economic forecasts for current policy challenges.
While I suggest you be familiar with the basic terms and concepts surrounding the origin and nature of money (understanding the anatomy of the Federal Reserve system is also helpful, though not necessary), this is a true economic masterpiece that explains forthrightly and simply the inferno that will come about if we hold onto our broken paradigms obstructing free commerce between nations.
Lauren Blankenship is a former homeschool debater and a popular writer and speaker on monetary issues.