American hegemony: intellectual property rights, dollar centrality, and infrastructural power

How does dollar centrality persist in the face of continuous US current account deficits and a steadily worsening net international investment position? Two mechanisms create a structural basis for dollar centrality, explaining how dollars enter global credit markets and why surplus countries continue to hold dollar-denominated assets. First, institutional structures deriving from late development suppress domestic demand in major current account surplus countries, making them reliant on external demand for growth. Local banks recycle those dollars into the global economy, creating huge dollar liabilities and assets on their balance sheets. This locks them into continued use of the dollar and reliance on the US Federal Reserve during crises. Second, US firms participating in the global unbundling of production have constructed commodity chains in which they capture disproportionate shares of global profits through their control over Intellectual property. These profits sustain valuations and thus the attractiveness of dollar-denominated assets. Routinization in use of the dollar and compliance with Trade-Related Aspects of Intellectual Property Rights (TRIPS) and US controlled commodity chains creates infrastructural power in Michael Mann’s sense. This routinization sustains US geo-economic power in the face of persistent current account deficits and growing net international debt relative to US gross domestic product.