A Shared Currency for the Rest of the World

Photo by Greg Rosenke on Unsplash

William Adeleke is an academic in Kazakhstan — a sociologist with a focus on the economy and society. He had arrived at the conclusion that a form of guaranteed income using money created for that purpose was the solution to the problems for society associated with the existing economic system — specifically, poverty. He became aware of my paradigm and saw immediately that it represented precisely such a solution. He got in touch with me and we have become friends and allies, sharing thoughts about our paradigm while advocating for it. He is in the process of establishing an institute that will provide online courses explaining the paradigm, to be aimed at academics, ‘fellows’ in think-tanks, and officials in governments.

The point, for present purposes, is that he asked me recently for a more detailed response to the issue of instituting this monetary paradigm in poor nations: specifically, how it would help in paying for imports.

The truth is, I had not thought that issue all the way through. I have lived my whole live in the U.S. I developed my monetary paradigm in that cultural and economic context. While I have had no doubt that any nation that adopted this paradigm would be materially better off than it is at present, the specific issues facing smaller, poorer nations with fundamental issues concerning international acceptance of their currencies had not at any point completely occupied my mind.

My short response to my friend’s query is that in any nations in which imports always significantly exceed exports and are necessary to provide the essentials for the ongoing functioning of society, with this paradigm in place they would in reality be printing money to purchase those imports. That presents a problem.

This paradigm functions for an economy much like growing rice is accomplished. In the latter the fields constantly are flooded with water, with the excess drained away. With this monetary paradigm the economy is constantly flooded with money in the form of an income for (eligible) citizens and (optionally, but presumably undertaken) funding for all government based on the nation’s population (thus eliminating taxes/public debt). ‘Excess’ money is captured and returned to its issuer (either the existing central bank or a newly created Monetary Entity), to be re-issued as income to individuals and (presumably) funding for government. Like the rice fields, individuals and businesses would retain plentiful pools of money (based on annualized income).

If this monetary paradigm were to be instituted in a ‘closed’ economy, i.e., no exports or imports, there would be no problem. On the face of it, a nation with no imports or exports would be self-sufficient.

Exports represent more money coming into a nation’s economy and imports are money leaving it. For a nation with this paradigm in place, if exports were exceeding imports there would simply be more money in the economy, meaning more would be captured by the issuer of money. In any nation in which imports exceeded exports, with this paradigm in place money would be in a very real sense being printed to pay for imports.

The question is, why would the sellers of those imports accept such money in payment?

It is a question of the viability of a nation’s currency. For big, economically strong international entities like the U.S., the E.U., Japan, China, and a few others, the viability of the currency is beyond question (for purposes of international trade, at least). For smaller, poorer nations it is a major issue.

[More technically, the world is divided into nations with ‘hard’ currencies and ‘other’ currencies; conversions back and forth are based on exchange rates set by speculators, (supposedly) based on their perceptions of a nation’s economic viability (but in reality mostly simply deviations from established norms that give rise to opportunities for ‘profit-taking’ — thus tending to put any nation with a ‘weaker’ currency that had somehow increased in value ‘back in its place’).]

The best solution for all nations that are not big enough or rich enough to have an unquestionably valid currency would be to band together to share a common currency. The E.U. serves as an example. The nations of the E.U. share a common currency. Individually, only a few of those nations are economically big enough and strong enough to have an unquestionably valid currency. Together, those nations are about the economic equal of the U.S.

Even though those nations share a (roughly) common culture — or at least, for better and worse, a common history — sharing a common currency is not easy. The major issue is sovereignty: how much independence nations are willing to forego for the sake of the commonweal. For a large group of nations that share nothing in common to establish a geopolitical unit similar to the E.U. would be a difficult trick, indeed.

A common currency that would in no way compromise national sovereignty would be quite another matter altogether. That is what this paradigm offers.

There would a single Monetary Entity that would serve all nations sharing the currency. It would issue money to the member nations (through their central banks) for purposes of paying the income to eligible individuals and funding government (for the nations that chose that option). How each nation spent its money would be of no concern to the Monetary Entity. Any ‘excess’ money would be remitted by each nation’s central bank to the common Entity, to be recirculated.

In that way imports and exports among the member nations would be of no consequence: their internal balances of trade would not affect the flow of money into the economy of any member nation. As for the collection of ‘excess’ money, that would be a matter pertaining to individual persons and businesses, and not related to nationality in any way. The monetary union would be, as a unit, economically big enough and strong enough to make the common currency internationally viable for trade with other nations.

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Stephen Yearwood

unaffiliated, non-ideological, unpaid: M.A. in political economy (where philosophy and economics intersect) with a focus in money/distributive justice