GeoEconomics and the Emerging World Order: The Power of the U.S. Dollar
Speaker: Honorable Jack Lew (Former United States Secretary of the Treasury, White House Chief of Staff, and Director of the Office Management and Budget)
Date: 23 September 2020
Speaker Session Summary
SMA hosted a speaker session as a part of its SMA INSS/PRISM Speaker Series, entitled “Geoeconomics and the Emerging World Order: The Power of the U.S. Dollar.” This brief was presented by the Honorable Jack Lew (Former United States Secretary of the Treasury, White House Chief of Staff, and Director of the Office of Management and Budget).
Sec. Lew began his discussion by elaborating on the US’s role of possessing the world’s reserve currency. This position gives the US the capacity to aid its own fiscal and trade options in a way that strengthens both its economy and the country more generally, according to Sec. Lew. Using the US dollar as the world’s reserve currency also gives the US an advantage in its ability to borrow, especially during a global crisis like COVID-19, as the depth in liquidity in the markets gives the US an extra level of security. This ability, in turn, gives the US the advantage of being able to meet its immediate needs during the pandemic—a guarantee that other states may not necessarily have the luxury of having. The US’s current global financial role gives the US a sense of centrality in the world as well, which benefits its economy significantly.
Next, Sec. Lew discussed the US’s use of a sanctions regime, which imposes a burden on a state’s economy in order to push that state into changing a policy that the US objects. Sec. Lew stated that sanctions can be very effective when enacted with broad support from other like-minded countries and when implementation is relatively straightforward. Furthermore, the legislative branch needs to give the executive branch the tools to effectively utilize sanctions, according to Sec. Lew. Sometimes, regimes are willing to subject their people to hardship in order to maintain their power, making it very difficult to effectively utilize sanctions, as seen in the cases of Venezuela and North Korea.
Sec. Lew also discussed the overuse of sanctions and the implications that may follow. The US’s increased use of sanctions since its 2016 election raises some warning signals in Sec. Lew’s viewpoint, as it portrays the US in a negative light. Countries do not want to be dependent on the US for their livelihood, according to Sec. Lew, especially when it is difficult for them to understand the logic behind or justification for certain sanctions imposed by the US. As a result, countries are diversifying their economies; however, Sec. Lew stated that a potential migration from the US dollar will not happen suddenly or soon. Moreover, it is not in the US’s best interest to support or encourage other countries to continue to diversify their currency and build plumbing that enables less dependency on the dollar, according to Sec. Lew. He added that the US does not need to be immediately concerned with this diversification or competition, but it should be monitored and controlled for when increased diversification or competition may be of more concern in the future.
Speaker Session Recording
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Biography:
Jack Lew was confirmed by the United States Senate on February 27, 2013 to serve as the 76th Secretary of the Treasury. He served in that position until January 20, 2017. Lew previously served as White House Chief of Staff. Prior to that role, Lew was the Director of the Office of Management and Budget (OMB), a position he also held in President Clinton’s Cabinet from 1998 to 2001. Before returning to OMB in 2010, Lew first joined the Obama Administration as Deputy Secretary of State for Management and Resources.
Before joining the State Department, Lew served as managing director and chief operating officer for two different Citigroup business units. Prior to that, he was executive vice president and chief operating officer of New York University, where he was responsible for budget, finance, and operations, and served as a professor of public administration. From 2004 through 2008, Lew served on the Board of Directors of the Corporation for National and Community Service and chaired its Management, Administration, and Governance Committee.
As OMB Director from 1998 to 2001, Lew led the Administration budget team and served as a member of the National Security Council. During his tenure at OMB, the U.S. budget operated at a surplus for three consecutive years. Earlier, Lew served as OMB’s Deputy Director and was a member of the negotiating team that reached a bipartisan agreement to balance the budget. As Special Assistant to President Clinton from 1993 to 1994, he helped design Americorps, the national service program.
Lew began his career in Washington in 1973 as a legislative aide. From 1979 to 1987, he was a principal domestic policy advisor to House Speaker Thomas P. O’Neill, Jr., when he served the House Democratic Steering and Policy Committee as Assistant Director and then Executive Director. He was the Speaker’s liaison to the Greenspan Commission, which negotiated a bipartisan solution to extend the solvency of Social Security in 1983, and he was responsible for domestic and economic issues, including Medicare, budget, tax, trade, appropriations, and energy issues.
Before joining the Obama Administration, Lew co-chaired the Advisory Board for City Year New York and was on the boards of the Kaiser Family Foundation, the Center on Budget and Policy Priorities, the Brookings Institution Hamilton Project, and the Tobin Project. He is a member of the Council on Foreign Relations, the National Academy of Social Insurance, and of the bar in Massachusetts and the District of Columbia (https://www.sipa.columbia.edu/communities-connections/faculty/jacob-j-lew).
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