It has been a year since we have been aware of the severe financial downturn that has crippled the global economy. Since then, banking systems, financial networks, and nations have teetered on the point of insolvency. We have reached a period of uncertainty that rivals any in the history of modern economics, and our anxieties are aggravated by a desire for clarity and salvation of Promethean proportions.
Even still, our financial experts have yet to provide us with solutions that help us understand how deep these problems run. The problems plaguing our system are myriad, and despite widespread corruption, a consumer culture run amok, and an outdated industrial system, there are also systemic issues that need be addressed. It has become clear over the past decade that the integration of economies throughout the globe has not been followed by a structural apparatus to help us measure the status and well-being of the global economy.
If you ask the average person how they measure the well-being of the economy, they will most likely tell you that the jobless rate and the stock markets are the sources that garner their attention. Others will tell you that GDP, Interest Rates, and the strength of a given currency are important, and some will say they monitor foreign markets. Each of these indicators are undoubtedly essential, but they fail to take into account the very problem we face in today's economy: no markets are foreign, productivity in this country influences productivity elsewhere, and ultimately, the faith we put in our dollar goes only as far as we understand it to have stability across a wide range of geo-political concerns, including two wars and a pervasive energy crisis. If such a statement sounds redundant, if you've heard this discussion take place before, then why has it gone unsaid in the face of the obvious that we need global measures to help us understand how far deep our problems go, and more importantly, which direction must we turn to make our way toward a stable and sustainable economy?
Many regions of the world, for example West Africa and the Middle East are moving toward regional currencies among partner nations. However, these gestures toward a regional currency suffer from the same problem that national currencies do. They carry with them geo-political baggage. People share a currency only when national ideologies are amenable to financial cooperation. The Euro is in existence only because Europe appears to have a common heritage that makes a common currency seem tenable. The same happened in the United States at the end of the Civil War when state currencies slowly receded in favor of a currency backed by gold and silver only after political stability was established and questions of national integrity seemed resolved. Currency serves as an ideological placeholder for concerns beyond those of capital, and for this reason, it serves us well to understand how a global currency is untenable at this time. Simultaneously, we must distinguish between the need for a global currency and a global measure of currency; the latter, I believe is practical and necessary.
In 2007, Benn Steil, director of International Economics for the Council on Foreign Relations called for the end of "monetary nationalism," asserting that multinational currencies such as the dollar, Euro, and yen are examples of a trend towards a currency that is unencumbered by the policies of institutions that cannot reconcile their financial interests with the problem of national sovereignty. Others have suggested the establishment of global currencies such as the "dey," an amalgam of the world's dominant currencies. These well-intended suggestions go largely unheard because they resonate as threats to national identities. We often operate under the assumption that currencies are somehow free of the ideologies and cultural heritage of the economies that produced them. But money is a highly-sophisticated form of language. To ask a group of people to give up their currency is akin to asking someone to speak a new language overnight or to immediately surrender their system of laws in favor of a new justice system. Furthermore, we must be mindful of the practicalities involved in controlling the printing of money and the determination of monetary policy. These issues are largely sustained by national governments, and are therefore difficult to negotiate at the global level. Just as questions of sovereignty cannot be solved overnight, neither can the question of global financial parity.
However, the mere presence of this discussion brings to our attention that we operate under multiple cultural systems at once. The global financial crisis itself is evidence that a distinct global heritage exists and increases our awareness that we live in a world where we constantly negotiate among multiple sovereignties, and our national interests are merely a component of a broader schema of things we must account for as "flexible citizens." Thus, we need to make small, manageable steps toward a holistic critical approach to the current financial climate. To this end, I suggest the following:
1. We must formulate two standard measurements of a global currency. The first must be a nominal currency, meaning it should be based on the price level of goods and services that can achieve a long term equilibrium exchange rate with other currencies that account for the same goods and services. It can be configured as an average among a basket of currencies throughout the world, just as the European Currency Unit served as a unit of account for European currencies before the introduction of the Euro in 1999. Call it the Global Currency Unit, keeping in mind that before any currency can exist, a general system of account must become a part of our financial consciousness. The ECU did that for the Euro, and I suggest it is necessary to do so now for the global market.
2. The second unit of measurement should be a normative currency. The global economy did not reach financial ruin simply because it was a mystical process beyond the grasp of our provincial minds. It resulted in part because there seldom exists a unit of measurement that doubles as its own critical apparatus. In other words, a standard needs to exist to ensure that, for the sake of a sustainable economy, we are paying attention to goods and services that are actually good for the planet and its inhabitants. A normative currency would take into account goods and services such as renewable energy products, potable water, sustainable agriculture and low-yield infrastructure. Unless a global index is constructed for these products, national interests, particularly those of petrol-rich and petrol-dependent states will only measure the economy in relation to its highest present-value. For this reason, a normative currency acts as a way to measure the scope of the global economy in relation to its sustainability.
3. These two units should be published alongside domestic financial measures. Financial media, including our most prominent financial journals, should make efforts to publish these measurements concurrently with national measures and should encourage a debate about the significance of these numbers in relation to our current system of measuring the economy.
4. These measurements must remain theoretical and should be discussed and debated. If a global cultural heritage is sustainable, in time, a currency will be one of many questions that will be deliberated alongside questions of national sovereignty, and the role that global society has in relation to its local and regional incarnations. But these deliberations cannot be rushed, nor are they as arbitrary as we would like to think. Proposing a global currency as a theoretical measurement is a reminder of the presence of a global structure with limited authority over our daily lives, but one that has far-reaching and undeniable impacts on our social and financial well-being.
5. We must recognize and continue to educate our populace about our current system of currency. For example, our current currency is a fiat system, meaning that our real dollars are determined not by the supply of gold in the economy but by our ability to govern ourselves. As a result, we must contend with the fact that the health of our currencies depends on our ability to plan and organize a sound financial system. This also means that if we are serious about addressing this crisis in the long term, we must be willing and able to standardize the way we measure the economy, just as we did during the Bretton Woods Accords, to regulate international monetary and financial order at the conclusion of World War II, that established the World Bank and the International Monetary Fund, among other important global financial institutions. In time, if good measurements are put in place today, global financial security will become recognizable to citizens across the globe. That is the very nature of a currency based on faith. It must have the ability to make people conscious of its significance to their own lives. Keeping this in mind as we construct global measures is a way for us to keep ourselves honest about the huge responsibility we have to ourselves and our neighbors as we try to make sense of the world we have built for ourselves. Thus, governments should resolve to lend authority to these measures by participating in their standardization and dissemination.
Most economists would agree that this is a necessary first step. I have simply tempered the argument by drawing attention to the fact that these measurements are practical, necessary, and do not require a full currency to have real value to our present troubles. Without these measures, we will continue to beat our heads against fiscal barriers of our own design. Without a global unit of account, we will continue to operate under an economy of fear, the bane of any investment-based economy, because no beast lurks so eerily as the one that lurks in the dark. No one knows how far down the bottom of this financial crisis lies, and until we begin to think parallel to the forces that push us downward, we never will.