BRETTON WOODS CONFERENCE

“Persistent financial turmoil has led to demands for reform or reinvention of this ad hoc system from advocates such as Joseph Stiglitz, the Nobel laureate economist, George Soros, the investor, and Zhou Xiaochuan, the long-serving governor of the People’s Bank of China (the central bank). Not surprisingly, it has also reawakened interest in the one period when exchange rates, rather than being left to the caprice of events, were governed by international agreement. Roughly from the end of World War II until the early 1970s, the world’s currencies were locked at fixed rates of exchange to the dollar, which served as the reserve currency, interchangeable with all others. This was the so-called Bretton Woods system, named for the mountainous retreat in New Hampshire where, in the summer of 1944, forty-four Allied nations convened to hammer out a monetary agreement.

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            “ . . . under Bretton Woods, capital imbalances among nations were relatively muted and banking crises were rare, as were defaults by countries on ‘sovereign debts — the money borrowed directly by governments. During the Bretton Woods period, inflation was high, but standards of living rose around the globe. Banking represented a far smaller share of economic output than in the freewheeling financial climate that has prevailed lately, and inequality was less pronounced. If Bretton Woods cannot claim credit for all of these conditions, it was part of an architecture of financial regulation that, since the 1970s, has been relentlessly dismantled.”

Roger Lowenstein, “The New Fundamental Order – Until It Collapsed,” a review of The Summit: Bretton Woods, 1944: J. M. Keynes and the Reshaping of the Global Economy, by Ed Conway in the New York Review, December 3, 2015.