The ecological currency hierarchy: empirical support for currency power driven asymmetries in environmental and social autonomy

Abstract

ABSTRACT The intersection of the International Monetary System (IMS) and ecological degradation and social inequality remains, despite some excellent examples, a relatively underexplored area. This paper draws upon the literature to argue that an ecological currency hierarchy (ECH) describes how a hierarchy of currencies grants Core countries considerable autonomy over their economic direction while Periphery countries are subject to conditions in the Core. As capital continuously seeks returns, Core economies can sell debt regardless of global economic circumstances, while the Periphery may only do so when returns in the Core are high and risk tolerance is high. When conditions in the Core offer low returns on investment, foreign direct investment floods into the Periphery driving up their debt levels and material extraction. This structural debt/material extraction dynamic is a function of having a non-Core currency and leaves Periphery countries unable to engage in long-term, autonomous economic planning. We conduct econometric analyses using World Bank, International Monetary Fund, and International Resource Panel data to confirm that having a Core currency increases demand for debt and lowers material extraction, while also confirming that rates of return on investment in the Core drive foreign direct investment, debt, and material extraction in the Periphery.