Webinar Summary: The Case for a New Bretton Woods

By Katie Gallogly-Swan

On Thursday, January 20, the Boston University Global Development Policy (GDP) Center and the United Nations Conference on Trade and Development (UNCTAD) co-hosted a webinar book launch of ‘The Case for a New Bretton Woods’, authored by GDP Center Director, Kevin P. Gallagher, and Richard Kozul-Wright, Director of UNCTAD’s Globalization and Development Strategies Division.

The panel featured guest speakers Winnie Byanyima, Executive Director of the Joint United Nations Programme on HIV/AIDS (UNAIDS), Daniela Gabor, Professor of Economics and Macro-Finance at the University of the West of England, Bristol and Jayati Ghosh, Professor in the Department of Economics at the University of Massachusetts at Amherst, who provided comments and reactions to the book. The webinar was moderated by William N. Kring, Executive Director of the GDP Center.

The webinar opened with Kozul-Wright providing a brief overview of the book and the inspiration for writing it. According to him, the world is in desperate need of functioning multilateralism. Countries alone are unable to solve the major problems of the day, and the failures in response to the COVID-19 crisis have further demonstrated the shortcomings of the existing multilateral system.

To explain this claim, the book provides a history of multilateralism that challenges the conventional story of progress in the liberal international order.

The original ‘Bretton Woods moment’ in 1944 created a dedicated group of institutions guided by a core set of principles to manage the global economy. Kozul-Wright explained that while this is not a book of heroes and villains, if there is a hero, it is the then-US Treasury Secretary, Henry Morgenthau, who championed a clear set of principles for what a new global economic system should deliver. If there is a villain, it is Paul Volcker, the former Chair of the US Federal Reserve who advocated a process he himself described as “controlled disintegration of the global economy,” presenting a vastly different set of principles and priorities than the Bretton Woods institutions. Since the advent of neoliberalism, the plumbing of the global economy was thus fundamentally altered towards what is now called the ‘Washington Consensus,’ which, simply put, protects and prioritizes the interests of the private sector over broader shared goals of inclusive and sustainable development.

According to Kozul-Wright, the resulting system isn’t simply unfit for purpose today; it has never delivered its promises of boosting productivity and increasing efficiency. To this end, the authors agree with International Monetary Fund (IMF) Managing Director Kristalina Georgieva that the international system needs a new Bretton Woods moment to eliminate neoliberal impulses.

The book argues the international community must recover some aspects of the former Bretton Woods system, but must also address its shortcomings. Indeed, UNCTAD itself was born in the 1950s out of frustrations with inadequacies in the system. While this doesn’t require starting from scratch, Kozul-Wright was clear that if there is any hope of advancing against today’s crises, such as the pandemic or climate change, transformation is a must.

The book sets out to identify some of these necessary changes. One example is IMF governance, which suffers from rules and advice that are out of date and out of kilter with contemporary needs. Capital controls will be needed to tame the instability of speculative flows, together with better monitoring of systemically important players in the financial system. The IMF must also address conditionality problems that have plagued the policy advice it has offered in past decades. Systemic issues remain, such as the urgent debt crisis that needs tackling if development or climate goals are to be met.

Indeed, prioritizing the achievement of development and climate goals requires an orientation towards ‘global public goods’ – such as COVID-19 vaccines – which are critical to mutual prosperity. This would require bringing trust back into the international trading system. A priority for developing countries is a serious conversation about Special and Differential Treatment at the World Trade Organization, which provides policy space needed for countries to grow their economies and achieve public policy goals. Global asymmetries don’t just exist between countries, however, and Kozul-Wright touched on the multilateral giants dominating the global trading system, which will require coordinated anti-trust policies to foster a fairer business environment. Similarly to the IMF, the trading systems rules are not sufficient to the crises the world faces, and rules in some areas will need to be rolled back.

In all, according to Kozul-Wright, the politics of multilateralism are critical; at the end of the day, it is a power game and progress will not succeed if this dynamic is not recognized. This means facing issues such as dollar hegemony and understanding the importance of countervailing powers. To him, while the political challenge is somewhat hidden in the book, it has to be the basis of any frank conversation moving forward.

Winnie Byanyima then responded to Kozul-Wright’s presentation with a turn to contemporary material realities. Inequalities are spiraling and dominant economic and financial models and institutions are unable to respond equitably or effectively. According to her, it is “immoral, absurd and self-defeating” that global leaders have not vaccinated the world or enabled people in developing countries to cope with the shocks, and that even more people are set to die from the economic crisis than from the virus itself. As all this unfolds for the majority of the world, the ten richest men doubled their wealth in the last year. For Byanyima, a radical transformation of the Bretton Woods model to deliver common good in the public interest is the only realistic response, and this vital book helps light the way.

Byanyima then outlined some highlights from the book. Firstly, the core principles of the original Bretton Woods moment of stability, protection from crises, cooperation, prevention of large deficits and surpluses and protection of people from private interests have all been undermined. In 1944, the success of Bretton Woods institutions was to be measured to the extent that capital served the general welfare. But according to Byanyima, neoliberalism has gutted even the idea of the general welfare. There is evidence-free faith in the markets and private capital has normalized policies designed only to provide an attractive investment environment, all while obstructing workers’ rights and hampering social progress.

A second highlight for her was the weakness of the current system to manage the debt crisis. Instead of a multilateral and accountable approach, there is a cumbersome and lawless system, typified by the failure of the Group of 20’s (G20) Common Framework which continues to let private creditors off the hook.

A third highlight is the clear proposals towards transforming the global economic governance regime. The book makes clear the principles of the system need to be profoundly revised to advance welfare, job creation and an economy that thrives within planetary boundaries, which must include redistributional policies such as fair taxation rules, action on corruption, debt management systems and protecting developing countries from financial markets.

According to Byanyima, the book uncovers the past and provides a vision for a positive, alternative future. The evidence provided is overwhelming, but as Byanyima points out, this is not always enough. A vision depends on citizens, civil society, media and more to win this transformation.

Jayati Ghosh followed by relating her three main takeaways from the book’s proposals. Firstly, their urgency: these proposals should have happened yesterday. Secondly, their viability: the proposals are all things that can be done and, indeed, many have been done in the past. The existing approach is not working, but more than that, it is deadly. This has the result of pushing people away from multilateralism, in the belief that these rules are not working for them. Lastly, the light the proposals shine on what must be done.

One question these takeaways left her with, however, is why has this change not happened already? The answer points to the need for countervailing power. As Kozul-Wright said, at the end of the day, multilateralism is a power game. The exercise of relative power is clear at all levels of negotiations whether at the UN Conference on Climate Change, on tax reform, at the IMF, or at the G20. It’s also apparent in the power of capital against everyone else expressed through powerful states.

This leads Ghosh to present two problems that require addressing to advance the book’s agenda. Firstly, control of the narrative. Reformers and activists are still unable to get this message across to a sufficiently wide portion of the population. This book is a useful contribution towards this effort, since it is not overly academic, but readable and accessible.

Secondly, there is the problem of where to start. There is no shortage of suggestions of ‘global’ institutions, such as a global protection fund or a global vaccine effort. When these initiatives do manifest, however, they are either distorted or captured by the powerful. Ghosh proposes this is perhaps where reformers need to think a bit beyond global multilateralism, considering alternative modalities, such as regional approaches to find early footing.

Perhaps such a turn to regionalism would allow the global community to stop thinking about globalization in its own terms by constantly chasing global solutions. This might make space for more regional strategies for developing capacities, industrialization efforts that rely on regional groupings, regional monetary strategies and regional protections against capital flow volatility.

Ghosh concluded by proposing that one of the ways to fight the pernicious realities of present-day multilateralism is through an internationalism based precisely on enabling new forms of alternative strategies to emerge at national, regional and cross-national levels.

Daniela Gabor began her contribution by reflecting on the book’s conclusions about the importance of the developmental state, as in her assessment, governments are giving too much leadership power to private finance to address the crises the international community faces.

Gabor went on to explore the book’s proposals in relation to the specific challenges of climate change and financialization.  Her first point was on ideas and ideology. Despite the debates during the “Bretton Woods moment” on the role and function of the International Financial Institutions (IFIs) like the IMF and the World Bank, their activities have strayed far from original ambitions. If global leaders recognize that this is an age of ecological exceptionalism, which benefitted countries in the Global North, what economic ideas are necessary to design an economy in line with this understanding? What would new Bretton Woods institutions prioritize in this unequal, climate-changed world?

Her second point was on structures, where she turned to her own work on the ‘Wall Street Consensus’. While the book largely argues the existing multilateralism doesn’t work, Gabor offered that perhaps it does work, but for a very specific set of financial actors, with a development paradigm depending on financial actors to achieve goals. This delivers a Bretton Woods system for asset managers, which provides liquidity for private equity funds, asset managers and pension funds. If Morgenthau’s approach is correct and the global economy needs to discipline capital, what does it look like today in the context of financialization? Is it enough to play with capital controls, when African countries have not applied for the debt suspension throughout the pandemic crisis in order to maintain access to markets? And finally, there is the even harder question of how political will can be mobilized to deliver this agenda.

A question-and-answer section followed which covered a broad range of issues, including the role of the US leadership in advancing this agenda, the strategic approach of a rapid versus incremental transformation, better linking IFI policies with prosperity of people and how the book’s proposals connect with a range of existing efforts to establish new global institutions.

Kozul-Wright concluded by considering the political challenge facing this agenda. A major difference between the present moment and the 1970s, when there was a serious attempt at transforming towards a New International Economic Order (NIEO) and the powerful solidarity that existed between Global South countries. It didn’t last, and Volcker had a role in that. The NIEO created an environment for advancing significant changes through a combination of narrative, political solidarity and economic strength. The challenge today is how to develop this combination and build the momentum needed for a new Bretton Woods moment.

Never miss an update: Subscribe to updates from the Global Economic Governance Initiative.