Dealing fairly with trade imbalances in monetary unions

Abstract

Politicians around the globe wrangle about how to deal with trade imbalances. In the Eurozone, members running a trade deficit accuse members running a surplus of forcing them into deficit. Yet political philosophers have largely overlooked issues of justice related to trade imbalances. I address three such issues. First, what, if anything, is wrong with trade imbalances? I argue that in monetary unions, trade imbalances can lead to domination between member states. Second, who should bear the burden of rebalancing trade? I argue that surplus and deficit countries should share that burden. The current situation placing the burden squarely on deficit countries is unjust. Third, which institutional arrangements should monetary unions adopt to regulate trade balances? Monetary unions can either reduce trade imbalances within the monetary union, neutralise the impact of trade imbalances on the economic sovereignty of member states, or delegate economic policy affecting trade balances to a legitimate supranational institution. The Eurozone must adopt one of these options to prevent member states from domination. Which option protects members best against domination depends on what makes interference between members arbitrary, an unresolved question in republican theories of justice.

Rethinking Monetary Sovereignty: The Global Credit Money System and the State

“…In putting forward this new conception of monetary sovereignty, we contribute not only to IPE scholarship but also to the emerging normative literature on the global monetary system (Bruin et al 2018; Cordelli and Levy 2021; Herzog 2021; A. James 2012; Meyer 2021; Viehoff 2018; Wiedenbrüg 2021; Wollner 2018). As we show, understanding when states are able to achieve their economic policy objectives is crucial for determining what states in a vastly unequal and opaque monetary order owe to each other as a matter of justice.…”