Next gen affirmative 1ac advantage-Econ


Heg Impact-A2: Economic Crisis



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Heg Impact-A2: Economic Crisis


Recent economic crisis doesn’t end US primacy

Robert J. Lieber, Government Professor GWU, 2009, International Politics, Vol. 46, p. 135

The extraordinary financial crisis that has impacted the United States, Europe, large parts of Asia and much of the rest of the world has provided the impetus for renewed predictions of America’s demise as the preeminent global power. Of course, present problems are very serious and the financial crisis is the worst to hit the United States and Europe since the great depression began some 80 years ago. The impact on real estate, banking, insurance, credit, the stock market and overall business activity is quite severe, and a painful recession is already underway. Yet by themselves, these developments do not mean that America will somehow collapse, let alone see some other country assume the unique role it has played in world affairs. Arguably, the impact of the crisis upon the US economy is actually less than for the major European powers. For example, the $700 billion bailout for financial firms approved by Congress amounts to about 5 per cent of the country’s annual gross domestic product, significantly less as a percentage than the burdens borne by many countries. In addition, while the exchange rate of the euro declined sharply in the early months of the crisis, as did the British pound, the Russian ruble and many other currencies, the dollar rose sharply in value as foreign investors sought a safe haven for their funds. (Among the other G-8 currencies, only the Japanese yen experienced a substantial rise.) The United States will eventually surmount the present crisis, the excesses that helped to cause it will be corrected, and despite painful costs of adjustment, its economy and financial systems will sooner or later resume a more normal pattern of activity and growth. The new Obama administration will continue and even intensify cooperation with other leading countries in efforts to reform the international economic and financial systems. These may or may not produce a new ‘Bretton Woods’ system, but agreements will be reached and the United States necessarily will play a central role in this effort.
No economic power transition to China

Stephen G. Brooks & William C. Wohlforth, Professors of Government- Dartmouth, 2008, World Out of Balance: International Relations and the Challenge of American Primacy, p. 132-3

Finally, even if China benefits more from enhanced global economic interdependence than the United States, a power transition is simply not in the cards for many decades precisely because the United States now occupies such a dominant power position in the system. The challengers that Gilpin discussed were great powers with advanced economies at a comparable level of development to the hegemon. In those circumstances, aggregate GDP is a far better index of power than in a case where the rising state has a very large but comparatively poor population. As Chapter 2 established, the power gap between the United States and China is currently immense, especially in military capabilities; no single factor, including globalization, can wipe it away anytime soon.

Heg Impact-A2: Dollar Shift


US dollar won’t be replaced as the global currency

Stephen G. Brooks & William C. Wohlforth, Professors of Government- Dartmouth, 2008, World Out of Balance: International Relations and the Challenge of American Primacy, p. 126-8

In fact, Pape’s scenario is highly improbable. For one thing, there is little reason to think that a switch to euro oil pricing could occur in the policy-relevant future. In this regard, OPEC’s overall stance is most crucial. Over the years, “OPEC has many times said that it would continue pricing oil sales in dollars only.” The general aversion of OPEC to switch away from pricing oil only in dollars is grounded in concrete economic factors. The various economic advantages of the dollar for OPEC would be less consequential if there were not downsides associated with pricing oil in multiple currencies. Yet from a transactions cost standpoint, continuing to price oil exclusively in dollars has a number of advantages. For these and other reasons, it thus appears that “OPEC is unlikely to bring about or even try to shift markets to euro-priced oil.” The more important point is that even if a switch to euro oil pricing eventually did occur, the practice of pricing oil in dollars is a very minor contributor to the status of the dollar as the international reserve currency. Global trade flows—of which oil is obviously just one element—are a tiny portion of global financial flows: the average daily turnover in foreign exchange markets is now $3.2 trillion per day, while the value of world exports is just under $12 trillion per year. Significantly, many of the core contributing factors to the dollar’s status as the reserve currency have the weight of path dependency behind them. The dollar’s role as the reserve currency is intimately related to the United States’ long-standing position as the largest military and economic power in the system. The dollar’s status as the reserve currency is also a product of the deep, well-developed nature of US capital and money markets: “Countries, or more precisely cities within countries, become financial centers when their markets in financial assets are deep, liquid, and stable. Status as a financial center, once acquired, thus tends to sustain itself. When a country succeeds in attracting a critical mass of transactions in the relevant securities, other investors bring their business there to take advantage of the liquidity and depth of the market. Incumbency is an advantage, and the United States is the leading incumbent financial center.” Furthermore, “network externalities” make use of the dollar very attractive: the dollar has long been widely held (around two-thirds of foreign exchange reserves are now held in dollars) and widely used, and “the more often a currency is used in international transactions, the lower the costs associated with using that currency and hence the more attractive is the currency for conducting international exchanges.”



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