The Political Economy of Monetary Sovereignty in the Era of Modern Money : Moving towards a Flexible Synthesis of Post Keynesian Economics and Critical GPE

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Title: The Political Economy of Monetary Sovereignty in the Era of Modern Money : Moving towards a Flexible Synthesis of Post Keynesian Economics and Critical GPE
Author: Kotilainen, Konsta
Contributor: University of Helsinki, Faculty of Social Sciences, Department of Political and Economic Studies
Publisher: Helsingfors universitet
Date: 2016
Thesis level: master's thesis
Abstract: This thesis investigates the political economy of monetary sovereignty in the post-Bretton Woods era of monetary governance. It examines whether monetary sovereignty matters for the macroeconomic policy space of contemporary states. It asks further whether monetary sovereignty ought to matter in the present global age. According to the standard view in the field of Global Political Economy, the current policy space of states is very narrow compared to the Bretton Woods period. In contrast to this position, however, the chartalist Post Keynesians argue that the recent decades in fact have seen a strengthening of the monetary sovereignty of states. Because the chartalists do seem to make an impeccable argument, it appears paradoxical that there nevertheless has been a recent tendency towards homogenous, slow-growth economic policies in the majority of states. This apparent paradox is resolved in thesis by reconciling these contradictory-looking positions: while monetary sovereignty has generally strengthened, the possibilities of states to exercise it often have not. Given this predicament, a possible way to enable the conduct of experimental macroeconomic policies in the future is proposed. The approach of the study is informed by a realist philosophy of science. Hypotheses of Post Keynesian economics and Global Political Economy are tested and revised in the spirit of iconic modelling. It is suggested that a realist approach provides a solid basis for moving towards a flexible theoretical synthesis capable of illuminating the political economy of monetary sovereignty from both explanatory and normative point of views. Several arguments are put forward. First, the Global Political Economy literature on the macroeconomic policy space of contemporary states has largely failed to integrate the core and valid insights of the chartalist economics. The strengthened monetary sovereignty matters for the ability of many states to conduct progressive economic policies. Second, while the chartalists are correct about the economics of monetary sovereignty, several monetary sovereignty-undermining processes and institutional developments of the post-Bretton Woods macroeconomic governance regime often tend to trump the practical potentials and theoretical considerations of Chartalism. Third, because the neo-Gramscian approach helps to illuminate the constitutionalization of the present consensus on macroeconomic policy – a process that is shown to constrain the possibility of many states to exercise their monetary sovereignty –, it can fruitfully supplement chartalist economics of monetary sovereignty. The neo-Gramscian view on the nature of these processes, however, has to be revised and updated to make it consistent with the Post Keynesian framework underpinning chartalism. Fourth, it is argued that the current consensus view of macroeconomic policy has failed and is likely to be replaced by an alternative set of governance ideas in the near future. It is suggested that in order to exercise monetary sovereignty effectively and in a way that contributes to transformative and cosmopolitan democracy, nation states may not be the optimal entities to exercise monetary sovereignty in the future. A chartalist case for the supranational exercise of monetary sovereignty is put forward.
Discipline: Political Science, World Politics
Yleinen valtio-oppi, maailmanpolitiikan tutkimus
Allmän statslära, forskning i världspolitik

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