In the lead up to the G20 meeting in Washington, many analysts -- and even some leaders -- forecast that the meeting would be a kind of sequel to the 1944 Bretton Woods meeting that established the postwar international monetary and financial system. To the more historically minded, the analogy seemed forced. The outcome of the meeting has confirmed their judgment. If John Maynard Keynes were alive, he might quip: “I was at Bretton Woods; this was no Bretton Woods.”
This is not to diminish the significance of the Washington meeting. It has accomplished some important things, not least of which was to bring together the leaders of the G20 for the first time. And to be fair, there were in fact some interesting parallels to the Bretton Woods meeting.
One was that the US played the lead role in convening both meetings, and in both cases it did so partly to acknowledge past errors. At Bretton Woods, the US policy makers were keen to make up for their policy mistakes that were widely seen to have contributed to the Great Depression. Last week, recognizing the role of the US subprime debacle in triggering the crisis, one top US official noted “a big proportion of what’s happened has been down to the US and we recognize our responsibility and the need for us to take the lead.”
At both conferences, the British also played the role of intellectual entrepreneurs. In 1944, it was Keynes who dominated the meeting in this way, earning a standing ovation at the end of the meeting for his contributions. (One British official is said to have whispered to Keynes that “they [the Americans] have all the money bags, but we have all the brains.”) Today, British Prime Minister Gordon Brown –- though no Keynes -- has been the key proponent of the main governance innovation to emerge from the Washington summit: the creation of supervisory colleges for the world’s largest financial institutions.
One can even draw a parallel between Bretton Woods and the recent Washington summit’s objective of widening global financial governance to be more inclusive of poorer countries by widening the G7/8 to a G20. It is often forgotten today that over half of the countries invited to Bretton Woods were from what we now call the South, and that some, such as Mexico, were assigned a significant role at the conference. US policy makers explicitly saw the conference as a way to shift postwar planning away from a strictly US-British focus (as the British initially preferred) in order to build a new multilateral financial order that had wider legitimacy.
Despite these similarities, the differences between Bretton Woods and the Washington meeting are more striking. The delegates to the former were financial policy makers and they explicitly chose to meet at a faraway resort in the New Hampshire hills so that the media could not easily find them. In Washington, it was heads of state who met, and they paraded in front of the cameras at every opportunity they could. Publicity appeared to be prioritized over technocracy this time around.
The Bretton Woods meeting was also preceded by two years of preparatory work and it resulted in very detailed agreements. By contrast, policy makers had very little time –- just a few weeks -- to prepare for the Washington meeting. Not surprisingly, many of the items in the final communique are pitched at the level of general principles and the more detailed provisions mostly just reiterate ideas that had already been developed in other forums. If the Bretton Woods was the end of a negotiation process, the Washington meeting is likely just the start.
The focus of the Washington meeting was also much more narrow than that of Bretton Woods. The bulk of the final communique addresses issues relating to the regulation of international financial markets. No mention is made of broader international monetary issues that concerned the Bretton Woods negotiators, such as the choice of exchange-rate policies or international reserve currencies.
But perhaps the most striking contrast between the two meetings has to do with their intellectual underpinnings. The Bretton Woods meeting was guided by an innovative and shared vision, pioneered by Keynes above all, that drew certain lessons from the crisis of the 1930s. This vision was one that sought to reconcile the rebuilding of an open liberal international economic order with the new more interventionist economic practices that had emerged from the Depression experience.
At the recent Washington meeting, it was hard to detect any new common intellectual vision that guided the discussions. The delegates ritually expressed their joint desire to preserve an open global economy, but they failed to lay out a novel set of ideas about how the financial system could be refocused to serve new goals in light of lessons learned from the crisis.
The severity of the crisis calls out for new directions. Will our leaders rise to the challenge? If they don’t, they should refrain from claiming the mantle of Bretton Woods.
* The opinions expressed herein are those of the author and do not necessarily reflect the views of The Centre for International Governance Innovation, its Board of Directors and/or its Board of Governors.