The special drawing right: a formal critic to the dollar dominance in the international monetary system

Abstract

In the late-1960’s, international discussions over a possible reform of the international monetary system originated the Special Drawing Right (SDR). While they had been created initially to represent an additional asset to complement the existing reserves of u.S. dollars and gold, after the crisis of the Bretton Woods system the SDR was considered a possible substitute of the u.S. dollar. Relying on a consolidated literature, this article aims at demonstrating that the origins of the SDR were not the exclusive result of technical financial negotiations, but of the convergence of higher political interests against the united States and the dollar dominance. KEyWORDS: Special Drawing Right; international reserve asset; international monetary reform; dollar hegemony. JEl Classification: F33; E42; F02. 1 This article relied on financing from the Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (Capes). I would like to thank Eric Helleiner, from Waterloo university and Balsillie School of International Relations, for the support to accomplish this study. * Professor of International Relations at the Federal university of Goiás universidade Federal de Goiás (uFG). E-mail: alinemartins.ufg@gmail.com. Submetido: 4/September/2015; Approved: 17/March/2016. Brazilian Journal of Political Economy, vol . 37, no 2 (147), pp . 401-416, April-June/2017 401 http://dx.doi.org/10.1590/0101-31572017v37n02a08 Revista de Economia Política 37 (2), 2017 • 402 Brazilian Journal of Political Economy 37 (2), 2017 • pp. 401-416 INTRODuCTION The Special Drawing Right (SDR) consists of an international fiduciary asset created in 1969 by the International Monetary Fund (IMF). Despite maintaining its space, however reduced2, in the international monetary order, this monetary instrument was reinvigorated after the outbreak of the 2008 crisis. It had an important role as it provided liquidity to the global economy and supplemented international reserves of the member countries. In 2009 the highest issuing of the SDR since its creation occurred, accounting for a total of uS$ 250 billion. Important proposals to reform the international monetary system after the 2008 crisis, among them the one presented by the united Nations Organization (uN)3, emphasized a more active role of the SDR in order to minimize the instability and inequality caused by the dollar dominance in the contemporary international monetary system(OCAMPO, 2012). As well as in debates on reform proposals in the international monetary system after 2008, the SDR is called upon since its origin to minimize economic and political instability generated around the global structural dependence on the u.S. currency. Therefore, this article aims at arguing how the genesis and the development of the SDR throughout the 1960’s and 1970’s were surrounded by discussions linked not only to the existing economic problems then, but also to the political discomforts tied to the u.S. dollar dominance and to the privileges resulting from this position of the u.S.A.. For such, initially this study argues about the politicaleconomic context from which the SDR originated, giving emphasis to the criticism by Charles de Gaulle’s government to the dollar’s central position and to the need for a reform of the international monetary system valid then. Subsequently, it is discussed the functioning of the SDR, such as its rules of allocation, calculation and value. Next, this study enters the debate on the SDR possibilities not only as a complementary asset, but as a monetary instrument capable of replacing the dollar as a key currency in the international economy. The study contemplates as well the reform proposals of the international monetary system, which reintroduced the debates on the SDR after the 2008 crisis, also pointing out some limits of this monetary instrument. lastly, the final considerations are presented. POlITICAl-ECONOMIC PROCESS OF SDR CREATION The Special Drawing Right (SDR) is an international monetary asset issued by the IMF. It works as a means of reserve and account unit of the Fund and other international organizations. Still under the Bretton Woods agreements, its primary function was to address the existing problems in the monetary system. 2 The SDR represented up to 9.5% of international reserves in 1972, however it reduced to 0.5% until 2009 (WIllIAMSON, 2009). 3 Carried out by Stiglitz (2009), who had as rapporteur Jan Kregel.