Revival: Europe: Journey to an Unknown Destination (1972) by Andrew Shonfield

Author:Andrew Shonfield [Shonfield, Andrew]
Language: eng
Format: epub
Tags: Political Science, General
ISBN: 9781351711005
Google: DK40DwAAQBAJ
Goodreads: 36706117
Publisher: Routledge
Published: 2017-09-08T00:00:00+00:00

Conflict over the Dollar

The new American political tactics, as they have emerged in the 1970s, appear to be an attempt to blackmail the Europeans into creating the collective authority which they lack by presenting them with the threat of massive inaction by the United States. The theory is that once the Europeans realize that the leadership and initiative are no longer coming from the Americans, they will produce some leadership of their own. This approach was much in evidence during the dollar crisis of the latter part of 1971 and afterwards. The Europeans are being told in effect that they must either put up their own substitute for the dollar system - or shut up, and accept the monetary arrangements that are designed to meet American convenience. I suspect that this ploy may have long-term consequences that the Americans may find by no means convenient. It is always risky to invite a number of people to look for a means of agreeing among themselves by ganging up against you. They may, after all, find one! The Europeans are genuinely irked by certain aspects of the American dominance of the world monetary system, and I believe that they could make their own financial arrangements much less dependent on the dollar, while stopping well short of the creation of a fully fledged European monetary union.

The argument is a little technical, but the main point is that the countries of the European Community might agree on a limited number of restrictive rules designed to control certain transactions in dollars and to reduce the use of dollars as part of their currency reserves. In that case they would in effect reduce the freedom of manoeuvre of all dollar-holders; and most of these are still Americans. They might also put the American Treasury in an awkward position if they decided that henceforth the dollar was no longer an acceptable asset to go into their currency reserves. There are already vast quantities of spare dollars in the hands of European central banks, and it is to be expected that they will try to reduce the amount and to agree on common rules restricting the future acquisition of dollars. We in Britain have some experience, through our attempts to deal with the problem of the wartime accumulation of sterling balances, of how a nation's freedom of manoeuvre may be constrained by the need to satisfy the foreign holders of its currency, especially at times when its own balance of payments is under pressure.

Once again there is here a built-in formula for feeding the fires of mutual resentment. For the Americans undoubtedly believe that offering the world the opportunity of converting itself to a dollar currency standard was a great service performed at considerable sacrifice to themselves. They emphasize the fact that in the course of it they lost control over their own currency, because so many other people outside the United States were using it. The Europeans do not deny this fact, but emphasize the very large financial advantages which the Americans have had in the process.

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