From Monetary Sovereignty to Macroeconomic Policy Autonomy? Examining Promises, Limitations, and Reform Possibilities of a Nation-State-Centric Macroeconomic Governance Architecture

Research output: ThesisDoctoral ThesisMonograph


This doctoral dissertation investigates the political economy of monetary sovereignty and macroeconomic policy autonomy in the post-Bretton Woods era of global economic governance. The study examines whether the alleged monetary and financial privileges of currency-issuing nation-states contribute to their ability to pursue monetary and fiscal policies – and if they do, in what way, and how direct or firm is this link? What are the theoretical implications? The dissertation also poses related normative questions about what the role of national monetary sovereignty should be in the age of strong cross-border interdependence and globalized state-market relations. What ends should the exercise of monetary sovereignty and the conduct of macroeconomic policy serve? How should currency issuance and economic policy be institutionally organized in the future? What do or should the concepts of monetary sovereignty (MS) and macroeconomic policy autonomy (MPA) even denote? By examining these closely intertwined issues, the dissertation seeks to show that the study of (global) political economy can coherently encompass conceptual, empirical, theoretical, and normative questions alike.

According to a widely held view in the field of International or Global Political Economy (IPE/GPE), the MPA of states has diminished markedly since the collapse of the Bretton Woods system in 1973. States have appeared to run into various globalization-related constraints. Not everyone agrees. In direct opposition to this position, the proponents of the neochartalist Modern Monetary Theory (MMT) argue that the post-1973 era is characterized by monetarily sovereign states enjoying unprecedented MPA. In effect, the neochartalists suggest that there is a more or less direct link between MS and MPA. Because the core accounting and operational propositions of MMT underpinning this (what I call) neochartalist hypothesis (NH) are arguably sound, it appears puzzling or even paradoxical that most states seem to have taken a turn towards homogenous and conventional economic policies over the past half a century. This development, as identified and accepted by most political economists, stands in marked contrast to what the typical neochartalist analysis would lead one to expect. The post-Bretton Woods paradox (PBWP) refers to this apparent theoretical tension or aporia between the relevant IPE/GPE and MMT claims that both seem to correctly identify important aspects of post-1973 economic governance.

This dissertation attempts to overcome the apparent paradox by addressing the relative merits and weaknesses of these two mutually contradictory but individually plausible accounts in a pluralistic and open-ended yet systematic way. It examines ways in which the MPA of states may have decreased (as IPE/GPE analyses tend to suggest) even if MS can matter and has indeed become the norm in the post-Bretton Woods years (as the neochartalists claim).

The apparently divergent developments of (de jure) state sovereignty and (de facto) autonomy are brought closer together by examining alternative formulations of the neochartalist hypothesis – what exactly is the relationship between MS and MPA supposed to be? These formulations are examined and revised in the spirit of theoretical and methodological pluralism. Throughout, the approach is informed by (a version of) critical social scientific realism, a philosophy of social inquiry that arguably provides a coherent basis for theoretical synthesis combining conceptual, explanatory, and normative work. Relatedly, the dissertations seeks to demonstrate the advantages of (what I call) analytical holism, an analytically careful approach to big-picture questions.

The dissertation consists of ten chapters. Chapter 1 introduces the reader to the post-Bretton Woods paradox by discussing key tensions between MMT and IPE/GPE claims about post-1973 developments in state autonomy. Chapter 2 provides a prelude to MMT, and the concepts of MS and MPA. It is argued that although neochartalism can be rightly criticized on at least ontological, historical, political, and economic theoretical grounds, MMT’s core accounting and operational statements about the basic monetary and fiscal capacities of currency issuers are sound. The related neochartalist concept of MS, while idiosyncratic and in need of much analytic scrutiny and ultimately revision, is accepted for the sake of argument. The concept of MPA seems at least as important but turns out to be even harder to define. Based on detailed conceptual analysis, several preliminary suggestions on both MS and MPA are made.

Chapter 3 goes on to formulate the neochartalist hypothesis (MS provides a high extent of MPA) and outlines several alternative interpretations of it. These interpretations all have the same basic propositional content (they all concern the relationship between MS and MPA) but a different logical form (how direct or “straightforward” this is relationship conjectured to be in, for instance, modal terms). The chapter then discusses how these versions of the hypothesis could be assessed through a combination of theoretical considerations and empirically informed thought experiments. This (modal) epistemological and methodological discussion is then situated within the broader metatheoretical context of critical social scientific realism and a related Helsinki approach to GPE. This approach seeks to overcome the field’s interrelated economic and philosophical deficiencies (what I call its “twin shortcomings”) through explicit and reflective attention to the role of economic theory and social scientific hypothesis in GPE. In effect, the Helsinki approach combines GPE with pluralist economics and critical social scientific realism. It is argued that the social ontology, epistemology, and methodology informing this approach should be developed further for instance in the light of the modal and normative considerations raised by this dissertation.

Chapter 4 assesses the most demanding versions of the neochartalist hypothesis. According to these formulations, MS is a sufficient or necessary condition for a high extent of state MPA. Based on IPE/GPE accounts, case-study-based thought experiments, and relevant scientific realist considerations, it is however concluded that MS is neither a sufficient nor a necessary condition for high MPA. Not all monetarily sovereign states enjoy high MPA; nor are all states that do enjoy high MPA monetarily sovereign.

Chapter 5 lowers the bar for the neochartalists and goes on to assess a less demanding version of their key political economy hypothesis. Now the question is whether MS can provide or at least contribute to high MPA. On theoretical grounds, the answer to this question is that it can (or this, at any rate, is my assessment of the relevant arguments). In this context, various more extensive negations of the neochartalist political economy are raised and discussed. This theoretical possibility then raises the more empirical question of whether MS does provide or contribute to high MPA somewhere, or whether it has done so in the past. It is argued that this question, too, should be answered in the affirmative, albeit with several important caveats.

Chapter 6 takes a step back and asks what the objectives of the exercise of MS and MPA should be. It is argued that approaches to macroeconomic governance should be assessed according to how effectively they foster (i) democratic autonomy; (ii) well-being in the sense of flourishing; and (iii) the chances of survival (by preventing global catastrophic and existential risks). It is then suggested that the current or recent new monetary consensus approach does not share these objectives and should thus be rejected (and is in fact in the process of being rejected). An alternative (post-)Keynesian approach is proposed. It is argued further that (i), (ii), and (iii) are all best viewed as cosmopolitan objectives.

Chapter 7 provides a cosmopolitan reading of MMT. It is argued that we may need to move beyond a primarily national exercise of monetary sovereignty to exercise currency-related capacities and rights effectively and in a way that could systematically promote democratic autonomy and the other key objectives of macroeconomic governance. Since we can explicate a clear neochartalist case for states being relatively ineffective exercisers of MS and build a further normative case for them being unlikely to meet the relevant cosmopolitan conditions, a supranational exercise of MS is called for. It is suggested that the move from national to cosmopolitan neochartalism allows a shift in focus from state autonomy, which is only instrumentally valuable, to democratic autonomy, which is arguably intrinsically valuable.

Chapter 8 addresses some of the key conceptual and theoretical ramifications of the cosmopolitan reading. In conceptual terms, it is argued that we need an updated contemporary (as opposed to an early or late modern) notion of MS that would better align with post-1945 developments in legal and political theoretical discussions on the concepts of monetary sovereignty and sovereignty more broadly. In theoretical terms, it is suggested that a correspondingly updated cosmopolitan neochartalism (or perhaps even a Contemporary Monetary Theory, CMT) should be seen as an integral part of a broader cosmopolitan Keynesianism.

Chapter 9 examines institutional ramifications that the cosmopolitan reading of MMT could have in the short, medium, and long term. As key institutional possibilities, (a) regional monetary-fiscal unions, (b) supranational clearing unions, and (c) global monetary and fiscal organs are discussed. This chapter seeks to assure the reader that the implications of the dissertation are not merely theoretical, conceptual, and philosophical but potentially also practical. For instance, it is argued that the implementation of a meaningful Global Green New Deal (and other urgent, large-scale public investment and reform programs) may, in effect, presuppose an increasingly supranational exercise of MS/MPA. Efforts to implement such a massively expensive and geographically extensive Deal could thereby greatly benefit from (something approaching) the cosmopolitan reading of MMT. As things stand, no other account explains why a supranational exercise of MS could be (i) macroeconomically effective, (ii) normatively desirable, (iii) institutionally viable, and potentially also (iv) politically feasible. Issues related to (iv), however, fall largely beyond the present work.

Chapter 10 provides a brief summary of Chapters 1–9. It then concludes by providing (what I consider) the most defensible version of the neochartalist hypothesis and by explaining how it resolves the post-Bretton Woods paradox. It is proposed that a cosmopolitan exercise of MS might well render the (causal) link between MS and MPA considerably more firm or robust, which could allow us to reformulate the neochartalist hypothesis in terms of probabilities or tendencies (rather than mere possibilities). While even the national exercise of MS can (sometimes somewhere) provide or contribute to high MPA, a cosmopolitan exercise of MS might well tend to provide high MPA (and thereby potentially widespread democratic autonomy).

Along with the works of others, this dissertation builds on, and greatly extends, the arguments and ideas of my own previous article publications and academic theses (see Kotilainen 2022a; 2022b; 2021a; 2021b; 2017a; 2017b; 2017c; 2016; 2013; Kotilainen and Patomäki 2023; 2022; 2020).

Keywords: Global political economy, global governance, international economics, macroeconomics, monetary theory, normative political theory, philosophy of social sciences, social ontology and epistemology, post-Keynesianism, neochartalism, MMT, cosmopolitanism, scientific realism, monetary and macroeconomic governance, monetary sovereignty, macroeconomic policy autonomy, global catastrophic and existential risk, democracy, well-being
Original languageEnglish
Awarding Institution
  • University of Helsinki
  • Patomäki, Heikki, Supervisor
  • Teivainen, Teivo, Supervisor
Award date14 Mar 2024
Publication statusPublished - Feb 2024
MoE publication typeG4 Doctoral dissertation (monograph)

Note regarding dissertation

Pre-examiners: Professor Eric Helleiner (University of Waterloo)
                          Professor Nuno Ornelas Martins (Universidade Católica Portuguesa)
Opponent:        Professor Eric Helleiner (University of Waterloo)

Fields of Science

  • 5172 Global Politics
  • Global Political Economy
  • Global Governance
  • Monetary and Macroeconomic Governance
  • International Relations
  • Political Theory
  • Geopolitics
  • 511 Economics
  • Monetary Theory
  • Macroeconomics
  • International Economics
  • Geoeconomics
  • 611 Philosophy
  • Social Ontology
  • Social Epistemology
  • Philosophy of Social Sciences
  • Philosophy of Political Economy
  • Political Philosophy
  • Global Ethics
  • Global Catastrophic and Existential Risk Studies
  • 5202 Economic and Social History
  • Monetary History
  • History of Economic Thought
  • 513 Law
  • Monetary Law
  • International Law
  • 519 Social and economic geography
  • Monetary Geography
  • Environmental Studies

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