Exorbitant Privileges (EP's)
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I’m Grant Symons. I convene Transition Edge to help us
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OK, so we just made up the acronym
EP's. There seems to be quite a few of them in this polarizing world... perhaps it might catch on? This week we take a glance at some of the more obvious ones.
The term came to mind while out at lunch with some colleagues, where the conversation about the aftermath of cyclone Gabrielle veered from one of empathy towards the disaster struck folks, to some colorful discussion around that pathetic effort of our local banks to help out. How do they confer such privilege with such little responsibility?
These are businesses that are making record profits, stand in front of reporters all smiles and concerns about their treasured customers, all the while reassuring
their shareholders that the level of delinquent loans on their books is manageable. And let's not forget that these are the mortgage commitments of ordinary folks that are in some cases losing their homes, while over the past few years they have also lost their local bank branch through cost cutting and profit increasing activities.
There seems to be a disconnect here somewhere.
Before we look further at banking, let's put things in perspective though. All of us in 'the developed world' are to some extent privileged when compared to those in the 'developing' or perhaps in some cases 'regressing'
world.
This is a privilege in itself that we have come to take for granted, at least during a period of cheap money and massive commoditization of goods, food and technology globally since circa 2008.
EP1 - The Global North over South
The Global North has privileges over its poor cousin, the Global South. According to a recent paper by Hickel and Dorninger et
al, Imperialist appropriation in the world economy, the Global North has some inherent advantages. Rich countries of the North rely on a large net appropriation of resources from the Global South.
• Drain from the South is worth over $10 trillion per year, in
Northern prices.
• The South’s losses outstrip their aid receipts by a factor of 30.
• Unequal exchange is a major driver of
underdevelopment and global inequality.
• The impact of excess resource consumption in the North is offshored to the South.
EP2 - USA Dollar reserve currency.
The USA is the world's largest economy and reserve currency. Being the reserve currency is a bit like being Microsoft windows on a computer. The system is based on your rules, language and operations. This affords the United States the ability to influence the global economy through the way it creates money, issues treasury bonds, manages interest rates and financial markets. US banks and those connected to this system benefit from
access and participation in vast markets, transaction flows and influence over how and when shifts occur in the system.
As an aside, the term 'Exorbitant Privilege' is attributed to the French in their criticism of the United States dollar becoming the global reserve currency after taking the mantel from the British pound post WW2.
Americas run of approximately 79 years means it has presided over massive technological and population growth with dramatic shifts in technology and the digitisation of money. Prior to 1971 the dollar was tethered to the price and availability of gold which was highly constraining and inconvenient to the USA's ambitions and requirements for expansion of everything. Since then, it has
had free rein in its activities.
Some history on reserve currencies...
