Letter: We would all be worse off without the dollar

May 6, 2025

This letter originally appeared in the Financial Times.

Unfortunately Michael Pettis, often on point, is way off the mark in arguing that America would be better off without the global dollar (Opinion, April 12). He strays from the outset when he misrepresents Dani Rodrik’s globalisation trilemma and ignores democracy, which is its third leg along with hyperglobalisation and the pursuit of national economic interest. Rodrik argued that countries could only achieve two of these three goals.

The reason why the US has, according to some, neglected its national economic interests is therefore connected to its hyperglobalising and its being democratic, whereas China can easily globalise and pursue national aims without worrying about the ballot box.

His arguments on internal and external imbalances needing to be aligned are again inaccurate as some countries can easily be in surplus and others in deficit. The issue is whether the trade surpluses stem from manipulation and subsidies — as they often do in cases where they are fed by industrial policies — or are simply the result of excess savings. Yes, global oversight of trade is defunct, but the answer lies in fundamentally reforming the World Trade Organization, not in creating new customs unions as Pettis advocates. The worst recommendation is to institute capital controls to halt payments surpluses. Are we really proposing that Germany be limited in its purchases of US government paper? Are we aiming for bilateral balances among trading economies? I certainly hope not.

Finally, the argument that the US is “the chief enabler of global economic distortions” is an argument that ignores the undeniable fact that the dollar has facilitated global commerce and growth for more than five decades, and the view that the US loses from being the world’s primary reserve currency goes contrary to what most economists would argue. It does impose certain responsibilities on the US, along with the “exorbitant privilege”. However, America would clearly be worse off without it, and, it can be argued, so would the global community.

Danny Leipziger Professor of International Business and International Affairs, George Washington University, Washington, DC, US