The Federal Reserve, the Global Monetary Regime, and Real-World Economic Justice

There are debates going on right now on global economic justice in two separate disciplines—political philosophy and monetary economics. Both concern the same fundamental issue: whether, and how much, the institutions and peoples of one country should be responsible for and take account of the consequences of their actions on other countries. The debate in political philosophy involves whether there even exists a working standard of global economic justice. This debate is being carried on between the “statists,” who see justice as a political standard, and the “cosmopolitans,” who argue that global justice has universal applicability. The debate in monetary economics involves whether the monetary policies of the dominant reserve central bank(s) should be concerned with and take into account the harmful consequences of their polices on the peoples and institutions of the periphery countries. The developing countries advance the view that the reserve currency central banks should design their monetary policies to avoid any harm they may be causing around the globe—basically representing the cosmopolitan view. The position of the U.S. Federal Reserve, the dominant central bank and the focus of criticism, is that any harm caused are not necessarily their responsibility—basically the statist view. In examining the monetary economics debate I present the claims of the harmful externalities of U.S. monetary policy and consider the defenses of the Federal Reserve to these charges. I argue that the U.S. Federal Reserve has a special obligation as the dominant reserve currency bank to evaluate policy consequences by justice standards and that the failure to do so puts its legitimacy at risk.