Today we may be witnessing---at last---the emergence of a truly global economy. Electronic commerce promises to transform the world into the vast common market for producers and consumers; at least, that is what all the hype would suggest. Whether it’s Priceline.com or eBay or numerous other companies springing up each week, consumers are increasingly gaining the opportunity to shop around and compare values for an array of products and services. The trend seems clear: We are rapidly moving toward a more transparent, more efficient global marketplace offering easy access to suppliers and customers without regard to geographic borders.

But in the middle of this exciting development---so full of potential to maximize the economic gains from competition and raise living standards around the world--a problem arises that seems both laughably simple and horrendously complex. There is no global form of money. For all the talk of a global economy, there exists no common monetary unit of account by which to measure the value of goods and services offered in the new global common market. So all the individual market participants, all the would-be producers and consumers, are stuck trying to figure out relative values among competing products available in different countries using the most ephemeral of monetary standards: national currencies.

Can Government Solve the Problem?

In concept, the problem could be solved in a straightforward manner. The governments of individual nations could agree to establish a global economy. There are logical procedures and historical precedents for doing so.

One way would be to set up a single global currency managed by a global central bank. Not to oversimplify the actual process, but the critical driving points would be to achieve international agreement on the objective, identify the key phases of transition, and then map out a timetable for execution. Europe’s move to a single currency shows that political cooperation among national governments is indeed possible; a larger-scale initiative aimed at achieving a single global currency would undoubtedly benefit from Europe’s experience and could likely proceed more rapidly. Global monetary union (GMU) would transcend European objectives in imposing political and financial conditions for a new common currency.

The other way is for governments to agree to maintain separate national currencies but make them all convertible into a universal reserve asset at a fixed rate. The classical gold standard provides a model of such a system--though as Wesleyan professor Giulio Gallarotti notes, the gold standard came into being as the result of "spontaneous order" rather than deliberate design. Still, governments could formally agree to abide by the strictures of an international monetary standard based on fixed convertibility of national currencies into gold.

The Bretton Woods system adopted in 1944 offers further evidence that governments are capable of designing and implementing monetary arrangements to provide an international monetary unit of account. Based on fixed convertibility of other currencies into the U.S. dollar--which itself was convertible into gold at a $35 fixed rate--the Bretton Woods system furnished a stable monetary platform for international trade and investment which enabled nations to reconstruct their economies in the post-World War II decades. When the Bretton Woods system succumbed to U.S. fiscal indulgences and collapsed in the early 1970s, international monetary order was abandoned.

Now the world stands some 30 years later on the eve of a new century. The question for today remains: Can governments work together to achieve a global monetary system? Can they resolve the problem of a global marketplace that currently operates in the absence of any global monetary standard of value? In short, yes, they can. But they won’t.

Electronic Commerce and Spontaneous Monetary Order

Polls indicate a strong correlation among Internet users and libertarians; the connection is hardly surprising. Those who appreciate the high-technology approach to global relations and commerce are more disposed to look toward private innovation rather than government intervention for solution. The libertarian attitude favors individual initiative and voluntary economic transactions, while governments tend to be more coercive. Legal tender laws are a prime example of government involvement in commercial transactions; by decreeing government-issued money as the acceptable form of payment for private obligations, government exerts a central role in the economy. When governments control the most basic market tool for measuring value---the monetary unit of account---political considerations inevitably come to influence what should be the pure bookkeeping aspects of private business.

So one wonders when we will see the advent of a serious challenge to government-issued national currencies in the form of electronic global money. Beyond such e-money products as CyberCash or DigiCash, which enable customers to conduct transfers and payments over the Internet, what is needed today is a form of legal tender that provides a genuine alternative to fluctuating national currencies. A consumer-oriented monetary product would aim to provide the user with a unit of account that is constant across borders so that competing products made available through worldwide electronic commerce could be rationally evaluated. Global money for a global common market.

While the idea is clearly in keeping with ideological resistance to government interference in private commerce, its most compelling aspect is sheer practical convenience. Imagine sitting in front of your computer screen and being confronted with the option of purchasing a new digital camera from one of three different suppliers; one in Japan, one in Germany, one in the United States. You are ready to buy, each version of the camera offers features you find equally desirable, transportation costs are negligible--so your decision will be determined solely on the basis of price. Which is the best deal?

You could write down the three different prices as given--in yen, euros, dollars--and then consult a web site that provides real-time foreign exchange rates so you could do the calculations and compare prices across the three currencies. The Japanese model that is available for Y100,000 stands as a better deal than the U.S. model advertised at $1,000 so long as the yen is currently trading at its current rate of slightly more than 100 yen to the dollar. But even as you flip back to order the Japanese camera, the yen could perhaps be strengthening to less than 100 yen to the dollar---in which case the U.S. camera offers the better bargain. Nothing has changed as far as the merits of the competing products, of course, but the variable exchange rate between the two monetary units of account directly affects the cost calculations. Meanwhile, the German camera that sells for 962 euros is equivalently priced to the U.S. model when the euro is equal to $1.04 dollars. But a stronger euro, say $1.08, might steer you toward the U.S. product to save $39 on the price of the camera. Maybe you should wait until next week. Then too, the German version will be available at a meaningful discount if the euro falls below parity with the dollar.

One might argue that prices on consumer products sold around the world do change to reflect the impact of moving exchange rates. Over time, that is more or less true. But the major advantage of electronic commerce is the immediate transparency on pricing that permits the purchaser to evaluate the options to make his choice. Just as the Internet sites are the cropping up to list various suppliers for everything from cars to cooking lessons, it is easy to imagine that an enterprising e-commerce or on-line auction provider would seek to help its customers make meaningful assessments of value across borders. Can we be far from the point when an e-commerce site automatically performs comparative "cross currency" calculations for its customers to facilitate their access to the global marketplace in ordering products? Moreover, since it would obviously be expensive and burdensome for the individual consumer to have to engage in foreign exchange transactions just to make a simple purchase, the e-commerce web site itself could provide the service of transacting the customer’s purchase in the currency that represented the best bargain.

"Increasingly, technology and individual initiative are providing an alternative to traditional banking."

The concept is not so farfetched. Banking services are quickly melding into Internet options and it seems reasonable to link foreign exchange services directly to purchasing accounts aimed at global electronic commerce. An e-commerce client might individually choose to maintain purchasing accounts in all the major currencies so that he could pick and choose to maintain purchasing accounts he wished to draw on for any given purchase. But why should the quest for currency convenience stall at such an awkward and inefficient stage? Even more useful to the customer would be some sort of general cyberspace purchasing account that could be translated into any designated currency as needed. The account itself would be denominated in terms of global monetary units of purchasing power---based on a common denominator form of money---and all prices of goods offered in any currency would be automatically defined in terms of the electronic global money. For mental convenience and ease of comparative shopping, such a proprietary monetary service offered by an e-commerce web site in conjunction with banking or credit card services might find strong demand among consumers.

The rub on such a proposal might once have been found in a consumer’s need to ultimately convert into his own "local" currency; that is, he would have to reconcile his cyberspace account into his own national currency at some point. These days, however, it is increasingly possible to never leave cyberspace accounting and payment channels, whether you are selecting a mortgage or ordering a pizza. Electronic commerce over the Internet means less and less need to ever have to convert money into physical cash. And if purchasing power is increasingly stored in cyberspace to be tapped or supplemented as needed, e-commerce participants might indeed opt to utilize a convenient global monetary unit of account instead of separate national currencies that confuse value comparisons and distort prices. So long as all parties to the transaction agreed on the form of payment, suppliers and consumers engaged in electronic commerce could conduct transactions in terms of the global common denominator money. Call it HarMoney.

Necessity Is the Mother of Invention

How else can the world proceed to achieve the maximum benefits of comparative advantage through international trade? If the monetary unit of account changes across borders and national currencies are in constant flux on foreign exchange markets, the whole notion of market efficiency is undermined by misleading price signals. The explosive growth of electronic commerce begs the question of international monetary order and the future of genuine free trade. What a travesty that government leaders speak so earnestly about an integrated global economy and shared prosperity---and then have no policy initiatives aimed at achieving any kind of global monetary order. The spirit of Bretton Woods no longer resides in the halls of government.

But the need for rational monetary foundation is more compelling than ever before; never in history have so many individuals been so personally empowered to reap the benefits of economic exchange in the absence of government intervention or control. Technology has provided the means for peaceful, voluntary transactions among individuals to match the output of the producers to the demands of consumers---anywhere in the world. As the global marketplace is increasingly accessed by suppliers eager to find new customers, and as web sites seek to clarify and facilitate the purchasing decisions of consumers, the demand for the global form of money will only increase. The first Internet company to design and implement a logical alternative to national currencies that transcends legal tender restrictions imposed by governments and provides a practical monetary unit of account for use in the global marketplace will pave the way. Not only to the next killer application to facilitate electronic commerce, but to a more liberating approach to market transactions in the global economy.