From Fugitive Cash to Non-Fugitive Provisioning: The Mundellian Trilemma, External Debt Feedback, and the Design Space of Post-Employment Redistribution

Abstract

The Mundellian trilemma is widely assumed to make large-scale redistribution — such as universal basic income — infeasible in an open global economy, yet this assumption has never been stated formally or tested dynamically. This paper constructs a four-bloc computational model of the trilemma’s transition dynamics, embedding reserve-currency asymmetry, secular growth decline, and external-debt currency mismatch in a heterogeneous open-economy framework. Under the static assumptions, universal cash-transfer redistribution does produce synchronized crisis. However, the constraint turns out to be selective rather than universal: three structural layers — the reserve-currency country’s exorbitant privilege, the decline of developing-country growth rates, and original sin in sovereign debt denomination — interact multiplicatively, concentrating pressure on the periphery through a depreciation–debt feedback loop while leaving the center largely unconstrained. The paper identifies the mechanism that determines whether this loop ignites: transfer modality. Cash transfers are fugitive — liquid, mobile, border-crossing — and feed the loop. Housing decommodification through Community Land Trusts is non-fugitive — it delivers redistributive value without injecting cash into markets or across borders. Under non-fugitive transfer, the multiplicative interaction collapses, developing-country debt falls by two orders of magnitude, and regime configurations that are simultaneously system-optimal and non-sacrificial for the periphery become feasible. The finding reframes the trilemma as a constraint on institutional form rather than on redistribution itself, and connects the international finance literature to the evolutionary question of which welfare-state regimes can survive under open-economy constraints.