It’s time for a new Bretton Woods deal

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What US Treasury Secretary Janet Yellen recently said is important, as its trade has once again linked values. In her speech to the Atlantic Council in Washington, she called for a new framework for the Bretton Woods agreement.

Renewal of the International Monetary Fund and the World Bank. And that’s a week before the two institutions hold their annual meetings. Yellen made it clear that the Ukraine war and China’s non-accession of sanctions against Russia were a focal point for the global economy.

In the future, US trade policy will not merely involve the unleashing of markets, but will uphold certain principles, from national sovereignty and a rule-based order to security and labor rights. In her words, the goal of the United States should be not just “free trade, but safe trade”. Countries should not be allowed to use their “market position in raw materials, technology or key products to have the ability to disrupt our economy or exert undue influence.” This is clearly a reference to Russia’s oil policy, Yellen says, but it could also include chip production in Taiwan or China’s stockpile of rare earth metals or personal protective equipment during the pandemic.

Yellen coined a new word for the post-neoliberal era as “friend support”. The United States will now “prefer friends’ support over the supply chains of a large number of trusted countries” with which they “share a set of standards and values ​​on how to function in the global economy.” It will also seek to create “principled” alliances in areas such as digital services and technology regulation, similar to last year’s global tax treaty, which led to this.

These are not “America alone” or even “America First” slogans, yet they acknowledge the existence of a political economy in which free trade can be truly free only if countries with shared values ​​and equal opportunities function. It differs, and does not differ in some sensitive respects, from the neoliberal era we are going through. The term “neoliberalism” was first used in 1938 at the “Walter Lippmann” symposium in Paris, a gathering of economists, sociologists, journalists and businessmen who wanted to find a way to protect global capitalism from fascism and socialism.

It was a moment that resonates in many ways with the period we are going through. Europe was torn apart by the First World War. A decade of concession credit policies until 1929 was unable to disguise the great political and economic changes that caused great divisions in societies. Labor markets and family structures were changing, and the pandemic, inflation, depression, deflation, and trade wars devastated the continent economically.

The neoliberals wanted to solve these problems by connecting global markets. They believed that if capital and trade were linked by a series of institutions that could float on top of individual nation-states, the world would be less likely to slip into chaos.

This idea worked for a long time. This is partly because the balance between the preservation of national interests and the global economy has not changed much. Even during the Reagan-Thatcher era of the 1980s, there was still a feeling that world trade in particular was in the national interest. While US President Ronald Reagan may have been a supporter of free trade, he used tariffs against Japan and also supported industrial policy (as most other Asian countries and many European countries do and do).

The transformation began in the United States during the administration of President Bill Clinton, which concluded a series of free trade agreements that culminated in China’s accession to the World Trade Organization in 2001. Now leaders everywhere recognize the reality of the “one world, two systems “problem.

Yellen says she hopes “we will not end up with a bipolar system,” especially given how much China itself has benefited from the neoliberal system. But “real problems have arisen,” admitted Yellen, who said, “China relies in many ways on state-owned enterprises and engages in practices that I believe unfairly harm our national security interests and multinational supply chains, even though they have become very effective. and excellent at reducing business costs, It was not flexible. ” These are two issues that need to be addressed, she says.

The crossroads in which we live today is no different from that which the neoliberal thinkers who formulated the original Bretton Woods system faced. They did not start with the idea of ​​laissez-faire markets operating in their own interest, but rather with a deep human problem, which is how to tackle a war-torn world to create a safer and more cohesive society build, one in which freedom, deliverance, and prosperity are assured. And the markets could not do it alone, new rules were needed.

This is the situation we are in now. One could argue that this shift is in arrears. Over the past 20 years, global capitalism has progressed far beyond domestic concerns in some individual nation-states and countries with very different political, economic, and even moral frameworks, not all of which have complied with the same global rules. Under such circumstances, fair and free markets begin to collapse.

Today, the process of creating a new Bretton Woods agreement has just begun, at a time when the values ​​that liberal democracies want to uphold are a good starting point. Economic columnist for the British Financial Times


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