Slaughter & Rees Report - 21 New Hampshire Days 70 Years Ago
July 28, 2014 --
As July turns to August this week, so starts the l-o-n-g summer vacation stretch for much of the Northern Hemisphere. Many a shop in Europe shuts down. Many a New York banker heads to the Hamptons. And in Washington, for better or for worse, every member of Congress recesses until after Labor Day. Holiday bags are packed with books of every flavor: biographies, murder mysteries, you name it. To help set the vacation mind, let’s add to the bags a bit of New Hampshire history from the summer of 70 years ago—history that retains profound implications for the global economy today.
About 93 miles northeast of the Tuck School is Bretton Woods, N.H. There in July of 1944, 730 delegates from the 44 Allied nations convened at the lovely Mount Washington Hotel. Their purpose? Not to take in the sweeping views from the hotel balconies and back veranda, lovely though they are. No, they gathered to create institutions to govern the global economy for the hoped-for future in which the Axis powers had been defeated. Great minds such as John Maynard Keynes of England envisioned a post-war architecture aimed at avoiding the economic chaos of the previous 30 years—World War I, Great Depression, and then World War II.
What did they accomplish in their 21 New Hampshire days? An amazing amount. First, an agreement to create something called the International Monetary Fund, to organize and stabilize world currencies and capital markets. Key aspects of this agreement included countries’ payments into the Fund to create a kitty of loanable capital to stabilize member economies, plans to fix currencies’ values to the U.S. dollar, and in turn plans to fix the value of the dollar to gold at $35 per ounce. Second, an agreement to create something called the International Bank for Reconstruction and Development—better known as the World Bank—to lend to countries to support their economic recovery and growth. Third, a proposal to create something called the International Trade Organization, to regulate international trade in goods and services.
Think of that: in just 21 days world leaders managed to frame the basic architecture for all global trade, investment, capital flows, and currencies. Of course, not everything agreed or proposed at Bretton Woods survived—or survived to this day. The ITO was never ratified by the U.S. Congress, and so post-WWII regulation of international trade fell to the less-encompassing General Agreement on Tariffs and Trade (GATT). The currency arrangements of the IMF fell apart in the early 1970s. But the IMF evolved and played a major role decade after decade. Ditto the World Bank. And ditto the GATT, which in 1995 was succeeded by the World Trade Organization, more ambitious and thus more in the spirit of the ITO. Despite their inevitable imperfections and missteps along the way, what came to be known as the Bretton Woods institutions—the IMF, the World Bank, and the GATT—fostered economic growth and stability for generations.
How does today’s stewardship of the global economy compare to that of 1944? Yes, the diplomatic answer would be, “Not well at all.” Bretton Woods was characterized by creative, collaborative, long-term thinking. As we have written here and there in recent months, today’s global economy is in many ways hobbled by stale, partisan, short-term thinking. The victims are companies, workers, and their families around the world: all unable to grow and thrive as much as they could.
Why can’t global economic leadership today be more like those 21 New Hampshire days 70 years ago? We wish we knew. One answer might be the absence of an existential crisis: the threat of Hitler becoming world emperor perhaps focused minds in a way that today’s problems, serious and sad though they are, do not. Amidst your August holidays, wherever you may be we encourage you to give this question a bit of thought. We two Matts are instinctive optimists who see great opportunity for those who can articulate answers to questions like these. Our fingers are crossed that come September leaders return refreshed with answers in hand, ready to go.
Note to Our Readers: With many business and policy leaders around the world soon to start August holiday, we, too, will be resting our pens for the month. The Slaughter & Rees Report will resume on Monday, Sept. 8. Happy August.
Articles © 2014 Matthew Slaughter and Matthew Rees. All rights reserved.
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