Toward a New Bretton Woods

By Shlomo Maital

 It is time to convene leaders of all the major democratic nations of the world, to rebuild the global economy and financial system.  It is not that hard.  We did it once before, with incredible success. 

  In July 1944,  the US and Britain convened a gathering of Allied economists and experts, led by the US Treasury’s Harry Dexter White and British economist John Maynard Keynes.  It was held at the lovely old Hotel Mt. Washington, at the foot of lovely Mt. Washington, in Bretton Woods, New Hampshire. 

   Keynes was by far the world’s smartest economist.  In 1941 he wrote a series of articles in The Times of London, explaining how to finance the costly WWII without causing inflation.  In 1944 he claimed the world needed a World Central Bank, to create the liquidity and money needed to rebuild world trade.  He was absolutely right. But alas, the US had 75% of the world’s GDP and even more military power.  The dollar, America said, will be the world’s currency.

   At the Bretton Woods meeting, the General Agreement on Tariffs and Trade (GATT), engine for free global trade,    the IMF,  the BIS (Bank for International Settlements), the World Bank —   all were created.  And the resulting global economy helped create economic miracles, as Europe rebuilt and later Asia.  The brilliant Marshall Plan helped a lot.

    The Bretton Woods gathering was held in July 1944, barely a month after the June 5 landing of Allied forces on the beaches of Normandy,  rolling back the  German invaders.

      The war would last for many more months; the war in Europe ended on May 8, 1945, with Germany’s surrender, and on August 15, 1945, when Japan surrendered.  But Allied leaders had the foresight to reinvent the global financial and economic infrastructure even before war ended.  And they did it in 10 days – because the wealthy Boston tycoons had reserved hotel rooms for their summer vacation to escape the summer heat.

      Even as the Russians destroy Ukraine, and their own economy, it is the right time to convene the democracies and reshape the world economy.  A major part of this meeting will be a plan to rebuild Ukraine and integrate it into the European Union.  It will include reductions of tariffs, and a renewal of the Trans-Asian Partnership (as Bret Stephens proposes in The New York Times). 

      The global economy was stumbling, in 2022, even before the war Russia instigated, slowing after an initial 2021 recovery from the pandemic.  We need a new Bretton Woods to generate renewed economic growth, deal with climate change, and yes, wake up soporific slumbering Europe to start defending themselves and funding a modern lean army.  An EU-US and UK-US trade deal is vital.   The current tendency for countries to try to become more self-reliant is understandable, but costly.  Collaboration is called for.

     And not least, we need a new commitment to democracy.  Democratic nations must step up and provide hope and opportunity for all their citizens, in the face of the corrupt oligarchs controlling the autocratic kleptocracies of Russia, Belarus, Venezuela….  Democracies have spawned their own ‘billionaire oligarchs’ and need to tax them.  Janet Yellin’s pragmatic suggestion for a global minimum income tax has been agreed to by 136 countries!