History, Politics and Economics
Edited by Joëlle Leclaire, Tae-Hee Jo and Jane Knodell
Chapter 11: The Global Crisis and the Future of the Dollar: Toward Bretton Woods 3?
11. The global crisis and the future of the dollar: toward Bretton Woods 3? Jörg Bibow INTRODUCTION In assessing the roots of the ongoing crisis and also the prospects for a sustained recovery, due account has to be taken of the central role of the US dollar in the world economy. The world monetary and financial order – with the US dollar as its hub – conditioned and induced particular macroeconomic policies in the rest of the world and in the USA, policies that led to the buildup of ‘global (and domestic) imbalances’ and underlying international (and domestic) credit structures. The Lehman crisis was a key event in their malign unwinding, and it prompted important policy responses around the world too. But certain underlying dynamics in the global economy may not change for as long as the dollar retains its special global status. Therefore, in weighing domestic policy options at the current juncture, it is important also to consider the future role of the dollar in an evolving and increasingly integrated world economy. GLOBALIZATION UNDER A DOLLAR-CENTERED GLOBAL MONETARY AND FINANCIAL ORDER The US economy has become more ‘open’ in terms of trade and investment flows, with correspondingly heightened vulnerabilities to external events that global linkages and interdependencies inevitably bring with them – a tendency called globalization that the USA shares more or less equally with much of the rest of the world. Even more important, the USA is not only unique in the world, but also uniquely important for standing at...
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