The notion of a single global is not new. In fact, it has been suggested by many ever since the 16th century. It actually came close to being inaugurated after World War II. Even so, the idea comes with a lot of opponents and proponents who hold different but heavy arguments. In this article, we are going to explore this idea as well as reason out the pros and cons of a global currency to find out if the world will ever have one single currency.
If the world could adopt a single currency, there would be a little good for everyone. Developed nations would benefit from the elimination of currency risk in international trade.
A global currency would level-out the global playing field as some countries like China will no longer take advantage of the currency exchange to make their goods and chattels cheaper on the global market. A great example of this effect is Germany after the introduction of the euro. After the adoption of the euro, a surge in demand for goods from Southern European nations led Germany into considerable prosperity.
Developing countries like Zimbabwe, India and Pakistan may also benefit considerably from the introduction of a global currency, which would form a base for future economic development. Zimbabwe has suffered one of the worst hyperinflation crunches in history. According to the proponents of a single currency, the country would benefit from this move as a global currency would not be subject to exchange rate fluctuations. This is because there would be no competing currencies to exchange with.
While the benefits of having one single currency worldwide are self-evident, the cons are much more valid
One of the downsides of adopting a global currency is the loss of sovereign monetary policy that regulates national economies. A great example is when the US economy underwent an economic crisis. To curb this, the Federal Reserve took unprecedented levels and increased the money supply to stimulate economic growth. Under a global currency, this aggressive management of the national economy wouldn’t have been possible since monetary policies will not be enacted on a country to country basis but rather globally.
Different countries have different political systems and economics
As you already know, there are developed countries like the US, UK and Germany among others. There are also the underdeveloped countries like Zimbabwe, India and Pakistan just to name a few. These countries have economies that differ significantly and need different management structures. Subjecting all nations to a singular monetary policy can lead to policy decisions that benefit some countries at the expense of others. While adopting a global currency in certain areas like Europe may lead to substantial advantages, for other areas, it may actually do more harm than good.
For instance, debt-laden nations may be unable to devalue their own currency to make its goods more attractive to international buyers. A good example of this is the financial troubles that countries like Spain and Greece underwent in 2010 after the adoption of the supranational currency- Euro.
Also, differences in national politics make it extremely hard to adopt a common currency. The adoption of a global currency will lead to the loss of political sovereignty since monetary interest would need to top political interests. Giving up these advantages can be hard and even disastrous. Spain is a great example, seeing as it has suffered serious depression in recent years. This is largely due to the lack of a national currency. It cannot exchange its rate with other countries to curb its excessive debts.
Currency is part of a country’s identity
The currency of a nation is a unique and individualistic symbol of its economy and the national flag. It represents significant people and events in its history, independence and sovereignty. A global currency, in this case, will probably be vaguely designed so that it does not favour any country’s identity over another. Also, not so many countries will be happy to share their currency with others due to their political differences.
Although the implementation of a single currency has its benefits, at present, it would be highly impractical. This is majorly due to the vast differences in the economic and global political structures which make the prevailing theory of a mixed currency approach highly desirable.