The political economy of the dollar

extended version of the lecture given at the University of Warwick on Nov. 9, 1978

• Fred Hirsch's last dicta: "A controlled disintegration in the world economy is a legitimate objective for the 1980's"… The phrase captures what seems to me the prevailing attitudes and practices of most gov­ernments in this decade.
• We live in a world in which individuals and busi­nessmen… they want to do so unencumbered by national boundaries. At the same time, modern democracies, at least as much as other forms of government, long for autonomy; they want to control their own destinies in ways responsive to the needs of an electorate often concerned less with na­tional than with local or sectorial interests. Yet, theory and experience indicate we can’t have it both ways, full integration and full autonomy.
• The happy days of Bretton Woods, often viewed today with nostalgia, were a special case, workable because of a particular economic and political setting… the inherent contradictions in the system were too great. With the benefit of hindsight, it would seem that an erosion of the United States competitive position was implicit in the postwar arrangements.
• I start from the premise that the underlying pres­sures toward integration and interdependence are growing stronger, not weaker. We cannot reverse or stop the advancing technology that brings us fast and cheap communication and transportation, or the spread of knowledge.
• There does seem to me a latent danger— no part of the intention of present European leaders— implicit in the development [of the euro]. Regional monetary unity implies a greater degree of visible loss of autonomy for mem­ber countries; yet national econom ic problems will remain. The temptation could arise to solve some of these regional adjustment problems within Europe by direct subsidies to producers, by protection against the outside world, or by other means damaging to the trading opportunities of others.