Since the 1970s, many global political economists have been seeing the US as a declining hegemon. After four decades into this hegemonic decline, performance of economies having been regarded as candidates for new hegemons such as Germany/Europe and Japan fell far short of these expectations, while US share of the global economy and its military supremacy remained stable. This staying power of the US stems from the “dollar standard,” under which the US dollar is the dominant foreign reserve currency and international transaction medium in the world economy. The dollar standard originated in the Cold War era when all major capitalist powers relied on the US for military protection. It persisted after the end of Cold War, thanks to the continuous mutual reinforcement of the dollar standard and the global domination of the US military. The recent rise of China, which is the first major capitalist power outside the orbit of US military protection, poses a serious dilemma to the US. On the one hand, China’s export-oriented development drives China to purchase US Treasuries on a massive scale, hence lending support to the short-term viability of the dollar. On the other hand, US’s skyrocketing current account deficit, much attributable to China, precipitates a crisis of confidence over the dollar’s long-term prospects. China is likewise caught in a dilemma between sustaining its export-driven growth and shifting to a domestic-consumption-driven economy. The development of the US–China currency conflict, together with the transformation of the Chinese developmental model, will be the most important determinant shaping the future of the dollar standard and US global power in the years to come.
Hung, H. (2014), "Cold war and China in the (un)making of the global dollar standard", The United States in Decline (Political Power and Social Theory, Vol. 26), Emerald Group Publishing Limited, pp. 53-80. https://doi.org/10.1108/S0198-8719(2014)0000026003Download as .RIS
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