Recreate Bretton Woods!

By Shlomo  Maital     



Hotel Mt. Washington

  Some 68 years ago,  in early July 1944,  leaders of the 40 Allied countries fighting WWII met at a lovely resort hotel in Bretton Woods, New Hampshire, Hotel Mt. Washington, nestled at the foot of Mt. Washington.  Their mission: Reinvent the global economy, destroyed by war.  They had a time limit:  Three weeks!  Why? Because the millionaires of Boston had reserved rooms for their summer vacation in the mountains, and the Hotel had no intention of angering good paying customers, Boston Brahmins. 

     The leading intellectual at the meeting was the British economist J.M. Keynes (Lord Keynes), already tired and ill and soon to die.  Under his aegis, the gathering created the World Bank, the IMF, the Bank for International Settlements, GATT (General Agreement on Tariffs and Trade), and several other breakthroughs.  They laid the foundation for the new global trading system that created wealth for Asian nations, helped European nations recover, and ultimately brought down communism and ended the Cold War. 

    The productive meeting stands in stark contrast to world leaders’ utter impotence to reach any meaningful agreement on anything, even within Europe. 

     But the Bretton Woods gathering failed in one key task, and the world is paying a heavy price for that error today.  Keynes recommended establishing a world central bank.  That made a lot of sense – create a world Fed, or Bank of England, or ECB, that could monitor global credit and ensure liquidity to fund trade and investment – just the right amount, not too much, not too little.  But America was opposed.  The dollar is the world currency, said Treasury official Harry Dexter White.  But it isn’t.  As America prints dollars maniacally, the dollar is losing its role as the stable global money. And without stable money, it is hard to run the global financial system.

       Recently, a U.S. Treasury official rummaging in the library stumbled on a transcript of the 1944 Bretton Woods conference.  We will soon be able to read in detail how leaders and economists did so much in so little time.  Perhaps this will even help us to recreate Bretton Woods. Why not convene experts and leaders, in precisely the same spot? (I once visited Hotel Mt. Washington; it has been restored, it is lovelier than ever, in a pastoral location, and if they wish, world leaders and economists can even hike up the mountain, after they solve the world’s problems..or take the original coal-fired steam engine up the mountain).   Perhaps the mountain air and the rich history will inspire them.