The European Union's creation of the euro rejuvenated a discussion among students of the international monetary system: How much longer will the dollar remain the world's dominant currency? This discussion was further invigorated by the large current account deficits the United States posted during the 2000s and by the financial crisis of 2008. By early 2009, many analysts were suggesting that the dollar could not long continue as the world's preeminent currency. The dollar stubbornly remains central indeed. As Benjamin Cohen notes in the book under review here, “the dollar remains the most favored vehicle, appearing on one side or the other of some 86 percent of all foreign exchange transactions. The dollar is also the favored vehicle for the invoicing of world trade, used for just over half of all world exports and still accounts for two-fifths of the international bond market, roughly one-half of the international banking market and two-thirds of central bank reserves. No other currency today comes close to matching the greenback's global reach” (p. 151).

Contemporary concern about the dollar's future echoes prior debates. As David Calleo's contribution to the edited volume under review highlights, the dollar's decline was a favorite topic during the late 1960s and then reemerged as a source of concern during the late 1980s. Concern about the dollar's status in both prior instances was triggered by developments similar to those that evoke current concern: the emergence of large and sustained external deficits that result in the accumulation of foreign claims on US income at what appears to be an unsustainable rate. And in each instance, these external deficits have been a product, in part, of large and sustained US government budget deficits driven in part by military spending and in part by large tax cuts. And in each instance, some observers predicted that the dollar was about to be supplanted at the center of the international monetary system, although in each instance, that chief rival was a different currency: the German mark, and then the Japanese yen, and now, perhaps, the euro (or maybe the Chinese renminbi). Such prior predictions of the dollar's imminent decline were obviously mistaken. Is this time any different?

The three books under review here, written by, or containing contributions from, many of the leading thinkers in the field, employ a common and compact set of considerations to produce remarkably similar answers to this question. Indeed, what is perhaps most striking is the extent to which all three works agree that the dollar's future depends upon the interaction among three factors: the global distribution of economic power, the existence of other national currencies capable of playing a central role in the international monetary system, and network externalities or what Barry Eichengreen calls “incumbency advantage.” Moreover, two of the three works assert that this time is indeed different: Changes in the underlying distribution of economic power will dominate; the dollar, they conclude, is unlikely to be as central in the twenty-first century as it was in the twentieth. The third does not contradict this conclusion.

Although all three books focus on similar considerations, each focuses relatively more on some and relatively less on others. Eichengreen's Exorbitant Privilege devotes most of its attention to the dollar's rise and (likely) decline. Eichengreen argues that the dollar will not remain dominant, but is unlikely to be replaced by another dominant currency. Instead, the world is headed toward a system in which multiple national currencies play international roles. The author reaches this conclusion after tracing the dollar's history from colonial settlement to the contemporary international system. He dedicates the first chapter to the dollar's creation and institutionalization. He highlights how the currency of the United States was propelled from wampum to international standard, in part by the ascent of the US economy to international predominance and in part by the creation of domestic institutions—the Federal Reserve System in particular—necessary to support the dollar in a global role. He then traces the dollar's rise to global preeminence following World War I and its institutionalization at the center of the global monetary order in the Bretton Woods system constructed at the end of World War II. The book then turns to more recent developments. One chapter traces the dollar's struggles during the 1960s and 1970s and then touches briefly on its revitalization during the 1980s. A second focuses on EU monetary cooperation and the emergence of the euro as a rival to the dollar.

The book concludes with three chapters that consider the impact of contemporary events. Has the 2008 financial crisis damaged the dollar's international standing? (The answer is not yet.) Will emerging rivals (the euro, the renminbi, gold) dethrone the dollar? (No.) This chapter contains a fascinating discussion about whether China can internationalize the renminbi (though one wishes this discussion was more explicitly linked to US institution building in the early twentieth century). Will foreigners abandon the dollar abruptly? (Perhaps, but if so, largely because the United States has failed to gain control of its fiscal situation.) Eichengreen concludes that although the dollar will be less central in the twenty-first century than it was in the twentieth century, no other currency is capable of playing the role that the dollar has played since the 1930s. The world of the future, he concludes, is one in which several national currencies coexist.

Cohen's The Future of Global Currency assembles a remarkably coherent set of previously published articles to reach a very similar conclusion. The dollar will be less dominant, but the future of the international monetary system will be one of multiple key currencies, rather than the dominance of a single currency: “Coming years … will see the emergence of a … fragmented monetary system, with several currencies in contention and none clearly in the lead—an increasingly leaderless mix of currency relationships” (Cohen, p. 148).

To be clear, however, The Future of Global Currency is better viewed as a complement to, rather than a substitute for, Eichengreen's Exorbitant Privilege. For whereas Eichengreen devotes most of his attention to the dollar's historical trajectory, Cohen focuses on the factors likely to determine whether the euro can supplant the dollar as the world's dominant currency. The first third of the book explores whether current arrangements enable the euro to supplant the dollar as the world's preeminent currency. The short answer is no. Cohen argues that governance issues (lack of a clear political authority structure), market issues (the cost of transacting in euros remains high), and the EU's antigrowth bias conspire against a truly dominant role for the euro. These EU-specific limitations are reinforced by the network externalities that sustain the dollar at the system's center. The second third of the book explores whether EU policymakers can implement the reforms necessary to propel the euro from regional to global currency. Cohen argues that in order for the euro to gain equal status to the dollar, EU policymakers must reform EU governance structures in order to give the euro a single and powerful voice in international forums, such as the International Monetary Fund and the Group of 20. Because Cohen is skeptical of the EU's ability to engage in such reforms, he concludes that the euro is likely to remain “a currency without a country” for the foreseeable future and will, therefore, continue to play second fiddle to the dollar. The final third of the book considers the future. Here, Cohen develops the case for what he calls a leaderless currency system in which monetary power has dissipated, thereby generating greater uncertainty about the institutional structure of the international monetary order.

Although both books represent important contributions by leading authorities on international monetary order, they leave the reader somewhat dissatisfied for the same reason. Both highlight the dollar's current preeminence. Both highlight how network externalities currently keep the dollar at the center of the system. Yet both conclude that in the not-too-distant future, the dollar will share the international stage with other currencies. I suspect that both authors reach this conclusion on the basis of their beliefs about the relationship between global economic power and currency centrality. Just as the dollar's preeminence rested on American postwar hegemony, so too must the transition to a multipolar world produce a system with multiple international currencies. Although certainly a reasonable conclusion to reach, neither author explains why the shift to a multipolar distribution of power will override network externalities and erode the dollar's incumbency advantage. Cohen leaves the question to the side, whereas Eichengreen simply asserts that the conventional wisdom “that incumbency is an overwhelming advantage in the competition for reserve currency status” is wrong (Eichengreen, p. 7).

This shortcoming is important, for as the volume edited by Eric Helleiner and Jonathan Kirshner makes clear, what one expects depends entirely upon which of these two systemic processes one believes will prevail. The puzzle that motivates The Future of the Dollar is why experts disagree so sharply about the dollar's future. Pulling together contributions from prominent economists, historians, and political scientists, the editors conclude that experts disagree about the dollar's future because they rely on different models. Those who are most pessimistic about the dollar's future focus on geopolitical considerations. These analysts relate the dollar's future to changes in the broader distribution of power in the international system. The rise of China and the EU, it is argued, reduce America's relative power and, thus, make it likely that the dollar will be less central. In contrast, experts who emphasize the incumbency advantage that the dollar currently enjoys are more optimistic about the dollar's future. Helleiner and Kirshner differentiate between an instrumentalist model, according to which the dollar's future rests on the continued perception of governments that pegging to the dollar and accumulating dollar reserves contributes to domestic development objectives, and a market-based model, in which the dollar's future rests upon continued willingness of private actors to use the dollar as their primary vehicle currency.

Although the theoretical framework is nicely articulated, succinctly captures the core elements of the question, and imparts substantial cohesion to the volume, one wishes that the editors had been more willing to press the contributors to explain why they favored one approach rather than another. One suspects that model selection follows disciplinary boundaries. It can hardly be a coincidence that economists adhere to market-based approaches, political scientists focus on power, and historians explore historical precedent. The editors' reluctance to push contributors to confront the meta-theoretical issues, or to take on this burden themselves, results in a volume that does too little to reduce our uncertainty about the dollar's future. Consider that of the eight chapters that examine some element of a market-based approache, three conclude that the dollar will decline, two conclude that the dollar's status is sustainable, and three conclude that the future is uncertain (Helleiner and Kirschner, p. 221). Of the five contributions that explore geopolitics, three conclude that the dollar would decline, while two conclude that the dollar's future is uncertain (p. 221). While fully recognizing that the book sets out to explain rather than eliminate difference, and in no way detracting from the excellence of the individual contributions, one might still hope that a book called The Future of the Dollar could do more than tell us that almost anything is possible.

Overall, the three books, singularly and as a group, are important contributions that help us conceptualize a centrally important question in the international political economy. The dollar's future, they tell us, will be shaped by the relative causal importance of network externalities and a changing distribution of global economic power. Yet as a group, the books do little to help us understand which of these causal factors will be the more important. And this neglect seems critical—and must be a topic for future research. For as I noted earlier, students of the international monetary system have been trumpeting the dollar's decline for 45 years. Yet, like the mythical phoenix, the dollar has always arisen from the ashes of its own financial conflagrations to resume its preeminent position at the center of the international monetary system. It remains unclear why we should believe that this time will be different.