Dollar Domination…

I handed in my first midterm paper here at Korbel this week. I have to say, it was a grueling experience, not because of the subject matter – no, it was a very interesting question (“Is more international trade always better?) – but because it’s been a while since I wrote an academic paper and my professor’s reputation precedes her in the grading department.

This elicits all kind of fear and self-doubt and consequently, repeated instances of the computerized version of ripping a half written page out of your notebook, scrunching it into a ball and hurling it across the room into the waste paper bin.

Professor Rachel Epstein, who teaches my International Political Economy class, is quite legendary at Korbel. You generally hear two things about her: She’s a hard grader, she teaches a very challenging class… and you have to take it if you get a chance!

For me there wasn’t much of a choice since IPE is a core, required class within the GFTEI program. However, even if it is not a requirement for you, should you come to Korbel, I highly suggest you take it too.

She is the type of professor, and her class is the type of class, that makes you feel like you owe it to her, yourself and the world to understand the issues and concepts and get a good grade. The stuff that gets covered is just THAT fundamental (and another good reason why I feel the GFTEI program is one worth pursuing).

On the other hand, it’s not often I think I could say that even if I get a crappy grade in a class I would still be just as happy that I took it. However, on balance, I think I could say that about Epstein’s IPE class.

International Political Economy, for those who may not be well acquainted with the subject, is about the power and politics that underpins international economic arrangements.

It’s also about the distributional and political consequences that flow from certain economic arrangements once they have come into being. Who wins and who loses from the pursuit of certain types of economic policies globally and what do we make of that?

So, for example, we look at trade and trade liberalisation/protectionism, how that is likely to come about or ebb away and why…who wins, who doesn’t?
Capital mobility across borders…why is there more capital mobility today than ever before and what are the political implications?
The IMF…why does it exist, who exerts influences over it and why does it pursue certain policies?

Each week we read seminal works in IPE that give us an insight into the intellectual underpinnings of some of the schools of thought that surround the main issues.

So far, as background, we’ve looked at different theories about what drives human behaviour and discussed the public policy implications of each of these sets of beliefs. So, for example, we’ve considered how the neoclassical confidence in “universal laws” of economics based on their assumption that we are all “rational, self-maximisers” has routinely under girded the IMF’s decision to pursue homogeneous economic policies in developing countries as a path to growth. Policies which have often proven unsuccessful and controversial.

A particular favourite reading of mine on this topic was that of behaviouralist, Dan Ariely, on how we are all “predictably irrational” and actually have no idea what we want or how much we are willing to pay for it and often come to conclusions on such matters on a totally arbitrary basis. Ariely suggests that once we understand how we are inherently wired to make “predictably irrational” decisions in our lives, we can confront this behaviour and make better decisions. It’s a compelling theory, and I suggest you take a look!

Stupid? No, just Predictably Irrational

We’ve also discussed theories of economic growth and stagnation. Why do different countries grow more than others at different times? Some say stagnation and decline are all to do with how interest groups impede growth to a greater extent as democracy deepens. Some say the entrenchment of property rights, along with the role of the State and an ideological belief in the legitimacy of the market are key to economic growth. Some don’t think economic growth is to do with either of these things.

We have looked at different theories of the pros and cons of international trade and of why it is more or less likely to be promoted or detracted from (The key being – does it promote global economic wellbeing, does more trade enhance or lessen international cooperation, and how does it affect the State and individual States‘ relative power and security within the international system).

Most recently, this week it was international monetary regimes, the gold standard, “dollar domination” and the implications for wealth, security and power within the international system that flow from the international monetary regimes that have existed since about…ooh…1870.

This particular issue of “dollar domination” is a fascinating one, if you ask me (it also evokes this image in my head but that’s besides the point…)

Such is this state of affairs taken for granted, I doubt that many Average Joes have ever stopped to ponder how it came to be that the dollar became the reserve currency of choice in the world and how that has affected America’s relative standing globally. This Average Joe certainly cannot pretend to have done so of late.

I also doubt that many Average Joes have stopped to ponder what the world and American would look like if the dollar was no longer the favored currency (Hint: America the Great probably wouldn‘t be so great anymore…).

However, this did not just turn out to the case out of coincidence, as we have discovered, and the likelihood that the Mighty Greenback will remain in this advantageous position and that the “peculiar privileges” this affords the US will continue to accrue going forward certainly cannot be taken for granted either. (Note: If you were paying any attention to the debate over the debt ceiling and the subsequent downgrading of the US government’s credit rating you will be somewhat acquainted with the type of event which could have potentially precipitated a massive flight out of US dollars, tipping the scales away from the US’ favour in this regard for the first time. Luckily for America, the Euro, the dollar’s main competitor as the “stable” currency du jour, is not doing so well either, so at the end of the day America won again and investors still consider the Greenback to be their favourite hideout from financial uncertainty…)


The class is hugely relevant to so much of what is going on in the world today. The financial crisis that began in 2008 and the European sovereign debt fiasco that is unfolding as I type this. Not to mention the tensions that exist between the US and China over trade, currency, and so much more.

On a lighter note, someone very cool who knows a whole lot about the importance of all of these things is strongly rumoured to be coming to the DU campus later this month…

See here for an analysis of why the POTUS is keen to keep visiting Colorado:

Posted on October 14, 2011, in Uncategorized. Bookmark the permalink. 1 Comment.

  1. America, Copulation Affirmative!!!

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