The View | Why the world needs a Bretton Woods 2.0
- As Bretton Woods institutions falter, nations like China are pushing for reform that reflects the global reality amid challenges such as debt distress and climate change
- While the most likely scenario is marginal changes to the international monetary system, multilateral collaboration should not be underestimated
The Bretton Woods system turns 80 in July. Many agree that its moorings are buckling. Its institutions are increasingly unable to manage global economic crises as its founding powers adjust to the rise of China and India while the entanglements of interdependence multiply and geostrategic tensions thwart cooperation.
Throughout the decade before the meeting in New Hampshire, delegates had witnessed unfathomable tragedies, both human and economic. Wall Street had crashed. Fascism had risen as international cooperation collapsed. More people had died than in any other war before. These events made a compelling case for a radically different approach to peace and prosperity.
The prevailing view at Bretton Woods rejected the laissez-faire argument that free markets automatically provide full employment. It was believed that public institutions must intervene in difficult times. Delegates established two institutions to support an open global economy and institutionalise multilateral cooperation.
Rules and conventions would influence member-countries’ economic policies. As the world’s largest creditor nation, the United States insisted on a fixed but adjustable system anchored by the dollar pegged to gold.
