Seventy-three years ago today, 44 nations descended on Bretton Woods in the White Mountains of New Hampshire for a conference on the future of the global financial system. In the Gilded Age, the area’s stately Mount Washington Hotel was a preferred summer destination for robber barons and presidents alike. Now at the height of World War II, the resort—which had almost shuttered during the Great Depression—would take its place in history. Three weeks after the landings at Normandy, a galaxy of finance ministers, central bankers, and economists assembled for to make sure the economic seeds of war were never planted again.
After the experience of two global conflagrations, the atrocities of Nazism, and the trauma of the Great Depression, a widely-held belief was that significant flaws in the international economic order lay at the heart of the conflict. From the post-World War I hyperinflation that ravaged Germany and Austria to unfettered protectionism and competitive “beggar-thy-neighbor” currency devaluations, the misery of political upheaval and world war had arisen from the nationalist free-for-all that was the interwar period. Fatigued, battered, and wizened, a generation of leaders sought to pave a better way.
The primary accomplishment of Bretton Woods was the creation of two institutions that still underpin the economic order: the International Monetary Fund and the World Bank. But perhaps more importantly, the conference was the first attempt to develop workable global institutions to prevent international conflict. The Roosevelt administration had in mind an even grander institution in the geopolitical arena—the United Nations—and Bretton Woods was in many ways an experiment to see if such an enterprise could be created in a more technical, less passionate field.
The dominant position the United States found itself in at the end of World War II is somewhat hard to conceptualize today. With its main rivals bankrupt or prostrate, America represented close to 60 percent of the global economy and could have dictated whatever terms it wished. But this was not the position taken at Bretton Woods. Instead, while negotiating an agreement certainly in its own interests, America nonetheless strove to accommodate the legitimate interests of the British, the Russians, the Chinese, and the other assembled nations. The far-sighted architects realized that global buy-in was critical, and that whatever was given up in horse-trading would be more than made up for in the peace and prosperity that would follow.
As Treasury secretary Henry Morgenthau, Jr. declared at the closing banquet, “[n]one of us has found any incompatibility between devotion to our own countries and joint action. Indeed, we have found on the contrary that the only genuine safeguard for our national interest lies in international cooperation.” The legendary economist John Maynard Keynes, who led the British delegation and had attended the disastrous Versailles Peace Conference in 1919, went even further: “We have shown that a concourse of 44 nations are actually able to work together at a constructive task in amity and unbroken concord. Few believed it possible. If we can continue in a larger task as we have begun in this limited task, there is hope for the world.”
More institutions followed, including the General Agreement on Tariffs and Trade and the United Nations. With the rise of the Soviet threat, the United States founded NATO and in the spirit of magnanimous self-interest that permeated Bretton Woods, underwrote the Marshall Plan to bulwark Western Europe against communism. Through the Cold War and beyond, a bipartisan consensus on foreign policy from Truman and Eisenhower to Reagan and Clinton oversaw the rules-based order that had its origins in Bretton Woods and kept us safe, secure, and prosperous.
Unfortunately, the primary trend in American politics today is to move away from this leadership. Both political parties lambasted the Trans-Pacific Partnership, which would have cemented American leadership in the East. As the interwar isolationists failed to understand that two oceans could no longer protect our nation, so as we now turn inward to put “America First.” Global hegemons have taken note and rise to take our place. While we lecture our NATO allies over spending, many of our closest friends have begun to chart their own course or follow another siren.
Britain, Canada, and Australia joined the Chinese-sponsored Asian Infrastructure Development Bank, a rival to the World Bank, over our explicit objection. And China’s One Belt One Road initiative will spend at least $4 trillion on infrastructure across Eurasia, pulling both Asia and Europe into its orbit and using its economic might the way the United States once did. At Davos recently, Xi Jinping sounded like a Bretton Woods delegate, declaring that countries should “refrain from pursuing their own interests at the expense of others.”
To throw away an unparalleled system designed and led by America as first among equals—one appealing in spirit to both idealists and realists alike—is the height of folly. We ought to remember the lessons of Bretton Woods, before it is too late.
