Currency Manipulation: Is This a Trade War?


1. Introduction

Currency manipulation has not ceased to become a subject of debate among nations in today’s scenario. Such strategies have survived the middle ages and exists even today.[1] It refers to the act taken by governments in order to change the value of their currencies relative to other currencies for some motives. One of the motives for such actions by wealthy nations is to gain an unfair competition advantage in the global trade market.[2] The countries basically manipulate the currencies to make their exports efficaciously cheaper which in return makes imports quite expensive.[3] Instead of leaving the currencies to freely fluctuate, the value of currencies is changed against other currencies by fixing the rate of exchange or changing its value (increasing or decreasing); such changes itself being subject to national policy intervention,[4] which results in global trade imbalance in long run by distorting currency prices. The countries with massive trade deficits often use the term, “currency manipulation” in their political discussion. Foreigners, are accused for their “vile action” when it comes to trade deficits, by the politicians and the citizens of a certain country. However, saving a tiny amount of income and running massive government budget deficit can be the actual reason behind trade deficit.

2. Currency Manipulation & Global Economy

Currency manipulation has severe effects on the global economy. It is accountable for millions of job loss in the United States (US) and Europe.[5] Many scholars have argued that China, being the major currency manipulator,[6] has led to possible threat in the trade market. With the currency being devaluated, the market shares in manufacturing industries of China may increase more and more and that may probably lead to increase in pricing power, which ultimately threatens the jobs around the globe.[7] The industries that are highly export-oriented can be annihilated by unjust strong currency. Many Foreign Direct Investors (FDIs) tend to undertake capital flight due to expected currency manipulation or devaluation of the currency.[8] The countries which are substantial importers can be a subject to inflation. There can be the huge impact in the labor composition as well as in the productivity as the manufacturing sectors mostly engage in trade and bear huge percent of job loss.[9]

3. The Ongoing Debate

Many economists have claimed that China has been manipulating its currency so as to provide negative effects for United States.[10] The Department of Treasury of the United States has stated that China has taken a solid step to devalue its currency in order to gain a competitive advantage in an unfair manner.[11]At the moment, the recent debate is whether or not the other countries are using policies in order to weaken the value of their currency for gaining a trade advantage. Suppose, if some other country devaluates its currency with respect to the dollar, US imports from the country becomes less expensive and the exports to the country becomes more expensive. This result in negative affect to US exports to the country and the producers of import-sensitive goods in US may feel difficult to compete with imports from the country. But it benefits the US consumers who buy imported products and businesses that depend on inputs from other country because the product becomes less expensive.[12]

Japan was immensely condemned for undervaluing its currency during the first decade of 21st century whereas Germany is being accused of currency manipulation because it has largest current account surplus in the world. But the irony is that it does not have its own currency and uses Euro.[13] Also, China was just moving towards the flexible exchange rate and therefore, it was accused of currency manipulation. [14]But several claims have been made that the accusation on China is not true. The United States have also been accusing Brazil and Argentina as currency manipulators to give artificial boost on export of the products.[15] Also, the International Monetary fund (IMF) and the World Trade Organizations (WTO) are not able to take a direct action regarding currency manipulation because the rules of WTO is quite unclear regarding the issue and IMF does not have any sort of jurisdiction to change exchange rate policies of any countries. However, they can impact in an indirect manner.[16]

4. Conclusion / Suggestion

With the ongoing issue of currency manipulation, countries like Nepal, which extremely depend on import, can be benefited when it comes to importing goods. However, Nepal already has pegged currency with India,[17] with whom it trades the most. Article IV of Articles of Agreement of the IMF provides members with general obligations to avoid manipulating exchange rates in international monetary system.[18] Currency Manipulation also violates the Most Favoured Nation principle, the national treatment principle and tariff bindings.[19] However, so as to solve the ongoing issue, WTO and IMF should come together, by rectifying the disconnect between the two, and resolving inherent weaknesses among themselves[20] to bring out clear policies. A new organization can also be formed to monitor currency manipulation which shall be overlooked by the WTO and the IMF. Bilateral or multilateral agreement between countries can also be formed to prevent such manipulations.[21]

Many of the currencies in the world seem undervalued because the US dollar is very strong. So, US dollar being strong, United States is considered to be an amazing place to settle the cash during economic uncertainty in the world. The United States also has inflation-adjusted interest rates which makes the US dollar strong. Foreign money also flows in the banks of US, US stocks are purchased and the investment in real estate is made, which has made the US dollar strong, which essentially might make other currencies undervalued as compared. So, it is difficult to identify whether the countries are actually manipulating the currencies to adjust balance in payment and to gain competitive advantage or is it just the dollar being strong. So, the question arises; is this a trade war?

* The author is a B.B.A. student at College of Applied Business, Kathmandu, Nepal

[1] H. van Werveke, ‘Currency Manipulation in the Middle Ages: The Case of Louis de Male, Count of Falnders’ (1949) 31 Transaction of the Royal Historical Society <> accessed 26 November 2020

[2] Ernest H. Preeg, ‘Exchange Rate Manipulation to Gain an Unfair Competitive Advantage: The Case Against Japan and China’ in  C. Fred Bergsten and John Williamson (eds), Dollar Overvaluation and the World Economy (Institute of International Economics 2003)

[3] Robert Kimmel, ‘What is currency manipulation?’ The Straits Times (2 July 2017) <> accessed 26 November, 2020

[4]  Tarek A. Hassan, Thomas M. Mertens and Tony Zhang, ‘Currency Manipulation’ (2019) National Bureau of Economic Research, Cambridge Working Paper 22790, 3 < > accessed 3 December 2020

[5] Laurence Howard, ‘Chinese Currency Manipulation: Are There Any Solutions?’ (2013) 27 Emory International Law Review <> accessed 26 November, 2020

[6] Wei Liu and Libing Deng, ‘Who is the Exchange Rate Manipulator: China or America?’ (2012) 3(3) World Review of Political Economy < > accessed 29 November 2020

[7] Peter Navarro and Stephen S. Roach, ‘China’s Currency Manipulation: A Policy Debate’ (2012) 175(3) World Affairs < > accessed 29 November 2020

[8] Troy Segal, ‘Currency Fluctuations: How they Affect the Economy?(Investopedia, 23 August 2019) <> accessed 29 November 2020

[9] Ernest H. Preeg, ‘Exchange Rate Manipulation to Gain an Unfair Competitive Advantage: The Case Against Japan and China’ (n 2).

[10] Bryan Mercurio and Celine Sze Ning Leung, ‘Is China a “Currency Manipulator”?: The Legitimacy of China’s Exchange Regime Under the Current International Legal Framework’ (2009) 43(3) The International Lawyer 1257

[11] Ana Swanson, ‘The U.S. Labeled China a Currency Manipulator. Here’s What It Means’ The New York Times (6 August 2019) <> accessed 29 November 2020

[12] Rebecca M. Nelson, ‘Debates over Currency Manipulation’ (Congressional Research Service, 28 January 2020) <> accessed 29 November 2020

[13] Scott Sumner, ‘Currency Manipulation: Reframing the Debate’ (Mercatus Center, February 2020) < > accessed 3 December 2020

[14] ibid.

[15] Farok J. Contractor, ‘Currency manipulation and why Trump is picking on Brazil and Argentina’ The Conversation (4 December 2019) <> accessed 29 November 2020

[16] Economic and Social Council, ‘The Issue of Currency Manipulation’ (Economic and Social Council, THIMUN Affiliated Conference)

[17] Jason Fernando, ‘Nepalese Rupee (NPR)’ (Investopedia, 10 October 2019) <,with%20declining%20rates%20of%20inflation > accessed 29 November 2020

[18] Articles of Agreement of International Monetary Fund (adopted 22 July 1944, entered into force 27 December 1945) 2 UNTS 39 (IMF Agreement) art IV (1) (iii)

[19] Johnathan E. Sanford, ‘Currency Manipulation: The IMF and WTO’ (Congressional Research Service, 28 January 2011) <> accessed 29 November 2020; Vera Thorstensen and Carolina Muller, ‘How does International Trade Regulation Addresses Exchange Rates Measures?’ (2014) 70(2) Revista Dierito GV < > accessed 30 November 2020

[20] ibid.

[21] Chen Yu, ‘Currency Manipulation and WTO Laws: Should the Anti-Dumping Mechanism Be Entirely Dumped?’ (2019) 20(6) The Journal of World Investment & Trade < > accessed 3 December 2020

The Pandemic as a Way to Socialism


1. Introduction

The SARS-CoV-2 virus, causing the disease COVID-19, has taken a form of global pandemic today. Among the cases with an outcome, 3% have died, making the death toll go up to 1.56 million (as of December 8th, 2020).[1] These numbers will only go up and so will the importance of vaccines and health services to prevent and cure the disease. For a pandemic of this magnitude, vaccines and health services, if not made readily available to the general public with minimum of costs, can claim even more lives. Health sector involves ethical and moral issues. Medicine forms an essential part of humanities. A state’s responsibility of providing health care to its citizens comes from marxist ethical theory.[2] Therefore, greed of pharmaceutical companies and hospitals should not hinder the goal of making medicines and health services available to all. A lot of problems that we face, including the problem in health sector, during the pandemic, can be traced to capitalism.

2. Covid-19, Health and Socialism

The corona pandemic has brought about severe social, economic and political crisis. The stock markets crashed, panicked people were bulk-buying supplies, and governments are still scrambling to respond. Inability of the government can be related to the effect of privatization of means of production. Such allocation of factors of production to a class of people, has caused class struggle, alienation from self, work & other people, and exploitation of labour,[3] while China’s control over the virus can be attributed to its government control over resources, which in other countries, is very weak.[4] Therefore, the inherent problem is concentration of resources to a class of people i.e. capitalism.

Political economist Grace Blakely debunks the idea that “if the market is flourishing, the rest of the society is as well”, taking the present pandemic and the situation after lockdowns, as a reference. While the rich have added to their wealth, the poor have lost more and more.[5] Critics to capitalism attribute mass deaths and daily deaths to capitalism and its failures. “Profit over people” has always been true in a capitalist society, even in health institutions. [6] “Survival of the richest” can be seen in the present pandemic. Thomas L. Friedman states, “Covid-19…is the logical outcome of our destructive war against nature”.[7] The mismanagement of animals in the Wuhan wet market, which is predicted to be the outbreak point of the virus, for the sake of profit, itself leads to the suggestion that the pandemic is a result of capitalism. [8]

2.1. Health Crisis as a way to Socialism

Marx in his theories, has dealt with public health and basic needs and how any inconvenience in such sector, the cause being capitalism, leads to destruction of capitalism. He firmly believed that capitalism sows seeds of its own destruction. Some even say that “public health is a mid-wife to Marxism”.[9] Commodification of even the basic elements of life can be seen in today’s capitalism-based society. We can see the profit of hospitals and giant pharma-companies is more important than lives of people. We have seen how loopholes in the law are being exploited for gains and profits, by such organizations. However, Marx believed that such traits of capitalism is what leads to its own destruction.

Ken Rogoff, a former economist from International Monetary Fund (IMF), had mentioned that “the next great battle between socialism and capitalism will be waged over human health and life expectancy.” Marx offers criticism to present practice of privatized hospitals and pharmas.[10] The present crisis has exposed the flawed economic structures, labour rights, social hierarchy, health organizations, leaders and human nature.[11] Joel Kovel, an eco-sociologist, in his book titled ‘The Enemy of Nature: End of Capitalism or the End of the World (2002)’, provided that nature would dominate over human creation of capitalism. As per Lovelock, in his book ‘The Revenge of Gaiga’, in any battle between the nature and humans, nature will always stand victorious. [12]

Economist Marina Mazzucato stated that the pandemic should make us rethink about our capitalist society. Alex Azar, the present U.S. Secretary of Health and Human Services has claimed that Covid-19 treatments and vaccines, if made, might not be available to the general public of America merely due to affordability issues.[13] Any health system is flawed, when we see that affordability is bigger concern than availability. This shows the problem with capitalism and Marxism (or socialism) being the possible solution.[14]

2.2. Theory of Metabolic Rift

People from the field of biology like Charle’s Darwin and Thomas Huxley have also influenced Marx’s idea of communism. More specificially, zoologist Ray Lankester, had mentioned about “nature’s revenge” in his book ‘Kingdom of Man’(1911), which is said to have influenced Marx.[15] Marx’s theory of metabolic rift was a way of looking at ecological or metabolic relations. Marx had said;

“Large landed property reduces the agricultural population to an ever decreasing minimum and confronts it with an ever growing industrial population crammed together in large towns; in this way it produces conditions that provoke and irreparable rift in the interdependent process of the social metabolism, a metabolism prescribed by the natural laws of life itself.”[16]

We can interpret this idea of Marx with the present situation. With large pharma-companies and capitalists taking over the general will and rights of the people, it is natural to have a political revolution or maybe a revolution in mentality of people. “Class” being the main focus of Marx’s study, it is important to understand his view on dispute between classes. Classes exists to this day and so does the struggle among the classes. At expense of the sick, health sectors have been making large profit. So, isn’t an “irreparable rift” inevitable against such system? As Marx has famously stated “workers of the world, unite! You have nothing to lose but your chains!”

2.3. Is Socialism the Answer?

In the present, people fear absolute socialistic health system, as it can lead to lack of health-services, which results to rise in prices. Public health can become a tool for the bureaucrats for personal gains and rise in price can be a real threat as it contributes to national revenue, which the bureaucrats can easily use for selfish motives.[17] However, taking the example of National Health Service (NHS) in the UK, one can observe that it works on socialist principle in limited distributional sense.[18] Market socialist principle in health care and health insurance policy is important to regulate public health sector.[19] Affordability and easy availability of health care is not exactly socialism.[20] It is “socialist principle” in the health sector that should be given importance rather than favouring capitalism  by citing fear of socialism. However, socialist redistributive policy of the US still is not efficient.[21] Thus, while some nations require an introduction to socialist principle in their health culture, some require revolution to their already-introduced system.

Adam Przeworksi has stated that “whether the socialist or the capitalist model has been more successful in practice is impossible tell.” Some even argue that socialism has never existed in its true form for it to fail, and thus, a comparison of capitalism and socialism cannot be done.[22] While it is difficult to establish methodological considerations so as to establish grounds to determine which of the two systems (capitalism or socialism) is better,[23] contrary to popular belief, empirical study shows that socialism (or rather socialist principle) have historically shown greater improvement to health and social indicators, than capitalism.[24] Vietnam’s socialist centrally planned economic regime aimed for provision of social services to all population free of charge. While resources and supplies were limited, an egalitarian approach ultimately improved its human development indicators in comparison to similar economically poor nations.[25] Similarly, in Cuba it can be seen how health indicators improved in comparison to the rest of Latin America after the Cuban revolution.[26]

3. Conclusion

A nation is not of capital but of its people and land. We have only proved Hobbes’s idea of State of Nature. According to him, humans are cruel by nature and there exists war of all against all.[27] For Cyrus Edson, “socialism of the microbe…is the chain of disease, which binds all the people of the community together.”[28] While the statement might be true to some extent, such “togetherness” is only within the classes rather than in between them. The rich have added to their riches while the poor have added more to their debts. The intent of the organizations and companies working on vaccines is to secure patents rather than saving lives. It has been more of a race rather than it being a work for a “cause”.[29]

“Social democracy” has always entailed establishment of socialist principle.[30] Present scholars to neo-marxism and their theories of the state, are the basis to solve the problems we face today. They see this situation as a chance to analyse the world we live in.[31] Without a revolution to the eco-political situation, the situation will worsen, if not now, definitely in the future. This reflects Marxian idea of changes from capitalism to socialism in his theory of dialectic materialism, where in, communism is the ultimate end to all synthesis. Further, it is important to establish a socialistic principle and reform along such lines. However, it is again equally important to note that, in the present world, economic reform, while is important, an unplanned and abrupt one can lead to further weakened public health system.[32] Therefore, the present pandemic has highlighted weaknesses in public health system of countries which have failed to fulfil its socialistic feature and thus, a planned reform in the public health sector is of utmost requirement.

* The author is a second year economics major and business data analytics major (dual major) student at Washburn University, Kansas, USA

[1] ‘Covid-19 Coronavirus Pandemic’ (Worldometer) <> accessed 8 December 2020

[2] Bejnamin B. Page, ‘Socialism, Health Care, and Medical Ethics’ (1976) 6 (5) The Hasting Centre Report < > accessed 2 December 2020

[3] Michael Heinrich and Alexander Locascio (trs), An Introduction to Three Volumes of Karl Marx’s Capital (NYU Press 2004)

[4] Carlos Martinez, ‘Karl Marx in Wuhan: How Chinese Socialism is Defeating COVID-19’ (2020) 10(2) International Critical Thought < > accessed 6 December 2020

[5] Anastasya Eliseeva, ‘Coronavirus and the Crisis of Capitalism’ (New Frame, 13 March 2020) < > accessed 4 December, 2020

[6] Nick French, ‘How Capitalism Kills During a Pandemic’ (Jacobin, 26 March 2020) <> accessed 4 December, 2020

[7] D. Raja, ‘Reading Marx in Times of Covid-19’, The Indian Express (4 May 2020) < >

[8] A. Alonso Agguire, Richard Catherina, Hailey Frye and Louise Shelly, ‘Illicit Wildlife Trade, Wet Markets, and Covid-19: Preventing Future Pandemics’ (2020) 12 (3) World Medical and Health Policy < > accessed 28 November 2020

[9] Richard Horton, ‘Offline: Medicine and Marx’, (2017) 390 (10107) The Lancet < > accessed 28 November 2020

[10] ibid.

[11] Mariana Mazzukato, ‘Coronavirus and Capitalism: How will the Virus Change the Way the World Works?’ (World Economic Forum, 2 April 2020) <> accessed  1 December, 2020

[12] Anitra Nelson, ‘COVID-19: Capitalist and Post-capitalist Perspective’, (2020) 13(3) Human Geography <> accessed 2 December, 2020

[13] Mariana Mazzukato, ‘Capitalism’s Triple Crisis’, (Project Syndicate, 30 March 2020) < > accessed 30 March, 2020

[14] Rob Wallane, Alex Liebman, Luis Fernando Chaves and Rodrick Wallace, ‘Covid-19 and Circuits of Capital’, (Monthly Review, 1 May 2020) <> accessed 3 December 2020

[15] Lewis S. Feuer, ‘The Friendship of Edwin Ray Lankester and Karl Marx: The Last Episode in Marx’s Intellectual Evolution’, (1979) 40(4) Journal of the History of Ideas <> accessed 3 December 2020

[17] James I. Ausman, ‘What happened to USA health care on the way to socialism?’ (2018) 9 (196) Surgical Neurology International < > accessed 3 December 2020

[16] ‘Marx on the Metabolic Rift: How Capitalism Cuts us off from the Nature’ (MR Online, 15 October 2019) <> accessed 29 November 2020

[18] Martin Powell, ‘Socialism and British National Health Service’ (1997) 5 (3) Health Care Analysis < > accessed 2 December 2020

[19] H.E. Frech III and Peter Zweifel, ‘Market Socialism and Community Rating in Health Insurance’ (2017) 59 (3) Comparative Economics Studies < > accessed 2 December 2020

[20] Etienne Deffarges, ‘Is Universal Health Care Socialism?’ (The Health Care Blog, 5 September 2018) < > accessed 2 December 2020; Joel N. Naroff, ‘It isn’t enough to Label Medicare-for-all as Socialism. We need Solutions not Slogans’ (The Philadelphia Inquirer, 11 December 2019) < > accessed 2 December 2020

[21] Lee Nason, ‘Letter: Health care problems are from socialism not capitalism’ South Coast Today (17 February 2020) < > accessed 1 December 2020

[22] Vicente Navarro, ‘Has Socialism Failed? An Analysis of Health Indicators Under Socialism’ (1992) 22 (4) International Journal of Health Services < > accessed 2 December 2020

[23] Roberta Garner and Larry Garner, ‘ Socialism, Capitalism and Health: A Comment’ (1994) 58 (1) Science and Society < > accessed 2 December 2020

[24] Vicente Navarro, ‘Has Socialism Failed? An Analysis of Health Indicators Under Socialism’ (n 22)

[25] Alberto Gabriele, ‘ Social Services Policies in a Developing Market Economy Oriented Towards Socialism: The Case of Health System Reforms in Vietnam’ (2006) 13 (2) Review of International Political Economy < > accessed 2 December 2020

[26] Vicente Navarro, ‘Has Socialism Failed? An Analysis of Health Indicators Under Socialism’ (n 22)

[27] ‘Hobbes’s Moral and Political Philosophy’ (Stanford Encyclopedia of Philosophy, 12 February 2020) < > accessed 5 December 2020

[28] Cyrus Edson, ‘The Microbe as a Social Leveller’, (1895) 161(467) The North American Review <> accessed 6 December 2020

[29] Nick French, ‘How Capitalism Kills During a Pandemic’ (n 6).

[30] Vicente Navarro, ‘Has Socialism Failed? An Analysis of Health Indicators Under Socialism’ (n 22)

[31] Annastruman, ‘Climate Emergency’, Covid-19 and the Australian Capitalist State’ (Developing Economics, 29 March 2020) <> accessed 28 November 2020

[32] Alberto Gabriele, ‘ Social Services Policies in a Developing Market Economy Oriented Towards Socialism: The Case of Health System Reforms in Vietnam’ (n 25)