Chartbook 216: When was the era of Bretton Woods? — Adam Tooze

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Mike Norman
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As Perry Mehrling has recently argued in his intellectual portrait of economic historian Charles Kindleberger, the true undergirding continuity of international finance were not inter-governmental arrangements about national currencies, but the interlocking balance sheets of private finance stretched between the City of London and Wall Street. These made the Bretton Woods system increasingly unworkable by the late 1960s but they also ensured that the end of the system in the early 1970s did no produce a bottomless collapse of the dollar.

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So this question - when was the era of Bretton Woods? - is, in fact, anything but simple. And its implications for how we think about global political economy are clearly non-trivial.

This is at least a should-read for those into monetary systems or global finance. The conventional view of Bretton Woods is unrealistic, as is the conventional view of just about everything. Adam Tooze attempts to set the record straight in terms of the history.

Tooze shows how Bretton Woods was implicitly doomed from the outset since fixed exchange rates are not compatible with modern growth. Class structure and the resulting power distribution were incompatible with it. And global asymmetries resulted in disruptive effects. 

The conclusion is that a flexible system was needed to adapt quickly to changing conditions, but adopting too much flexibility simply accommodates the issues of class structure and power distribution, as well as global asymmetries. This affects the world system economically, politically, and socially in adverse ways. So a satisfactory solution was not attainable within the bounds of the Bretton Woods system. The breakdown did not happen at once but was a gradual affair until it was finally recognized that the system was unworkable for the major players and their interests.

The reality is that every solution has its pros and cons so adaptation is a constant requirement. A major con is that powerful forces are afoot and perverse incentives prevail. Hence, adaptation is not always benign for the world system.

For those wondering why my light posting lately, there are several reasons. First and most immediately, I was out of town for a week and had no opportunity. I just got around to reading this, for example.

Moreover, some of my current projects are requiring more of my time than previously. 

Concerning the longer term, the era of blogs is going the way of email, being replaced by social media, Twitter and Facebook, and subscription services like Substack. That is to say, blogs are "losing market share."

 My focus in econ and finance is MTT, and there is little new being put up on blogs on MMT. Moreover, the political orientation is growing and the theoretical is shrinking. I am interested neither in keeping up to date on the other venues nor do I have the time. So in the future, I will only be calling attention to things I think are should-reads or must-reads on MMT and related subjects. So expect only occasional posting unless conditions change.

Chartbook
Chartbook 216: When was the era of Bretton Woods?
Adam Tooze | Shelby Cullom Davis chair of History at Columbia University and Director of the European Institute.