Glimpses of the Multipolar World

Sanskrit cosmopolis, reserve currencies, John Maynard Keynes, and proposals for a multipolar financial system to end the US dollar empire

Apr 08, 2023

Each week in my newsletter, I offer seven glimpses for seven days of the multipolar world. This week, I share glimpses of the Sanskrit cosmopolis, reserve currencies, John Maynard Keynes, and proposals for a multipolar financial system.

1. Gratitude

I am thankful to all my subscribers, readers, viewers and listeners. Your support means the world to me as I make my transition to life as an independent author.

2. What I am reading

I began reading Richard Eaton, India in the Persianate Age 1000-1765. This book brilliantly reconceived the periods of the history of India. It disputed the model inherited from European 19th/20th century history, of a threefold division of time between Ancient (Hindu), Medieval (Muslim) and Modern (Britsh colonial then Independence) periods. It introduced me to the fascinating concepts of the Sanskrit cosmopolis and the Persianate cultural influence on India. There will be more on Eaton’s book in future newsletters.

3. Governing the unruly multipolar world

I took a deep dive into the history of the idea of global reserve currency in the podcast this week. This episode was provoked by the outcry in America about other nations that showed the audacity to trade in their own national currencies rather than the US dollar.

I relied heavily on Adam Tooze, Crashed and The Deluge in making this episode, and also drew on John Darwin, After Tamerlane and Niall Ferguson, The Ascent of Money. There were a bunch of articles from the IMF and various business newspapers that I also consulted.

It intrigued me how much the idea of the multipolar world has been around. French President Sarkozy spoke of the multipolar world in 2008 in relation to the global financial crisis, and called for reforms to global institutions, including currency systems.

I also quoted on the podcast a brief phrase from the 2009 paper by the Governor of the Bank of China, Zhou Xiaochan. He referred to the unique historical circumstances that established the $US dollar as the global reserve currency, and the need to rethink the system. The fuller quotation from his statement is

“The outbreak of the current crisis and its spillover in the world have confronted us with a long-existing but still unanswered question, i.e., what kind of international reserve currency do we need to secure global financial stability and facilitate world economic growth, which was one of the purposes for establishing the IMF?
“ The acceptance of credit-based national currencies as major international reserve currencies, as is the case in the current system, is a rare special case in history. The crisis again calls for creative reform of the existing international monetary system towards an international reserve currency with a stable value, rule-based issuance and manageable supply, so as to achieve the objective of safeguarding global economic and financial stability.

That proposal for a multinational reserve currency system was taken up by the 2010 UN Conference on Trade and Development. But the US fought off the proposals tooth and nail, with the last three Presidents working to protect US hegemony. Nobel Peace Prize Winner Obama pursued an America First policy. What’s more he increased the use of economic sanctions and the reserve currency as weapons of economic war. Trump escalated the trade war, with China, regardless of fears of the mutually assured destruction, or the balance of financial terror. Then Biden unleashed the dogs of economic war on Russia, raided the Russian central bank and destroyed global trust in the Western rules based order of finance.

So we are in the place we are today. Let us hope our current circumstances lead to the return of the global monetary system, just like the international order, to its natural multipolar state.

4. Using history to live mindfully in the present.

I also comment in the podcast how commonly circulated histories of reserve currencies illustrate how, when thinking unmindfully about history, we often take a contemporary arrangement, created by unique circumstances, and project it back wrongly in time, as the system that operates universally across time and place.

The usual story is the USD became the global reserve currency after WW2, and before that the British pound, backed by the gold standard all the way back to the 1700s, and then before then the dominant European empires like the Dutch and the Spanish. Wikipedia, will even tell you that the Greek drachma, in the fifth century B.C.E., the Roman denari, and so on were global reserve currencies.

But this is not a true global history. Certainly the Spanish silver trade from the 16th century, linked Spain, most of Europe, the Americas, Phillipines and China, but the realities of the economies of the world then simply do not support the description of this as a ‘reserve currency’. Even the real global history of the 19th and 20th history is very different to the usual account of the Pax Brittanica establishing pound sterling and the gold standard as a rock solid reserve currency for the world.

Britain was a major financial power in the 19th century, but there was no global currency. Germany challenged it. And so did America. The gold standard or ‘reserve currency’ did not operate worldwide. India operated a different metallic standard. China did too. And the Americas, North and South, were something of a wild west. The ‘gold standard’ really only emerged in Europe in the last 30 years of the 19th century. Its success was also underpinned by discovery, extraction and exploitation of enormous gold deposits from British colonies - South Africa and Australia, especially from 1890s.

In summary, there was, if you like, a multipolar system of finance. For example, French and Russian state banks bailed out the British Barings bank in 1890 in a major collapse. As Jurgen Osterhammel wrote in The Transformation of the World: A Global History of the Nineteenth Century,

“In the world as it existed before 1914, there was a greater convergence of interests and spirit of cooperation in the field of monetary policy than in diplomacy and military affairs.”

As Adam Tooze explained in The Deluge, the American Century blew that apart. We need to get back to that spirit of cooperation and extend it globally, without a third world war.

5. Fragments from the Burning Archive

On the podcast I also refer to the proposal by John Maynard Keynes for a supranational ‘bancor’, or multilateral currency system. The proposal was put by Keynes and another economist Schumacher. You can read the actual article from 1943 that set out the concepts of a multilateral International Clearing Union.

Ed Tout explained the proposal

Under Keynes’s scheme, there was to be one world-central bank, the ICU. All member nations would be given an annual quota of Bancor, the bank’s currency, proportionate to their share of world trade. The distribution would be managed by the ICU board of trustees. Any country’s balance of payments which slipped into deficit or surplus would either be debited or credited in Bancor until balance had been restored. In theory, all countries would be incentivised to keep their trade in goods and services balanced, forgoing ‘beggar-thy-neighbour’ trade policies, which had led to the tariffs and other obstructions to trade in the 1930s.
To manage ‘hot money,’ financial stability would be maintained through the member central banks having fixed-but-flexible exchange rates between nations, and all currencies fixed to Bancor, with Bancor fixed to gold. The maintenance of these rates, the issuing of Bancor and the controlling of world gold reserves would each be the responsibility of the Governing Board of the ICU, a technocratic elite which Keynes assumed would be beholden to British and American interests.

IMF and Americans tend to portray Keynes as a defender of empire. His intellectual opponent was Harry White, a self-made man, who did not like Keynes’ aristocratic, gay style, and his Bloomsbury intellectual irony. Keynes wrote of his proposal that:

“The proposal] is complicated and novel and perhaps Utopian in the sense, not that it is impracticable, but that it assumes a higher degree of understanding, of the spirit of bold innovation, and of international co-operation and trust than it is safe or reasonable to assume.”

Keynes might have been a bit of a snob, but I can only hope we rediscover a better spirit of authentic cooperation and trust, amidst the growing conflicts in the world.

6. What surprised me most this week.

Well, I read with dismay about the USA and China both positioning aircraft carriers in the Taiwan Straits and talk of an economic blockage.

I also saw the extraordinary images of protesters in France breaking into the Black Rock offices in Paris like the Bastille in 1789. More on that next week.

7. Works-in-progress and published content

My next paid-subscribers-only post will be on Monday. It is an excerpt from my upcoming book, Thirteen Ways of Looking at a Bureaucrat.

This week my works-in-progress and published content were:

on the podcast I published Episode 95. The End of the US Dollar Empire
On the YouTube Channel I published videos - have a look and give them a like or comment:
I developed further materials for both my online courses on history.
I finished editing Thirteen Ways of Looking at a Bureaucrat, and exported it from Scrivener. Over the next few weeks I will write some new essays for this collection, and get it ready for publication
I laid low on Twitter this week.

Let me know if there are issues or topics you would like me to talk about on the podcast or the YouTube channel or even on the Sub-Stack.

Burning Archive