The U.S. dollar, global instability, and the rationale for reforming the international monetary system

Abstract

The protectionist policies and economic measures adopted by the current Trump administration are not an unprecedented phenomenon, but rather a historical response to the decline of U.S. hegemony in the face of China's rise and the growing influence of the Brics countries. Following the instability of the interwar period and the proposals advanced by Keynes at the Bretton Woods Conference (1944), the supremacy of the U.S. dollar and the globalized finance capital — to which the real economy and international trade have become subordinated — gradually eroded the American manufacturing base in favor of China. Given the adverse effects of the free movement of speculative capital — which strengthens the dollar while undermining U.S. economic competitiveness —, Trump's protectionist policies can be understood as an attempt to reindustrialize the country and halt the erosion of its global leadership. Looking ahead, further tensions among nations appear likely, as overcoming global financial asymmetries requires institutional arrangements that a dollar-centered international monetary system, resistant to multilateralism, is ultimately unable to provide.