Deweaponizing Interdependence

The Trump II administration’s trade wars and framing of the dollar’s reserve status have accelerated concerns about the sustainability of the current monetary and trade system. Against a backdrop of various disintegrative tendencies, our new book Deweaponizing Interdependence: Bringing the Idea of International Clearing Union into the Twenty-First Century reintroduces the concept of an International Clearing Union (ICU) and offers an important overview of critical approaches to the prevailing monetary system.

The ICU concept is closely associated with J. M. Keynes but has older origins, diverse sources of debate, and a high degree of contemporary relevance. In discussing the concept, this volume examines key contemporary political issues, including principles of fairness in trade and finance, de-dollarisation, development, exchange rate policy, capital controls, as well as urgent issues of climate emergency and ecological breakdown. It provides perspectives from different disciplines and the Global North and South and opens up debate regarding new global institutional possibilities.

Consider the rise in trade tensions, exemplified by the conflict between China and the US. These tensions stem from a structural contradiction: as global trade surpluses and deficits cancel out, surplus countries accumulate savings while deficit countries accumulate debt. This reflects a fallacy of composition, the mistaken belief that what is possible for one actor is achievable by all simultaneously. Not every country can run a trade surplus at the same time, yet the current international monetary and trading system encourages behaviour consistent with this illusion.

Deficit countries may respond individually through unilateral measures, as seen in the second Trump administration’s tariff policies. Such actions, however, risk triggering retaliatory spirals similar to those of the 1930s. In the 2020s, these dynamics have been compounded by the weaponisation of interdependence, the securitisation of commodity chains, and growing bloc divisions. This volatile combination undermines cooperative action at a time when the world faces multiple existential challenges. Nevertheless, behaviour-shaping rules and more appropriate common institutions remain possible. The idea of an International Clearing Union (ICU) offers one potential pathway.

Clearing union ideas date back to at least the 1890s and were widely discussed in the interwar period. During the early 1940s, several clearing union proposals circulated, but Keynes’s version became the primary reference point. His ICU envisioned an impartial system of currency management centred on a world central bank issuing a common currency, the bancor. Financial positions would be defined systemically relative to the rest of the world, and adjustment obligations would apply symmetrically to debtors and creditors.

Keynes aimed to avoid the problems associated with a dominant national reserve currency, reduce trade and monetary conflicts, and enable more rational economic policymaking for mutual benefit. The proposal, however, faced early criticism from E. F. Schumacher and Michał Kalecki, among others. Moreover, the outcome of the Bretton Woods conference reflected primarily US preferences, establishing the dollar as the dominant global currency.

Scholars and policymakers have repeatedly revisited the ICU idea. Changing world-historical conditions have prompted reconsideration of its institutional design, functions, and normative justification. Some proposals have incorporated ethical and political insights from Kalecki and Schumacher; others have focused on the operational role of a clearinghouse or a world central bank. Many have sought to enhance feasibility under contemporary conditions. Notable contributions include the Brandt Commission in the 1980s, Paul Davidson’s work in the 1990s and early 2000s, Joseph Stiglitz’s proposals in the 2000s, and Zhou Xiaochuan’s intervention during the 2009 global financial crisis. While many innovative plans draw on post-Keynesian theory, a variety of economic perspectives has informed ICU debates.

ICU discussions remain highly relevant. Several developments support this claim: intensifying globalisation has increased the need for effective world economic governance; persistent global imbalances continue to generate domestic policy problems, interstate conflict, and underdevelopment; and the current monetary system remains prone to instability, as demonstrated by the 2008–9 global financial crisis. Since the “conservative turn” of the early 2000s, Keynes’s analysis of the economic causes of peace and war has regained salience. The 2010s and 2020s have been marked by disintegrative tendencies, potential trade wars, and renewed contestation over the role of the US dollar, including within BRICS discussions. Pandemic-era inflation, rising debt, and elevated interest rates have further intensified debate over the dollar’s global role. Since early 2025, the second Trump administration’s rhetoric and tariff policies have deepened concerns about the sustainability of the current order.

Warnings by Keynesian and post-Keynesian thinkers – perhaps especially by the Brandt Commission – about the political consequences of recurring recessions, crises, and conflicts appear increasingly prescient. In the 2010s and 2020s, right-wing populism became a major political force. Many analysts link uneven growth, economic volatility, and concentrated power to declining support for democracy and rising authoritarian tendencies. These developments form part of a broader polycrisis that cannot be reduced to the policies of any single country, although the US remains structurally central to the global political economy. The dollar’s contested status and US tariff policy underscore this centrality.

The chapters of this volume examine different dimensions of ICU prospects, transitional pathways, institutional design, and normative justification. The contributions collectively explore the economic-theoretical rationale for an ICU, its potential to rationalise world economic governance and mitigate systemic contradictions, the role of financial and monetary innovation, the relevance of global risks such as climate change, and the political feasibility of transition.

Taken together, this topical volume highlights the enduring relevance of ICU proposals and discusses the manifold questions they raise. The hope is that renewed attention to the ICU can contribute to the deweaponization of interdependence and to building more stable, equitable, and cooperative forms of global economic governance. Further debate – along with possible institutional experimentation – is of course needed. However, this is not just a discussion for the sake of discussion. The implementation of the ICU would have world-historical significance, and many of the chapter-authors discuss feasible paths toward the ICU and the requirements for institutional design.

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Deweaponizing Interdependence is a result of the Research Council of Finland-funded project “How to avoid tendencies toward trade wars? A multi-method study about institutional designs for an International Clearing Union (ICU)”, which ran from 2021 to 2025 and was led by Heikki Patomäki. This open-access book is available in both hardcover and paperback and can be downloaded HERE.

A book launch will be held on 4 March starting at 16:00 EET. You can attend the book launch via Zoom HERE.

The project also included a more detailed Delphi study of different scenarios and their feasibility. Readers may also be interested in the results of this study, which have been published in the article: Heikki Patomäki (2025) “From Crisis to Global Reform? Delphi Insights on the Feasibility of an International Clearing Union”. Journal of Post Keynesian Economics, (48): 4, 2025, pp. 606–632: open access, available HERE.