SM | DEVELOPMENT
BRETTON WOODS TO BREXIT
The British vote to leave the European Union and the election of Donald Trump as president of the United States have brought a new style of politics — not just in the United Kingdom or the United States , but for the world
BY HAROLD JAMES
The developments of 2016 constitute a major challenge to the liberal international order constructed after the defeat of Nazism in 1945 and strengthened and renewed after the collapse of the Soviet system between 1989 and 1991 .
The United States and the United Kingdom were the main architects of the post-1945 order , with the creation of the United Nations systems , but they now a p p e a r t o b e p i o n e e r s i n t h e r e v e r s e direction — steering an erratic , inconsistent , and domestically controversial course away from multilateralism . Other countries , meanwhile , for various reasons are incapable of assuming that global leadership , and the rest of the world likely would not support a new hegemon in any event .
The postwar system created at the Bretton Woods , New Hampshire , conference in 1944 should be credited with economic growth , a reduction in poverty , and the absence of destructive trade wars . It built a comity that encourages to this day cooperation on issues as diverse as taxation , financial regulation , climate change policy , and terrorism
The central postwar concern was international financial stability . The United States and the newly created International Monetary Fund were at the center of a system that sought to maintain that stability by linking exchange rates to the dollar , with the IMF the arbiter of any changes . But today exchange rates are largely set by market forces ; the IMF has morphed into a combination of crisis manager , global economic monitor , and policy consultant ; and US dominance may be replaced by new powers , such as China and the European Union , even as domestic political forces seem to be tugging the United States away from international engagement .
What changes are needed to adjust today ’ s world to the changed geography of economic development , to a transforming geopolitical environment , and to large and potentially unstable financial flows ? In 1944 and 1945 a multilateral liberal world order was built , largely at the initiative of , and in accordance with , the perceived interests of one power : the United States . Forty-four countries were formally present at Bretton Woods , but US and British policymakers steered the negotiations . The essential vision involved multilateralism that benefited everyone . The Soviet Union , which participated in Bretton Woods , did not ratify the agreement , in part because it was suspicious of the American motivation , and in part because it did not want to supply the data that was a requirement of
34 | NOV . 2017