Thursday, October 18, 2007

Towards a Philosophy of Money-3

Modal Evolution of Money
The traditional approach towards capital seems to be quite simplistic. For Marxists, this was a class instrument that exploited the proletariat by denying them its control but for the liberalists, this was a tool of generating maximum efficiency into production activities. Marxists underestimated its range by ignoring the deeper processes of monetization of societies. The capitalist hold over socio-economic realm was not based upon direct exploitation but upon the indirect manufactured consent-driven hegemony. Its continuity was primarily due to the inherent changes in the character of capital which were exchange-centric rather than production-centric. Even the liberals could never usher a free society of trading states because capital turned out to be an instrument much more prone to instability than efficiency. They also missed out upon the basic equation of exchange between self and the other. As a result, the notion of capital remain trapped into an obvious simplicity while the case was not so.
The evolution of capital from the mode of production to the mode of exchange needs a theoretical perspective. Though the period under reference can be larger than even a century, for the purpose of ease, we shall examine the post-oil shock period because this one carries many fundamental changes in the evolution of currency e.g. the collapse of gold standard, dominance of petro-dollar, increasing debt profile of developing countries, emergence of Euro, rise of BRICs economies, increasing importance of networked societies, rise of global financial flows and increasing brittleness of global financial regimes. Adding to it, the formation of GATT and WTO, rise of MNCs, development of off-shoring, outsourcing and supply chain management has shocked the world out of its hegemonic structures. The contemporary global scenario presents a dominating trend of monetization of international relations. It’s a phenomenon that arose a bit independent of cold war politics and it did not end after the cold war ended. The fundamental design of world economy was much complex to be understood within the realm of bipolarity. The traditional Marxian understanding of the term capital had given way to new possibilities of meaning. The currency is that evolved form of capital where it is at once a tool of national power and also a tool of transcendence from national limitations. It carries paradoxically both the trends. That is why the notion of capital needs to be analyzed as to why this kind of behaviour is there.
1) Does it mean that currency is double-edged weapon instead of being a singular indicator?
2) If the whole process of appropriation happens at the level of exchange, should it mean that relations of exchange are more layered and important than the relations of production?
3) Does it imply that it enables currency to maintain an ambivalent relationship with the traditions of liberalism and realism?
4) Does that mean that a currency is a value-free entity that can be equally appropriated by any value-laden concept?

From national to regional and beyond- Locating the systemic realm of currency

In the vast tradition of liberal theories in International Relations, the concepts of economic interdependence, free trade, regional approaches to trade and liberal democracies have grown without developing a sound foundation of utilitarian approach towards money. The success of Euro holds serious lessons of monetary theory for the students of political economy.[1] There is also an emerging area of research towards the possibility of an Asian Currency Unit (ACU). The shift of definition from the national to regional is a semi-paradigm shift; from regional to the inter-regional would make it a total one. Even the elements of a global trading regime demand the construction of an objective transactional unit that saves the nations, trading blocs, peoples and companies from the ravages of value-fluctuations. Loss of value (inflation) is a disease that afflicts most of the national monies. The simple question is how to replace bad money with good money. Within “laws of peoples” as proposed by John Rawls, there remains scope for such a relational entity that ensures fair justice to one and all. How the issue of exchange can be delinked from the issues of equality as well as elimination of hegemony. Is full-fledged theory of free trade possible without a complete theory of a global root currency? Of course, it shall be a long journey but what is aimed here is to survey the broad indicators/possibilities within the available literature of IR theory. So, this shall be the first area of enquiry particularly within the liberal tradition so that the primary reasons for non-emergence of such an idea could be explored.
What we intend to do here is to attempt a hypothetical construction. If we assume that currency is a binary construct where one arm can be called the root one and the other arm can be called offshoot. This assumption gives an implicit recognition to the fundamental dynamism of relations of exchange. It also does not rule out the interference of many factors in value-fluctuations. It also helps to remember that whatever be the form of a currency, it is rooted in a reality that does have its teleological ends. The root currency is the currency with respect to what the nations, groups and individuals evaluate their growth, future worth and through which they conduct monetary transactions with the rest of the world. It responds only to larger time scales and retains the level of a standard in short and medium periods against which other things can be valued. The offshoot currency is that responds to shorter time scales and is not upheld as a viable standard for long in public eye. This assumption of binary nature of currency can be applied to anything- dollar, yuan, yen, euro, gold, oil etc. The notion of root currency is not a very common term yet all monetary transactions do carry a value-determining international standard behind them. It is a universal against which every exchange of goods and services finds and calculates its worth. It is something unavoidable in the global reality of today. The way a national currency is quite a personal matter for a nation, the root currency is an impersonal matter for a nation but who determines a root currency is a challenge that demands the participation of all the parties involved. It is not a value-neutral question. You either accept it or go against it. There is a peculiar predicament involved here. We rarely think that even monetary constructions are also a product of a deeply rooted thinking system. There is a certain relationship between knowledge and politics that aims to preserve and sustain not only self but also the support structures of the self. Whether it is an individual, a group or a nation, every one wants to hold on to a power structure that shall keep its position at least significant if not dominant.
It is proposed to delineate certain features of emergence of Euro on the basis of this assumption where Euro is supposed to be the set objective of root currency and all national currencies as the offshoot ones. There is available lot of literature on the emergence and aftereffects of this monetary union but what is desired here is that instead of being a unit-driven approach, there should be visible an implicit current of structural necessities because states can’t be rational agents in all kinds of situations. We need to establish the co-ordinates of transition of currency from one level to the other level. As far as such conceptual formations are missing, we cannot strengthen IR theory. So, the questions that need to be explored are
1) How are the boundaries of a currency constructed and what are the exogenous and endogenous assumptions working behind such a construction?
2) How does the political space redefine its boundaries and subjects and the notion of currency?
3) How the idea of political in terms of universal is absent and how it is related with the non-emergence of an international currency?

[1] Engdahl, F. William, “How the IMF Props Up the Bankrupt Dollar System?”
available at

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