The historic Bretton Woods summit shaped a golden era of growth. This year’s G20 could be our equivalent
- Michael Jacobs is professor of political economy at the University of Sheffield
For historians of the postwar economic era, 2024 marks an important anniversary. Eighty years ago, in July 1944, a small town called Bretton Woods in New Hampshire, America, hosted a conference. Its purpose was to establish a new set of rules and institutions that could keep order over global capitalism after the disasters of the Great Depression and the second world war. It is not too much to say that Bretton Woods established the infrastructure of the modern global economy.
Eight decades later, the world is a very different place. But once again the global economy – post-Covid, post-energy price shock, experiencing rapid climate change – is in crisis. Calls for a new Bretton Woods have been growing louder.
Forty-four nations sent delegates to the Bretton Woods conference, but in practice it was dominated by the US and UK. Its presiding intellect was the brilliant British economist John Maynard Keynes.
Keynes’s theories had already revolutionised economists’ thinking about domestic policy. If economies fell into recession, Keynes argued, it was the job of the state to raise public spending in order to maintain full employment. As the second world war was ending, Keynes turned his attention to the international sphere.
Under Keynes’s guidance, the Bretton Woods conference created two new institutions: the International Bank for Reconstruction and Development, later known as the World Bank; and the International Monetary Fund, or IMF. The World Bank’s task was to invest in countries’ postwar economic development, through both commercial and concessional (low-interest-rate) loans. The IMF’s role was to support countries that got into financial trouble, to avoid the beggar-thy-neighbour currency devaluations that had contributed to the Great Depression of the 1930s.
Along with the Marshall plan, which between 1948 and 1952 saw the US lend European countries today’s equivalent of $173bn (£135bn) for their postwar recovery, the Bretton Woods conference shaped the “golden era” of global economic growth from 1945 until the mid-1970s. But in the free market era that followed – after the elections of Margaret Thatcher and Ronald Reagan in 1979-80 – the World Bank and IMF changed. They started applying restrictive conditions to their loans, forcing recipient countries to make “structural adjustments” to their economic policies, in practice meaning public spending cuts, deregulation and privatisation. Keynes’s creations became, in effect, instruments of the anti-Keynesian counter-revolution.
Michael Jacobs is professor of political economy at the University of Sheffield and a visiting senior fellow at the global affairs thinktank ODI
Continue reading…The historic Bretton Woods summit shaped a golden era of growth. This year’s G20 could be our equivalentMichael Jacobs is professor of political economy at the University of SheffieldFor historians of the postwar economic era, 2024 marks an important anniversary. Eighty years ago, in July 1944, a small town called Bretton Woods in New Hampshire, America, hosted a conference. Its purpose was to establish a new set of rules and institutions that could keep order over global capitalism after the disasters of the Great Depression and the second world war. It is not too much to say that Bretton Woods established the infrastructure of the modern global economy.Eight decades later, the world is a very different place. But once again the global economy – post-Covid, post-energy price shock, experiencing rapid climate change – is in crisis. Calls for a new Bretton Woods have been growing louder.Forty-four nations sent delegates to the Bretton Woods conference, but in practice it was dominated by the US and UK. Its presiding intellect was the brilliant British economist John Maynard Keynes.Keynes’s theories had already revolutionised economists’ thinking about domestic policy. If economies fell into recession, Keynes argued, it was the job of the state to raise public spending in order to maintain full employment. As the second world war was ending, Keynes turned his attention to the international sphere. Under Keynes’s guidance, the Bretton Woods conference created two new institutions: the International Bank for Reconstruction and Development, later known as the World Bank; and the International Monetary Fund, or IMF. The World Bank’s task was to invest in countries’ postwar economic development, through both commercial and concessional (low-interest-rate) loans. The IMF’s role was to support countries that got into financial trouble, to avoid the beggar-thy-neighbour currency devaluations that had contributed to the Great Depression of the 1930s.Along with the Marshall plan, which between 1948 and 1952 saw the US lend European countries today’s equivalent of $173bn (£135bn) for their postwar recovery, the Bretton Woods conference shaped the “golden era” of global economic growth from 1945 until the mid-1970s. But in the free market era that followed – after the elections of Margaret Thatcher and Ronald Reagan in 1979-80 – the World Bank and IMF changed. They started applying restrictive conditions to their loans, forcing recipient countries to make “structural adjustments” to their economic policies, in practice meaning public spending cuts, deregulation and privatisation. Keynes’s creations became, in effect, instruments of the anti-Keynesian counter-revolution.Michael Jacobs is professor of political economy at the University of Sheffield and a visiting senior fellow at the global affairs thinktank ODI Continue reading…
