Strong Western allies and leading global economies, the United States and the European Union have the potential to band together to set the standard for other nations. Both global influences have the means to increase cross-border cooperation and endorse globalization and trade as an economic boon– not a burden– on both macro- and micro-scales. On both sides of the Atlantic, however, the unequal access to capital credit concentrates ownership, economic power, and inevitably political power in the hands of a few (Ashford and Hall 2011). The inequality from systemic flaws in the money system has been stimulating anti-globalization backlash in both Europe and the US. Facing competition from lower-wage economies and hyper-efficient technologies, students, workers, and ordinary citizens in general are increasingly supportive of nationalist and protectionist thinking. The money system plays a key role in wealth concentration, market balance, and fair trade, with European Central Bank and US Federal Reserve monetary policies directly affecting the degree to which all parties can participate in free trade.
When governments use debt-backed money to pay for their expenditures, the backing is not producing marketable goods and services. This is in contrast with a system where money is backed by real private sector assets such as shares in new technologies and other capital, which assets pay for themselves out of the future profits they generate (Kurland et al 2004). Government debt-backed money is currently being used to finance government spending rather than finance private sector growth, which increases the burden on tax payers, stifles entry into the market, benefits currency speculators, discourages free-market and free-trade policies, and concentrates ownership of new productive capital in the hands of a few. Reliance on government debt-backed currency in both the EU and the US negatively impacts transatlantic relations by creating market distortions that discourage fair trade and exacerbate the wealth and income gap. Thus, a fundamental weakness in the present European-American relationship is that both money systems operate with currency backed almost exclusively by government debt (CIA Factbook 2015).
The market manipulation and distortion likely accounts for much of the resentment toward transatlantic trade proposals. Many concerns with the TTIP, for example, stem from the fear that the agreement’s secretive loopholes will further concentrate wealth in the hands of corporate elites at the expense of domestic workers and firms. Solving the underlying problem with the money system would directly address global inequality and trade issues, as well as answering other transatlantic issues such as the Greek financial crisis, refugee crisis, or Brexit implications (“Trading Places” 2016).
Furthermore, the money problem reflects a more basic problem of economic imbalance and instability. People locally, nationally, regionally, and globally are under-producing to meet their consumption needs, and wealthy people are reinvesting most of their income rather than their incomes to purchase goods and services. This only exacerbates the widespread economic inequality and concentration of wealth in the hands of a few.
Reforming the tax, banking, and money systems of both the US and its EU allies is a sustainable approach to encourage transatlantic trade and diplomacy. By stimulating private sector growth owned by a widening based of citizens, money could be used for its true purpose of enabling everyone—not just corporate elites—to participate in trading goods and services. Developing the mechanisms to create an asset-backed money system that enables every citizen to produce through ownership of capital assets as well as their labor, the US Fed and ECB can become key institutions to increase transatlantic economic growth and stability. How the money system could connect people to profits of production is currently being overlooked, so the inequality of access to own capital and control one’s economic standing continues to increase. Thus, reforming the inefficient government debt-backed currency in the US and EU is key to increasing transatlantic trade, decreasing economic inequality, and stabilizing markets. The global community needs innovative leaders to develop proper banking and tax laws savings to decentralize capital ownership through future profits. The transatlantic ‘West’ is capable of conducting such a campaign.