After all, the global system of trade was designed and enforced by American officials, especially the US Trade Representative. The US created a world whose most important commodities (food, oil, etc) were priced in dollars, meaning that anyone who wanted to buy these things from *any* country would first have to get US dollars, which they could only get by shipping their valuable stuff to the US, which sends them dollars in return.

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Think about this trade for a minute: to get US dollars, people outside of the US would have to dig up or chop down or manufacture *real things* that were in finite supply. Meanwhile, to get the US dollars to *pay* for these real, finite things, the US just had to type zeros into a spreadsheet at the Federal Reserve:

https://www.youtube.com/watch?v=54fg-A1gCrM

The technical term political scientists use for this arrangement is "fucking sweet."

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Two of my favorite political scientists are Henry Farrell and Dan Davies, whose new paper, "The US dollar system as a source of international disorder," was just published by The British Academy as part of its "Global (Dis)Order international policy programme":

https://www.thebritishacademy.ac.uk/documents/6018/Global_Disorder_-_The_US_Dollar_System_as_a_Source_of_International_Disorder.pdf

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Farrell and Davies explore the history of the weaponization of "dollar centrality" (their term for the arrangement where the whole world agreed to treat the dollar as a neutral trade instrument), and show how Trump's incontinent belligerence fits into it, and lay out some shrewd possibilities for where this could all end up.

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Farrell is one of the leading experts on how these boring, invisible, complex systems of financial settlement, fiber optic connections and other plumbing of the post-war era have been increasingly weaponized by successive US administrations. In 2023, he and Abraham Newman published *The Underground Empire*, an excellent book on the subject (really, the *definitive* book on the subject):

https://pluralistic.net/2023/10/10/weaponized-interdependence/#the-other-swifties

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Davies, meanwhile, is a brilliant scholar (and explainer) of complex systems. Last year, he published *The Unaccountability Machine*, about the way that the feedback mechanisms in the systems that keep the world running are badly broken, leading to much of our modern dysfunction:

https://en.wikipedia.org/wiki/The_Unaccountability_Machine

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Their paper represents a fusion of both of their approaches, and makes for fascinating reading. They start by characterizing the post-war global system as broadly "homeostatic," meaning that it can maintain stability in the face of shocks. Homeostasis requires a feedback mechanism so that it can constantly adjust itself - think of your home thermostat, which needs a thermometer so it can figure out when to run your furnace/air conditioner and when to stop.

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Political scientists have identified many of these feedback systems. For example, KN Waltz describes how, when one "great power" starts to dominate the world, the weaker states in its orbit will switch their alliances to rival powers, in order to "balance" power between the big beasts. Smaller, poorer, and/or weaker countries that have looked to the US for trade and military alliances might switch to China if it looks like the US is getting too powerful.

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Not necessarily because China offers a better deal than the US, but because a decisive global victory by the US would give it the power to squeeze these countries, because they'd have nowhere else to go.

Waltz's work is especially relevant this month, with Canada inking a Chinese trade deal and Canadian Prime Minister Mark Carney publicly declaring a "rupture" with the US-dominated order:

https://www.programmablemutter.com/p/davos-is-a-rational-ritual

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When great powers ignore the feedback of these systems, the result is a collapse in global homeostasis, and radical shifts in the global order. Farrell and Davies argue that this is what's happening with the weaponization of the dollar, which has prompted many countries to take action that should have caused the US to back off, but which the US has ignored as it doubled down on the weaponized dollar:

https://www.bloomberg.com/news/articles/2025-10-20/ethiopia-in-talks-with-china-to-convert-dollar-loans-into-yuan

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Even when the US has a "rational" case for weaponizing the dollar - for example, by forcing the world into a global financial surveillance project aimed at stemming finance for terrorism - it runs the risk of making things worse. If the US's anti-terror financial demands are so onerous that they provoke other countries into setting up multiple, independent, fragmented global financial schemes, then terrorists and their backers will have their pick of ways to move money around.

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Even where the US has had limited success with financial sanctions (by isolating North Korea, or by targeting specific individuals rather than countries), it has undermined those successes by peddling and formalizing cryptocurrencies that evade those sanctions. With Trump's crypto project, America gets the worst of both worlds: ineffective financial sanctions that nevertheless weaken the dollar's centrality to the world, and the power that confers upon America.

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The world relies on the dollar because it has to rely on *something*. There are hundreds of currencies in the world, and it's prohibitively expensive for exchange brokers to maintain deep reserves of all of those currencies so that any currency can be swapped for any other. Likewise, it is cumbersome and risky for transactions to rely on a chain of exchanges.

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If someone in Thailand can only buy oil from Norway by first trading Thai baht for Japanese yen, and then Australian dollars, and then euros, and *then* Norwegian kroner, they'll be bedeviled by shifting exchange rates, transaction fees, and, possibly, shady brokers who just take the money and run.

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After WWII, when the great powers and middle powers were hammering out the global financial system, economists like John Maynard Keynes proposed an international supercurrency that would only be used to facilitate exchanges, but he was outmaneuvered by America's chief negotiator, Harry Dexter White, who insisted that the US dollar will fill that role:

https://profstevekeen.substack.com/p/this-is-the-end-of-the-us-global

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So everyone uses the dollar, and because everyone uses the dollar, everyone *has* to use the dollar: the dollar enjoys "network effects," where the more parties there are who will accept it, the more valuable it becomes and the harder it is to find an alternative.

In my theory of enshittification, network effects are a powerful temptation to make a service worse.

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If you own a system with strong network effects, you can make it worse for all its users (and better for you) without risking your users' departure, because they are all holding each other hostage:

https://www.eff.org/deeplinks/2021/08/facebooks-secret-war-switching-costs

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So it is with dollar weaponization. In order to use the dollar to settle transactions, parties must have access to systems that are directly under US government control (like a dollar account at the Federal Reserve), or are, practically speaking controlled by America (like the SWIFT system for moving money across borders).

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The fact that you *have* to use dollars, *and* you can't use dollars without the US government's say-so, means that the US can impose onerous terms on dollar users and not have to worry that they'll switch to another currency.

Farrell and Davies describe how, during the "high era" of globalization, US Treasury officials fought to insulate the dollar from control by the US security apparatus.

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Treasury officials understood that the dollar was a source of enormous US power and advantage, and they didn't want to risk all those benefits by beating up dollar users and tempting them to look elsewhere.

But ultimately, Treasury lost. This, too, is in accord with my theory of enshittification: once an institution locks in its users, the factions that want to make things worse will start winning the argument.

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This is exactly what happened to Google, when, having locked in search users, the company fell under control of its enshittifying faction, who oversaw a program that made search *worse*, so that you'd have to search repeatedly (and look at multiple screens' worth of ads) to get the answers you sought:

https://pluralistic.net/2024/04/24/naming-names/#prabhakar-raghavan

Google's anti-enshittification faction argued that making search worse was a betrayal of the company's mission.

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The pro-enshittification faction pointed out that lock-in meant that Google could make more money by betraying its mission without losing users, and they won the day. It's a lot easier to live your principles if you suffer when you betray them, and it's a lot easier to hold an institution to its principles if betraying those principles results in immediate penalties.

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After 9/11, the US security apparatus demanded dollar weaponization: the Office of Foreign Asset Control bigfooted the international finance system, forcing them to spy on, report and block transactions the US disliked. The threat of being excluded from the dollar system was powerful: when one bank refused to stop doing business with North Korea, the US "designated" the bank as noncompliant, provoking a bank run. The rest of the world's banks fell into line.

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The fact that the US could punish banks for actions that harmed American interests, *even if the bank followed all the procedures required of it*, encouraged banks to adopt a "zero risk" policy, where they made up policies that went well beyond America's rules, conducting even more surveillance, blocking even more transactions, and reporting even more activities than was required of them.

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All of this made participating in the dollar system steadily more costly, as dollar users had to pay for expensive compliance measures or risk the failure of key transactions, or exclusion from the dollar altogether.

Late in Obama's second term, officials sounded the alarm about the dollar becoming increasingly unattractive for international finance, and counseled a relaxation of the post-9/11 ratchet of ever-tighter rules for dollar users.

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