Currency wars remain beyond the analytical reach of legal scholars in the age of globalization

Marcus Faro de Castro holds a PhD in Law by Harvard University (USA.) He is a full professor of Law at the University of Brasília, Brasília, DF, Brazil

In the wake of the global financial crisis which followed the collapse of the Lehman Brothers bank in 2008, a conspicuous innovation in monetary policy has changed the way in which economic authorities in many parts of the world went about their business. Powerful central banks have engaged in the purchase of “troubled assets”, which they thought should be removed from financial institutions’ balance sheets. This led some economists to argue that such policy innovation, dubbed “quantitative easing” (QE), caused a flood of international liquidity which in turn brought difficulties to peripheral economies, since it affected their ability to export.

Many may think that these events are part and parcel of what is often called globalization. The latter word has been used both in academic work and in journalistic materials to designate, among other things, conditions under which international economic relations have become more intensely subject to unexpected shifts, maybe causing unforeseen disruptions of economic policies and private economic strategies. Yet it matters whether such disruptions should be considered acceptable from a legal point of view. And since globalization has brought new and more complex conditions to international relations, addressing aspects of these processes poses new challenges to lawyers.

In confronting new realities brought by globalization, some scholars have strayed from legal conceptions that were relied upon to address concerns typical of the so-called Westphalian order. In addition, conceptual and methodological innovations have emerged that seem promising as toolkits to address phenomena such as cross-border integration of markets, transnationalization of political, economic and social processes, new tensions and tempo of the dynamics which propel the relations between the global center and peripheries.

Among the new ideas that have been explored by legal scholars to approach new aspects of international relations is that of the “recursivity” of law. The argument about recursive law can be summarized in the notion that under globalization international regimes often tend to be formed through repeated rounds of negotiation of normative contents or legal rules. Moreover, scholars claim that the reiterated instances of negotiation are not coordinated under a unifying blueprint or planned strategy and involve not only governments but also NGOs, professional associations, experts and other “middle-ground” actors. Such actors contribute to connect opposing parties and help to establish a political “middle ground” between what initially appear to be irreconcilable interests. Policy changes with an international dimension (e.g., policies that address money laundering, access to medicines, international taxation, food safety, climate change and so on) may then come to be envisaged as a result of multiple recursive cycles of negotiation, with the help of intermediaries. The upshot is a vision of globalization as a process of benign mutual adjustment leading to outcomes – called “transnational legal orders” (TLOs) – that are legally and politically acceptable both globally and locally.

Such approach to the legal analysis of the production of the normative grounds of international cooperation may be taken as a theory of international law which conveniently complements the “pluralist” strand of international relations theory. It may also be seen as a counterweight to views advanced by globalism, since TLO theory affirms that the periphery may, through recursivity, “foil” and resist in varying degrees the political moves and pressures brought upon them by central countries and international organizations.

The theory of recursivity of law may be useful to shed light on several aspects of the formation of patterns of international cooperation, policy diffusion and policy change. Yet, it is not useful to address instances of policy change that derive from cross-border monetary impacts such as those associated with the practice of QE by governments in the global North. Indeed, the catch-phrase “currency war” was used by Brazilian authorities to criticize QE as the source of cheaper dollars that undercut the ability of Brazilian industrialists to export and prompted authorities to adopt otherwise unwanted policy adjustments.

In fact, policy changes resulting from cross-border monetary impacts occur because more refined international laws in the field of international monetary relations are still lacking, after key rules and principles which structured the so-called “Bretton Woods” system fell into desuetude since the 1970s. Moreover, even after the 2008 crisis, multilateral cooperation in the field of monetary and financial regulations has failed to gain traction.

The article entitled Monetary Impacts and Currency Wars: A Blind Spot in the Discourse about Transnational Legal Orders discusses how TLO Theory (which is an outgrowth of the theory of recursivity of law) remains limited in its ability to adequately address the processes by which policy changes result from monetary policies practiced by central countries. The article employs notions such as “market-based ‘structural power’” and “monetary interportfolio relay” and shows how they can be more useful in uncovering financial processes by which price signals – not “middle-ground negotiators” – quickly and pervasively impact economies and normative orders around the world.

To read the article, access

CASTRO, M. F. Monetary impacts and currency wars: a blind spot in the discourse about Transnational Legal Orders. Rev. bras. polít. int. [online]. 2017, vol.60, n.1, e006. [viewed 20 April 2017]. ISSN 1983-3121. DOI: 10.1590/0034-7329201600114. Available from:

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Como citar este post [ISO 690/2010]:

CASTRO, M. F. Currency wars remain beyond the analytical reach of legal scholars in the age of globalization [online]. SciELO in Perspective: Humanities, 2017 [viewed ]. Available from:


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