The Role of Hegemony in the Status of the Euro
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This paper analyzes the question of whether a global economic trading system could be established without a hegemon like Great Britain or the US, and whether these countries are interdependent economic entities that are responsible for how the global system functions. The paper explains that realists believe the system works best with the presence of a hegemon, where liberals believe that the system functions most fairly by economic interdependence between nations. The paper asserts that the basis for the hegemonic theory can best be referenced by the role of British domination of international trading during the 19th Century with its Gold Standard policy, as well by the U.S. leadership in rebuilding the global economy after World War II with the support of the Dollar-Gold Standard of the Bretton Woods system up until the early 1970s. The paper concludes that while liberals and realists both see replacement of the dollar by the Euro as a matter of time, realists believe that during the time taken for the EU to develop the liquidity of the Euro, the U.S. would have time to ensure the value of the dollar responds in kind.
From the Paper:"Admittedly, the collapse of the Gold Standard was a direct effect of World War I, for European nations sold all their gold assets to finance their war efforts and in turn amassed large deficits; in addition, they continued to borrow extensively from nations that were largely unscathed by the conflict, such as the United States, after the War was over in order to pay off previous loans. Realists believe that the Gold Standard failed because of the decline of Great Britain as the hegemon, whereas liberals see the beginning of an eventual failure of the Gold Standard as a result of external political/economic forces that were precipitated prior to the outbreak of War, such as the German unification in 1871. Offsetting the power balance of Europe, the German unification added more competition to the a new market economy that quickly offset Britain's competitive position and further contributed towards an alternative to one medium of exchange in a marketplace dominated by one power. This in turn would further contribute to the weakened role of a hegemonic trading power as the likes of Great Britain had trouble competing with a confluence of economic substitutes and exchange alternatives offered by a mass market in a new Germany. Realists would most likely purport that as Britain's capacity waned and power prestige was replaced by the emerging United States, the Great Depression's severity spread across the globe because Britain failed to assume its role as hegemon and the United States halted loans to financially and physically battered Europe. Liberals would argue back that it was unilateral policies such as enacting of the Smoot-Hawley Tariff and the ensuing trade protectionist reactions of other nations that plunged the entire system in a world-wide structural depression."
Sample of Sources Used:
- Eichengreen, Barry. Capital Flows and Crises. 2004
- Gilpin, Robert and Jean. Global Political Economy: Understanding the International Economic Order. 2001.
- Spero, Joan Edelman and Jeffrey A. Hart. The Politics of International Relations. 1999
Cite this Analytical Essay:
The Role of Hegemony in the Status of the Euro (2010, August 13) Retrieved January 30, 2023, from https://www.academon.com/analytical-essay/the-role-of-hegemony-in-the-status-of-the-euro-128820/
"The Role of Hegemony in the Status of the Euro" 13 August 2010. Web. 30 January. 2023. <https://www.academon.com/analytical-essay/the-role-of-hegemony-in-the-status-of-the-euro-128820/>