Bretton Woods: could we do it all over again today?

A few years ago I wrote a book about the Bretton Woods conference of 1944.

The conference was one of those rare things: a moment where countries came together to fix long-standing problems that had bedevilled the global system for years. The imbalances between nations which fuelled Hitler’s rise to power; the trade and currency wars of the 1930s which had generated tension between superpowers; the financial instability that had contributed to the monumental financial crisis which began in 1929.

All of this was hashed out over a few hot and sweaty weeks at the Mount Washington Hotel in the summer of 1944, even as V1 bombs fell on London and the war in the Pacific reached its crescendo.

The reason I wrote the book wasn’t just that 2014 was the 70th anniversary but because there were lots of people saying we needed precisely the same thing all over again; a new Bretton Woods to mend the international monetary system. I wanted not just to tell the story of the conference (which turned out to be far more interesting, with far more plot twists, than I expected) but to explore whether we could do something similar again today.

And the more time I spent writing the book the more I felt that the chances of a new Bretton Woods were microscopic. This did not stop politicians advocating for it, much as they advocated for the completion of the Doha Round of trade talks or for a definitive agreement on BEPS – the international action plan on clamping down on corporate tax avoidance. It is easy to promise things when you know that they will never happen and you can always blame them on someone else.

The reason a new Bretton Woods always looked unlikely was that we simply didn’t have the preconditions – anything but. Back in 1944 there was one leading superpower. It wasn’t just that there was a financial crisis fresh in the memory; that crisis had preceded a war which meant life as usual had ground to a halt. The global economy was in pieces, so deciding what form it should take in future wouldn’t involve dismantling it painfully, as it might have done over the past decade. And since the world was at war, the allies could happily ignore their enemies and exclude them from the talks.

The only circumstances in which we could have a new Bretton Woods, I eventually concluded in the epilogue to The Summit, were if things got even worse:

no great shifts in the monetary system could happen without being preceded by a global war or an economic depression of even greater proportions than the recession that began in 2008. The authors of Bretton Woods recognised as much. They knew they had been handed a once-in-a-lifetime opportunity to install a global framework for exchange rates and capital controls – but that the window was a small one. As White himself told his fellow Americans as they sat in their hotel room at Bretton Woods, ‘within a few years after the end of the war you won’t be able to get an international arrangement of this kind any more than you could fly.’

But, as I write in my Times column this week, what if the economic crisis associated with COVID-19 is precisely that catalyst?

Clearly after this is all over we will have to repurpose or rebuild the WHO so it can actually be the health responder of last resort in future. That on its own would necessitate something like a Bretton Woods for health. Yet this is not only a health crisis; it is also an economic crisis, likely to force hundreds of millions of people out of work. Businesses will go bust and soon enough some countries may find themselves edging towards insolvency. And while COVID-19 is no respecter of class or wealth, countries and individuals with more resources are nonetheless better placed to withstand both the health and economic impact. Today’s globalised world – a product of the post-Bretton Woods era (the system set up in 1944 only lasted until the 1970s) has brought us greater inequality, more unstable economic growth, higher inflation and a bigger chance of financial crises. It brought us a financial sector which continues to put its interests before society’s. We did too little to examine the model after 2008. We should not skirt the debate a second time.

Now in some ways the underlying political conditions are even less promising than when I wrote The Summit a few years ago. The appetite for multilateral institutions is far smaller than a decade or so ago. The direction of travel is towards more nationalism rather than more internationalism. And the argument – reform these failing institutions that manage the global system rather than pulling them down – hardly fared well in the EU referendum.

But the fact remains: we live in an international economy. Unless we want to return to an era of far lower productivity and far less freedom to trade and travel, we will have to come up with some way of coordinating with each other. The existing post-war institutions set up at the time of Bretton Woods are hardly fit for purpose these days. We could continue with them or we could try to make ones which serve our purposes: a body that can police corporate tax and prevent avoidance. One that could manage migration and refugee flows. One that could ensure data is policed properly.

Or we could wait until the next global breakdown until we try to put the pieces back together.