Herman Mark Schwartz

The Political Economy of Currency Internationalisation: The Case of the RMB

Germain, Randall, Herman Mark Schwartz. Review of International Studies 43, no. 3 (2017): 765-787.

The rise of China has sparked a debate about the economic and political consequences for the global economy of the internationalisation of the renminbi. We argue that the dominant focus of this literature – primarily the external conditions and requirements for a national currency to become an international currency – misspecifies the connections between the international and domestic requirements for currency internationalisation, as well as the potential to become the dominant international reserve currency. We correct this oversight by developing an integrated theoretical framework that highlights the domestic adjustment costs which a state must accommodate before its currency can carry the weight of internationalisation. These costs constitute a critical element of an international currency’s ‘political economy’, and they force states to negotiate contentious social trade-offs among competing domestic claims on finite public resources in a sustainable manner. Our analysis suggests that the likelihood of China being able to successfully negotiate the social costs associated with running a fully internationalised currency is currently very low, precisely because this will place unacceptable pressure on groups benefiting from the economic and political status quo. This further suggests that the American dollar will remain unchallenged as the global economy’s pre-eminent international currency for the foreseeable future.

Keywords: Money and Finance; Economic Competition

Contributor(s): Randall Germain and Herman Mark Schwartz
Keywords: Money and Finance, Strange-Influenced Works, 2010's
Source and Medium: Journal Article

Year of Publication: 2017

Strange Power Over Credit; or the Enduring Strength of US Structural-Power

Schwartz, Herman Mark. In Susan Strange and the Future of Global Political Economy: Power, Control and Transformation, edited by Randall Germain, 87-110. London: Routledge, 2016.

This chapter provides some retrospective comments on what Strange says on the nexus of money and power; and second, in the light of what she had to say, to assess her vision of where the monetary system is heading. Strange was certainly right that the dynamics of power and governance in global finance today are changing. A leaderless diffusion of power is generating greater uncertainty about the underlying rules of the game. The linkage between money and power was one of the most enduring themes in Strange's work. The US political scientists, Peter Bachrach and Morton Baratz, had pointed out that the direct action represented just one face of power, and perhaps not even the most important. The causal mechanism works along the lines of the sequential Stackelberg leadership model of game theory. The United States acts unilaterally, as it typically does, exploiting what is often described as its exorbitant privilege.

Keywords: Money and Finance; Hegemony; Structural Power, Power; General Framework

Contributor(s): Herman Mark Schwartz and Editor: Randall Germain
Keywords: Money and Finance, Hegemony, Structural Power, Power, Strange-Influenced Works, 2010's
Source and Medium: Book Chapter

Year of Publication: 2016