The first lecture in a series on ‘Globalisation in Question’:
Is Dollar Hegemony Inevitable? Possibilities for Reform in the Global Reserve System
|Prof Anush Kapadia|
The global reserve system is dominated by a single currency, the US dollar, in which the vast bulk of global trade and finance is conducted. This currency hegemony gives the world’s only superpower the exorbitant privilege of having its own liabilities function as the global currency. Several scholars argue that the scale of this privilege help seed the financial crisis of 2007. Emerging markets poured their savings into dollar-denominated debt, creating a flood of cheap credit that lead to wild speculation and subsequent collapse. Since the crisis, several reform measures for this destabilising global reserve system have been suggested, with speculation on everything from a return to the gold standard, an elevation of the IMF’s Special Drawing Right (SDR), and the rise of the Chinese Renminbi being discussed. This lecture offers a systemic account of how the global reserve system works in order to evaluate these claims. It argues that that global currencies will continue to be nationally based, hence reforms will have to focus on international institutions capable of disciplining the (existing and/or rising) hegemon rather than creating new synthetic currencies like the SDR.
Prof Anush Kapadia teaches sociology in the Humanities and Social Sciences Department at the Indian Institute of Technology, Bombay. He has studied at Amherst College and Columbia University, having completed his doctoral thesis in anthropology in 2009. Prior to IIT Bombay, Prof. Kapadia taught at City University, London and Harvard University. His research focuses on the politics of financial systems, trying to understand how system-design choices are also political choices, and how these choices lead to macro-social outcomes such as growth or crises.
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