In a world of many languages, it is efficient if everyone shares a second language. In a world of many currencies, it is efficient if everyone shares a second currency. In the current world economy, that common second language has been English and the common second currency has now been the US dollar for a half-century. In August 1967, Charles P. Kindleberger made this point in an essay called "The Politics of International Money and World Language," published by the economics department at Princeton University as #61 in a series of "Essays in International Finance."
As Kindleberger points out in the essay, debates over a widely shared second language or second currency are inevitably controversial in political terms, because culture and prestige are at stake. He writes: "The basic question that will be left unanswered is whether economic efficiency is less important in these matters than political appearances, which many other observers would probably call political reality. It is possible that it is, but economists are accustomed to having doubts. At the least, I would insist that there is a trade-off between economic inefficiency and political appearances which must be explicitly evaluated to see whether the cost in one is worth the benefit in the other."
Here's a dose of Kindleberger:
However, the analogy which interests me most is that between the use of the dollar in international economics and the use of the English language in international intercourse more generally. Analogies are tempting, and dangerous because frequently misleading. But the dollar "talks," and English is the "coin" of international communication. The French like neither fact, which is understandable. But to seek to use newly-created international money or a newly-created international language would be patently inefficient.
Languages are ordered hierarchically. Like sterling, French used to dominate. Like the dollar, English does now. Frenchmen must learn English; it is not vital for Anglo-Saxons to learn French.
The analogy with the language quarrel in Belgium is exact. The Flemish must learn French, but the Walloons, despite their constitutional edict of equality between the languages and the legislative edict which requires civil servants to do so, do not learn or use Dutch. The Flemish are offended and begin to insist on Flemish, exactly as France has insisted that its representatives at international conferences, even when they know English perfectly, must speak only French and insist on all speeches in English being translated into French. The transactions costs of translation, including the misunderstanding in communication and the waste of time, are even more evident than the transactions costs of converting gold to dollars and dollars to gold, when it is dollars—not gold—that are necessary to transactions. ...
It is easy to imagine what is implied in a "sabotage" of French as a working language at the United Nations. Someone—presumably an Anglo-Saxon—at a working-committee meeting, observing that all the Francophones had a good command of English, suggested that the translation into French from English and possibly from French into English be dispensed with in the interest of efficiency. The transactions (translation) costs of simultaneous but especially of consecutive translation are high in efficiency, owing to loss of time or accuracy and of intimacy in two-way communication. It is highly desirable for Americans and British to know enough French, German, Italian, Spanish, and perhaps Russian to be able to receive in those languages, or some of them, even if they transmit only in English. But world efficiency is achieved when all countries learn the same second language, just as when the different nationalities in India use English as a lingua franca. ... One's own currency is the native language, and foreign transactions are carried on in the vehicle currency of a common second language, the dollar.
It is hard on French, which used to be the language of diplomacy, to have lost this distinction; but it is a fact. In scientific writing, as in communication between international airplane and control tower, English is the universal language, except for the rescue call "Mayday" which ... would have put in French as "M'aidez." But a common second language is efficient, rather than nationalist or imperialist.
The power of the dollar and the power of English represent la force des choses and not la force des hommes. This is not to gainsay the existence of unattractive nationals abroad—from virtually all countries. I recall particularly a Chicago Tribune reporter who got through Europe with two words: "Whiskey" and "Steak." But it is not nationalism which spreads the use of the dollar and the use of English; it is the ordinary search of the world for short cuts in getting things done. ...
The selection of the dollar as the lingua franca of international monetary arrangements, then, is not the work of men but of circumstances. Pointing to its utility involves positive, not normative, economics. Students of international politics must deplore the nationalistic overtones and would like to see the ultimate bastions of the system, and the means of producing policy, international.
But the analogy has one more aspect. The futility of a synthetic, deliberately created international medium of exchange is suggested by the analogy with Esperanto. This still commands a doughty band of true believers, but their legions have thinned. A linguistics expert states that Esperanto suffers from being inadequately planned as an international language. If he worked on it, he could devise a common language which would be much better suited to the task. Our instinct tells us that this is equally applicable to the myriad of [international monetary] plans—Triffin, Stamp, Postuma, Roosa, Bernstein, Modigliani-Kenen, and all the rest—all of which have strengths (and weaknesses) but also share the basic weakness that they do not grow out of the day-to-day life of markets, as the dollar standard based on New York has done, and likewise the Eurodollar. ...
At the other extreme, the French view that the international monetary system should re-enthrone gold as the international medium of exchange resembles an appeal for a return to Latin as the lingua franca of international discourse, an appeal not without its nostalgic value for those who admire ancient Rome and medieval culture, but one that is evidently swimming against the stream of history, as the increasingly rapid abandonment of Latin in the Catholic Church testifies.
Finally, the many academic economists who recommend separating international money and capital markets by a system of flexible exchange rates between national currencies in effect call for a return to Babel, with foreign languages used by none save professional interpreters. This maximizes transactions costs and minimizes international discourse. A compromise between this and fixed exchange rates is possible: with separate dollar, sterling (or dollar-sterling), franc, and ruble areas, each with many countries having fixed exchange rates and speaking a common area language but with flexible exchange rates and full formal translation between them. ... For those who like neat Cartesian designs, it has much to recommend it.
But how can one make such a division of the world among the great powers into spheres of influence stick, even if one has no misgivings about its morality? An earlier paper by Mundell raised the central issue, "What is the Optimum Currency Area?" and the same question could be put for languages. The rapid shrinkage of the world, however, makes it impractical to try to maintain traditional currency and language areas without infiltration of a single language and currency into a wider range of human activity. The Organization of Petroleum Exporting Countries (OPEC), consisting of Arab and Spanish-speaking states, inevitably reckons in dollars and discourses in English, and there is little that the statesmen of the maj or powers can do to prevent a succession of hundreds of similar steps toward reducing the costs of economic and social intercourse. In positive, not normative, terms the optimum currency and language area is rapidly expanding to the world. ...
The ironic and politically very damaging fact is that the European language is English, or perhaps one should say American, just as the European unit in monetary affairs is the dollar. This is because the optimum language and currency areas today are not countries, nor continents, but the world; and because, for better or worse—and opinions differ on this—the choice of which language or which currency is made not on merit, or moral worth, but on size.It's interesting to me that Kindleberger was making this point about the dominance of the US dollar and the English language a half-century ago, and this part of his argument seems to have stood the test of time. One of the most common questions I get asked in public forums is "How long before the US dollar loses its global preeminence, and will be forced to share the world economic stage with the Chinese yuan, the euro, the Japanese yen, and others. Kindleberger's meditation offers an answer to that question, which is roughly "not very soon."