Research
You will find a complete range of our monographs, muti-authored and edited works including peer-reviewed, original scholarly research across the social sciences and aligned disciplines. We publish long and short form research and you can browse the complete Bristol University Press and Policy Press archive.
Policy Press also publishes policy reviews and polemic work which aim to challenge policy and practice in certain fields. These books have a practitioner in mind and are practical, accessible in style, as well as being academically sound and referenced.
Books: Research
The COVID-19 pandemic generated crisis of 2020–1 could not be more different in content and character as compared with the crisis generated by Russia’s invasion of the Ukraine in early 2022. Nevertheless, having had in common a destructive impact on the global economy, both of these crises have further strengthened the dollar’s international dominance by further heightening uncertainty and an ensuing investor flight to safety. While the sanctions imposed on Russia have certainly given impetus to the de-dollarization initiatives of Russia and its allies, these initiatives will just as certainly have no discernible impact on the dollar’s dominance.
In a world shaken by crises, why does the dollar continue to dominate? In this book, Photis Lysandrou explores the interaction between global instability and the enduring strength of the dollar. Drawing on examples from the 2008 Great Financial Crisis to the COVID-19 pandemic and Russia's invasion of Ukraine, the author reveals how uncertainty and instability in global trade, production and politics drives investors towards the safety of the dollar, reinforcing its dominance over other currencies.
With clear and insightful analysis, Lysandrou reveals the true global financial foundations of dollar dominance, and lays out what it would take for other currencies such as the Euro to challenge its position.
Abstract
The financial crisis of 2007–8 broke out in the United States. If its structural causal origins were also specific to that country, then the dollar’s role as the world’s leading currency could not have had any significant bearing on the events prior to the crisis while the events subsequent to the crisis could not have had any significant reverse bearing on the dollar’s international role. On the contrary, if the structural causes of the financial crisis were global in that agents outside of the United States were as complicit in precipitating the crisis as were those inside the United States, then it follows that the dollar’s international role had to have been a critical factor in the crisis and that events subsequent to the crisis had to have critically impacted that role. This latter position is the one that will be advanced in this chapter.
The dollar’s dominance in the international currency sphere does not merely rely on the exceptional size, depth and liquidity of US financial securities markets. A further crucial combination of factors is these markets’ mass and corresponding gravitational force. If the majority of the world’s national currencies, and most notably those belonging to the world’s emerging market economies, continue to remain subordinate to the dollar even in the face of the continuing deterioration in the United States’ position in world trade and production, it is because these currencies remain firmly trapped in the dollar’s gravitational field with international financial investment flows acting as the medium through which this entrapment is enforced.
If the euro is to seriously rival the dollar as an international currency, the size of the eurozone’s capital markets must match those of the United States. The eurozone’s bond markets present a particularly acute problem in this context because far from closing the size gap with the US bond markets, that gap continues to widen considerably. This chapter will argue that to reverse this situation, two things above all else are required. First, that the eurozone’s corporate debt funding model be radically changed in order to make bonds rather than bank loans the preferred form of debt instrument. Second, that Germany be made to loosen its highly restrictive stance on central government debt.
Global capitalism comprises of two diametrically opposed systems: a highly fractured and de-centred system in its production and political spheres where countries of the East vie with those of the West, and a highly integrated system in its financial sphere where the dollar continues to be dominant because its backing mass of financial securities continues to be unmatched. Global crises serve to lock these opposing systems together in a mutually reinforcing dynamic in which, on the one hand, the ensuing heightened sense of insecurity and uncertainty cause further fracturing and disorder in the production and political spheres, and, on the other hand, these same crisis-generated effects also cause further strengthening of the dollar’s dominance in the financial sphere by causing successive investor flights to the safety of the dollar.
When the euro’s creators decided to go for a large area from the outset, the majority expert opinion was that this decision was motivated by political considerations and completely disregarded the economics of a monetary union. The contrary position advanced in this chapter is that while the euro’s creators ignored the standard economic theory of monetary unions, they did not ignore the harsh economic realities of the new global financial landscape. In the end, their eventual decision to include as many euro-candidate countries as was possible in the new currency union was to allow the latter to provide effective shelter against rising global financial pressures in general and against the gravitational force of the dollar in particular.
