Are Monetary Unions inevitable?
Before I actually begin to write this new sub-series, I need to explain why I am doing it. To be honest, first and foremost, it is an academic exercise that aims to bring an assemblage of near-theoretical views on the question of root money, its telelogy and its methodology. When I entered the process of a rigourous research-oriented work, I was quite looking for an academic community around me to help me engage in a debate and persistent critique. When I looked around, it was astonishingly absent; the kind of day-to-day involvement with the theme and the problems under study, is almost missing. I was amidst a vast but dead sea of indifferent and narrowly-focussed semi-professionals. At last, the only way for me was to create an other of mine into the public domain so that I can have a dialogue with my own progress or illusion of it.
The first paper that came my way was the one titleld 'Are monetary unions inevitable?' by Benjamin J. Cohen that was published in 'International Studies Perspective (2003), Vol.4 pp.275-292.(available at http://www.ssrn.com/). It turned out to be quite an interesting one and truly critical of any mainstream thinking on the question of monetary unity. Cohen's area of specialization is spatial treatment of currency as is clear from his earlier book 'The Geography of Money(1998)'. To my surprise, Cohen turned out to be quite critical of the idea of monetary unity. His method of critique is quite fact-based. He studies almost all the possible currency zones of the world in order to show that the euro unlike others, was the result of quite a long process of erasing the minor factors of monetary unification despite the two biggest supporting factors- the presence of a regional hegemon and deep-rooted community feeling in the european community. Roughly, this period was around 40 years. If similar conditions are asssumed elsewhere, there should be a sufficiently long expectation of currency unity across the other regions. Cohen maintains that the monetary integration is not an idea which is being pursued very seriously elsewhere (particularly by regional hegemons). He describes the case-studies of American indifference vis-a-vis the proposed common currency of Amero between Canada and America and Australian callousness towards the zac-the proposed one between New Zealand and Australia. Things do not stand only here. He goes further to zones where the regional community orientation has been very active and institutionally very well-entrenched. e.g. the countries of GCC(Gulf Cooperation Council), East Asia, Western Africa and MERCOSUR in south America. He regards the widespread literature and views regarding unification as more of wishfulness and less based on the hard-core realpolitik of the regions.
No doubt, the paper stands on firm empirical and historical footing but it seems that Cohen has moved with a set of arguments that don't promise anything in terms of theoretical insight. When the move for currency unification was initiated, there was not much interface with the fundamental issues of the global political economy. The fact is that the world is a closed economy though regions can never hope to be the same. This closedness is built on the idea that there must be a universal reference point for all national economies, regional economies, private and public economies vis-a-vis which future and present prosperity can be actually measured. A centrifugal approach by nations in matters of currency has not helped the world much. If one goes for exchange fluctuations of all currencies over the last fifty years, there is not even a single currency which has been really stable and been able to keep the purchasing power of its people totally immune from the global currents. The whole monetary architecture, instead of being rock solid, stands quite amorphous, wayward and unstable. Had this kind of theoretical premise been built, there should have been more emphasis upon the stability of purchasing power of all currencies instead of their unification only. Of Course, unity is a move towards that but still not a sufficient one. The recent upsurge in the prices of gold, oil and other commodities is happening against the missing backdrop of a root currency of the world. Through which mode of money, the we and the whole world is safe, is yet to be established. So, that is why volatility remains high on the scene.
Cohen misses one more point how the regions interact with each other. His study is intra-regional but not inter-regional. e.g. if the world is divided into dollar zone, yen zone, yuan zone and eurozone and all these zones are further put across a single reference point of gold or SDR or even oil, can't we say that the world is far removed from the real stablity of prices and wages. Cohen misses this structural logic of the international political economy and instead, invests too much energy on an idea which is a kind of repeated statements of empirical findings but without any creative insight into the fundamental issue of global money.