Grant Voytovich-Blog 3
Grant Voytovich
POLS 170
Blog
Cohen discusses how power has shifted in the international monetary relations in recent decades, and how the power is more widely spread after certain events. He says that it is no longer a few countries dominating the finances, which wasn’t what it used to be before. I believe that the some of the biggest shifts in international monetary power happened when the Bretton Woods system was created, then Nixon taking the United States dollar off of the gold standard, when different currencies were created for different countries, and when International Organizations were created. The Bretton Woods system was created at the Bretton Woods conference in 1944, and it was set up so that countries could have a fixed currency exchange rate centered around gold. This system hoped to create stability among countries that were involved, to limit devaluations, and to grow economies. It was centered around the United States Dollar. There wasn’t a common ground for currency before this was created. This spread out power, and ensured that one countries currency wasn’t more valuable than another’s. The Bretton Woods meeting also created the World Bank and the International Monetary Fund. The IMF ensures the stability of the countries involved, and the World Bank tries to build disadvantaged countries. Both of these things spread power to countries who aren’t at the “top” economically, and gives them a chance to grow. Another shift in power happened when President Nixon ended the Gold Standard. The United States of America had inflation problems, so he addressed this by stopping the gold window. The Gold Standard didn’t promote financial stability like they had hoped, so they decided it was better to stop it. This also created a shift in power, but it probably gave more power to the richer countries because they could go back to their own currency in international markets. Another shift in power happens when new currencies are created. A new currency slightly takes away from existing currencies, which promotes the balance of power that Cohen talks about. For example, when the Euro was created, countries that adopted the Euro would benefit. When the Kuna was created, which is the currency in Croatia, Croatia will gain international monetary power from this. It will also slightly take away from existing currencies, like I stated above. So, this is why international monetary power has become more diverse over time; countries established their own currency, which gave power to them, and in turn took away from bigger, existing countries. When they have their own currency, the more freedom they have with their decisions. The more that smaller countries get involved in international monetary power, the more spread out the power becomes.
Great read, Grant! Your point about the shift in the monetary power balance as new currencies are introduced to the market is very interesting - I had originally thought that power was very concentrated in global superpowers like the US, China, Russia etc. I totally agree with you and Cohen that power has become more widely diffuse/distributed. I think that leaders definitely need to balance autonomy and power/influence (the two components of monetary power). I totally agree with you that one of the biggest shifters in international monetary policy was the Bretton Woods conference because they decided that exchange rates would be pegged to the US dollar and the IMF and the World Bank were created. If I am correct, you are saying that with the creation of the IMF/World Bank, smaller, undeveloped countries or emerging markets are able to get involved in international monetary power (and have their own currency - making power distributed more evenly). But how evenly distributed are the benefits of globalization? Is the IMF definitely making a huge impact/making it better for these countries not at the 'top' (economically speaking) to grow?
ReplyDeleteThanks Brooke! I think that's a great point that you bring up about the distribution of globalization. Kameron mentioned in his blog the disadvantages of International Organizations, like the IMF and the World Bank. I don't think that we can say for sure that they are positively impacting every country that isn't at the top. There has been shifts within the IMF that made them focus on economy as a whole instead of the smaller countries, economically speaking. So, while the IMF doesn't positively affect every "smaller" country, I do think that they still play a role for some of them.
DeleteI think your blog is great. I think you made some great points about how few countries are no longer financial dominating. I also liked how you tied it to the IMF and the World Bank. Do you think the IMF and World Bank are useful today, and should stay in tact?
ReplyDeleteThanks Kameron! I think that the IMF and World Bank have become less trustworthy over the years, but I think getting rid of them completely would be extremely difficult. It would be tough to finance the poor countries if the World Bank is eliminated, so I think there almost has to be a middle group at all times. I don't think that middle group has to be the IMF or World Bank, but I think there should be something in place for the poor countries.
Delete