The Bloody Rise of the Dollar System

The current dollar-centered international monetary system is the result of a century of competition among the capitalist nations, especially the imperialist countries. The competition that led to the current dollar system was not only economic but also political and not least military. The military competition took the form of not one but two of the bloodiest wars in world history.

Relationship between economic, political and military competition

Although there is not a one-to-one relationship between political-military and economic competition among capitalist countries, political-military competition is ultimately rooted in economic competition. So in examining competition among capitalist countries, we first have to look at economic competition. What are the economic laws that govern competition and trade among different capitalist countries?

First, let’s review the laws that do not govern international trade under the capitalist system. Using the quantity theory of money and, at least implicitly, Say’s Law, the (bourgeois) economists picture competition among capitalist nations as a friendly game in which everybody emerges the winner. Within each country, according to the economists, “full employment” reigns.

According to the modern marginalist economists, under perfect competition each “factor of production”—land represented by landowners, capital represented by capitalists, and labor represented by workers—gets back in rent on land, interest on capital, and the wages of labor precisely the value each creates. Our economists claim that as long as “perfect competition” exists, no “factor of production” can exploit another factor of production.

Similarly in world trade, every country benefits by “free trade.” According to the theory of comparative advantage, each country concentrates its production on what it is comparatively best at, not necessarily absolutely best at. According to this theory, even if a given country has a below-average level of labor productivity in every branch of production, there will always be some branch where it will enjoy a comparative advantage enabling it to prevail in international competition.

Therefore, if we are to believe the economists, countries that are deficient in modern productive forces benefit from international trade just as much as the countries that monopolize the world’s most advanced productive forces. The result, the economists claim, is the most efficient system of global production that the prevailing technical and natural conditions of production allow.

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