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