The ongoing march of economic globalization is sometimes blamed for eroding the sovereign authority of nation states. Some even point to this process as the impetus for the wave of populism currently gripping the world. National political struggles are increasingly characterized as tension between nationalist and globalist forces.
This tension is unlikely to subside any time soon, especially considering that one of the last and most secure bastions of national authority and identity is now under siege- the national currency.
When British and American planners met at Bretton Woods in 1944 to discuss the post-war economic order, much of the debate centered around the nature of the currency regime. There were those, including John Maynard Keynes, who advocated the creation of a single world currency, the “Bancor.” Others argued in favor of adopting the US dollar as the de facto world reserve currency. The latter camp, unsurprisingly, was composed mainly of Americans.
The critical question and the main stumbling block hindering the path to a single world currency, of course, was who would get to control it.
Whatever advantages a unified currency might have had, in the end, it was simply not politically expedient. Control over a national currency, along with government spending and taxation, is one of the main tools for managing a national economy. There is no “one size fits all” approach to monetary policy, and neither would most nations like to give up their right to influence or control their own monetary policy. And so the modern, dollar-centric monetary order was born.
The popularity of cryptocurrency stems largely from cracks that appeared in this system during the 2007-8 financial crisis. In spite of Bitcoin’s mercurial price fluctuations and the attendant rise of a tiny class of anarchist and libertarian nouveau riche, cryptocurrency is largely viewed as a fringe movement- a welcome alternative for hackers and social malcontents, but ultimately insignificant in the grand scheme of things.
Meanwhile, Facebook has demonstrated a terrifying growth impulse, expanding to encompass more than 2 billion users and gobbling up any potential challengers. In the past, when corporations grew to such a point, US antitrust laws kicked in and broke up burgeoning monopoly power, as in the case of AT&T or Standard Oil. And now Facebook founder Mark Zuckerberg is aiming to integrate payments and finance and onboard 2 billion users to what would instantly become at once the world’s largest currency union and the world’s biggest financial corporation.
Unsurprisingly, the social media juggernaut is facing a backlash for its stated intention to enter the currency arms race. US lawmakers are asking the tech giant to put its currency plans on hold while they conduct impact assessments- but asking is all they can do. The development of the currency is officially in the hands of a Swiss non-profit created by Facebook, effectively insulating it from any legal action by state actors.
Could Facebook undergo an evolutionary leap and bring to the international political sphere the same ruthless tactics which secured its success in the corporate world? As the Cambridge Analytica scandal clearly demonstrated, Facebook has amassed enough power to exert a decisive influence in national elections, leading some to go as far as labelling it an existential threat to democracy. Given Facebook’s already proven record of lax ethical standards, the notion of using the platform to subvert governments in its quest for more power is by no means implausible.
One of Facebook’s own founders has now gone as far as to call for breaking up its monopoly, but it’s unclear if this would even be possible at this point. Aside from the formidable legal team Facebook would be sure to assemble, it exists far more in an international dimension than any corporation involved in an antitrust suit in the past; only an estimated 170 million of Facebook’s 2.2 billion users are even American.
If we see a major shift away from national currencies, interest rates as a means of regulating investment, savings, and employment would be marginalized as policy tools, relegating central banks to a position of insignificance. As it stands, national currencies bear the standard of national pride by means of the symbolism depicted on bank notes. If they are largely superseded by digital currencies, it can only signify further erosion of national identity- and with it, the erosion of loyalty to the state that represents the nation.
In a sign that such a shift is already taking place, former IMF head Christine Lagarde, who is reported to be pro-cryptocurrency, was recently nominated as the new head of the European Central Bank. Lagarde has spoken in favor of developing national digital currencies.
We may be witnessing the end of the era of national monopolies on currency, and the emergence of a sort of monetary anarchy, where ideologically motivated decentralized currencies like Bitcoin compete with corporate and state currencies for a borderless market.
We don’t think of the current monetary system as being a monopoly, but that’s precisely what it is, and nothing illustrates this better than the apprehension expressed by regulators in the face of Facebook’s announcement.
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