Opinion | Joe Biden’s dollar policy holds the key to a fairer global financial system

Name: Can globalisation survive coronavirus or will the pandemic kill it?
Uploaded: 2021-01-29T17:30:15.000Z
Duration: 4 min 58 s
Description: Can globalisation survive coronavirus or will the pandemic kill it?

How the US president steers the exorbitant privilege of the dollar is critical to the long-overdue reforms the global financial system needs to stop penalising the poor and emerging economies

Reading Time:3 minutes

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Joe Biden attends a memorial service for the nearly 400,000 American victims of the coronavirus pandemic at the Reflecting Pool in front of the Lincoln Memorial on January 19. Photo: Getty Images/AFP

Andrew Sheng

Published: 1:30am, 30 Jan 2021Updated: 11:25am, 18 Feb 2021

Where is Wall Street going? Finance is supposed to serve the real economy (Main Street), but the US and global economies are in the midst of a pandemic and recession, while Wall Street profits are higher than ever.

Is this “socialism for the rich and capitalism for the rest”, as described by Morgan Stanley strategist Ruchir Sharma?

The UN Sustainable Development Goals to tackle social inequality, climate change and living standards by 2030 demand major reforms to the global financial system. This is daunting for various reasons, mostly political.

Since the 1970s, the rise of neoliberal free-market philosophy has boosted globalisation and trade liberalisation while pushing the deregulation of finance, labour, production and service markets. Globalisation has benefited many countries, but the benefits have been unevenly distributed.

As American banking and finance grew, so did the financialisation of Wall Street practices. In the 1960s, the American corporate push to Europe and Japan created the Eurodollar market. American banks became global bankers.

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Can globalisation survive coronavirus or will the pandemic kill it?

In the 1970s, American banks innovated into investment and private banking. Unfortunately, their excess lending led to the 1980s Latin American debt crisis. When competition arose from Japanese banks, American and European banks created the Basel Accord to ensure equal competition for all banks.