Benn Steil wrote one of the best book in 2013, The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order. He focuses on the relationship of Keynes, the leading economist of the day on matters of international finance and Harry White, the Treasury representative who worked to structure the Bretton Woods agreement. The most important feature of this book is that political interests and negotiation will drive policy not good economics.
The end of the WWII required a new financial system and the British centric system from pre-WWII would not be left standing. Bled dry from lend lease and the horrible financial cost of war, Great Britain was in no position to bring back a gold standard or ask for loan relive. It would not even be able to maintain dominance in the commonwealth. The US, through the Treasury, wanted to set up a system that placed the dollar in the center of any world financial order. Yes, there would be a tie to gold, but the real system would be based on payments in dollars with the US serving as the dominant reserve currency. As they often say, the golden rule is that those who have the gold make the rules is clearly applied to the Bretton Woods agreement. The richness of the policy battle and politics is given significant detail and is worthy reading for anyone who wants to learn how policy is actually conducted.
Unfortunately, reading this type of book makes one careful with asking for a new Bretton Woods agreement or some new policy coordination. It is not clear what the world would end up with if there was a new global agreement. Also, the likelihood of any new international order is based on power politics. If there is no clear dominant power, it is unlikely there will be policy coordination. After learning more how Bretton Woods was developed and looking at the ramifications over the last few years, anyone should be careful when asking for order from what is considered the current chaos.
No comments:
Post a Comment