Ecuador’s having one of those globalization moments: its President tried to replace his country’s local currency with the U.S. dollar last month. That set in motion both a military coup and a debate over the virtues of adopting the dollar in daily use outside the United States. Is it really time for Ecuadorans to pass the buck?
Anyone who’s gone shopping in Third World tourist havens, or reads about Russian gangsters who like hundred dollar bills so much they print their own, knows that the dollar is welcome all around the world. But developing countries like having their own currencies. After all, when a government prints money, it makes money: you slap a few numbers and the picture of a national hero on a piece of paper, and suddenly it’s worth something. Not a bad deal.
That is, until people lose faith in it. If the world lacks faith in your currency, no one’s going to accept it to pay for goods or repay loans, and suddenly you can't do either. So places such as Ecuador — and Hong Kong and Argentina and now perhaps East Timor — are deciding either to tie their currency to the dollar permanently or simply use dollars instead of local paper. No more speculative attacks on their currency, no more printshop money shenanigans. In essence, Ecuador’s making the world a promise — either we’ll stay as productive as the U.S., or we’ll tighten our belts until you can’t tell the difference. Good luck to them.
But this goes beyond money: it tells us something about Ecuador’s place in today’s world. I mean no offense — Ecuador’s a dandy little country. But countries have two purposes — to provide an acceptable standard of living, and to reflect shared ethnic or cultural premises. And as it loses its ability to shape its economy, Ecuador is quickly becoming no more than a cultural emblem of what Ecuadorans share.
And that’s the issue. As global economic integration unavoidably leads countries to become part of currency blocs and free trade areas, countries will find it harder to define their purpose. Belgium, for example, once had its own currency and its own economic policies. As those functions rapidly shift towards the European Union, Belgium will become less a country than a bunch of Flemings and Walloons who don’t like each other. Spain, with its unhappy Catalans and Basques, is also a candidate for dissolution. And if these disaffected areas don’t print their own money, don’t restrict trade, and don’t run Soviet-style border checkpoints, who’s really going to care?
And so, Ecuador's dollar policy leads to a paradox: global economic integration, with its common money and shared rules, will leave us with a world of more countries, not fewer, ethnic ministates that subscribe to basic global economic etiquette and can then go about doing the important business of dancing their national dance and taking their national hero's birthday off.
Hail, hail Fredonia, land of the brave and free.
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