Introduction
The international monetary system is a system through which national currencies and regional currencies are exchanged for each other on the world market. Currencies of different countries in the world are of different strengths and value in the market.
Therefore, when they get in the international market as standards of exchange, they cannot be exchanged at the same rate or value. The international monetary system therefore lays down the rules that govern the exchange of different currencies of the world with the sole purpose of bringing in semblance and order.
The International Monetary Fund (IMF) is one of the organizations that have the duty of regulating the exchange of currencies on the world market by putting value on individual country’s currencies using the laid down parameters. However, questions have been raised on the necessity of the international monetary system and the need for a global currency.
Does a global economy require a global currency?
The global economy does not require a global currency. Though the world has opened up to become a global village in terms of trade and technology, there remains a formidable imbalance in the economic strengths of different countries.
A country’s economic strength is usually determined by the balance of payments, as well as the balance of trade. These are determined by value and amount of exports and imports that have been traded between the country and its trade partners. A positive balance of trade and payments will strengthen a given country’s economy.
However, its currency, the negative balance of payment, as well as its balance of trade will as well weaken the country’s currency and its economy. With the use of such market forces as determinants of currency value, the world has been able to trade for a long without a problem.
Although a global economy would be well off with a global currency, such a move would require the laying down of a global infrastructure to monitor and control the same with all players agreeing to the rules and regulations. This is not viable at all due to the differences that have been brought about by economic imbalances, which lead to work force and infrastructural imbalances in different countries (Gregorio 153).
An example of how a global currency cannot work at a minimum is the Euro and the Euro zone crisis. When different countries adopted the Euro in place of their own currencies, they did not see the problem of the Euro zone crisis coming. Weak economies like Greece have had to borrow a lot besides setting in austerity measures as a way coming out of their illustrious deficits.
This followed because of working at a level that was a bit higher than what its economy could support. This further led to the thought of reverting to its old currencies by the member countries using the Euro.
The world leading economies like the US whose currency is the reference point of exchange on the global market would not allow this to happen, as it would lose some of the influence that comes with different countries buying the dollar to trade on the global market.
Currency is a mode of identification to most countries. Therefore, ceding this identity for the purpose taking up global identity may not be acceptable.
Are International currencies parts of an Imperial Structure?
Yes, international currencies are parts of an imperial structure. The United States of America as a country has a policy of defending its interests against all other countries interests on all matters. One of these interests has been the trade on the global arena and the use of the dollar as the mode of exchange on the international market.
The US has an agenda to dominate the world at all levels, control it, and have its way in securing its interests. This kind of domination whether directly or indirectly is what can be described as imperialism that has so far been achieved by the use of the American dollar as a mode of exchange in the global market, as well as a measure of a given currency’s value as pegged to the dollar.
On the international market, price of most commodities especially oil is pegged to the dollar. Therefore, buying commodities on the international market requires one to buy the dollar first before he/she can now do the exchange (Smith 2). The American government on the other hand is the sole producer of the dollar. Thus, it controls the availability of the same on the market.
This type of control can be described as imperialist as it directly or indirectly controls the economies of other sovereign countries. The American government has resisted attempts by other countries to introduce gold as a mode of payment for their exports. This follows because such a move would diminish the American government’s influence on the global economy.
Countries keep the reserves of the American dollar in their own coffers for trading with it while at the same time using it as a measure of economic strength. China for example has a substantial reserve of the American dollar that it uses to spread its economic tentacles. Its massive reserve of the dollar has enabled it compete favorably in the international market.
On the other hand, it also uses its own currency, the Yen, to tip the balances of trade to its favor by devaluing it to make it praiseworthy cheap on the global market thus dominating the global market with its exports. Such dominance is imperialistic. Therefore, when countries use their currencies to the disadvantage of others, this is as well described as neo imperialism.
Is the international monetary system another example of Triadic regionalism and or the influence of BRICS?
The international monetary system can be seen as another example of Triadic regionalism. This is brought about by the desire of this group of countries to come together to form economic cooperation that would see the countries engage in similar economic policies for the sole purpose of preserving their economic powers and positions in the global market.
The Triadic regionalism concept in this case applies to the countries in the European Union, three countries in the North America (NAFTA), and some countries in East Asia forming the APT (ASEAN) regions. The three regional corporations control almost 80% of the world market.
The sole purpose of this kind of cooperation is to have a common purpose in terms of policy thus becoming a block that would give them a strong negotiating position (Hanggi 58). This is truly a form of international monetary system because it allows them to have a lot of economic control over trade, which in turn tips the balance of trade in the international market to their favor.
BRICS on the other hand was formed by countries aggrieved by the dominance of the Triadic regional block. Their sole purpose is to counter and reverse the gains made by the triadic group as a way of having a substantial share of the world market too. Both the Triadic group and BRICS can be described as International Monetary Systems because they have the same purpose in coming together.
The sole purpose of these groups is to find a way of removing barriers of trade from their target market at the same time protecting their own economies from the goods from other economic powerhouses, the sum total of it being to achieve favorable balances of trade in their economies.
This is meant to keep their currencies strong in the international market in a bid to afford them an opportunity to trade with weaker economies from an advantaged position.
Thus, to achieve this, they come up with conditions of trade that will control imports from certain countries at the same time allowing them to exploit the markets in the world market to their advantage. Therefore, the international monetary system is another example of BRIC’s, as well triadic regionalism.
Conclusion
The international monetary system was developed for the sole purpose of setting standards for trading in the international market. This followed because the volumes of trade between different countries had increased significantly thus raising the need for an order.
However, the tremendous economies took advantage of this arrangement to entrench themselves as the controlling powers of the same because they had developed their economies long before others thus raising the need to maintain the status quo.
Other developing countries whose economies were not as significant before, but have now developed, are also trying to take control of the markets in which they have strengths.
Countries like Brazil, India, and China have also come up strongly demanding a share of the same at the international trading front because of the advantages they believe they have against others. This kind of competition has simply led to the continuous readjustment of the international monetary system as time progresses.
Works Cited
Gregorio, Jose. “Adjustment in Global Economy.” World Economics 12.3 (2011): 153- 163. Print.
Hanggi, Holmes. “ASEM and the Construction of the New Triad.” Journal of Asia Pacific Economies 4.1(1999): 56-80. Print.
Smith, Neil. “Imperialism is A Paper Money Tiger.” The Libertarian Enterprise 638.1 (2011): 1-2. Print.