Don’t Count Too Much on a New Bretton Woods

Sure, some kind of important event will happen on November 4th involving the coronation of some guy named Barack, but international economic law geeks will have their eyes focused on a different date: November 15th.  On that day, G-20 industrial leaders will gather at the National Building Museum in Washington D.C. to try to come up with a global response to the global financial crisis.   Some of the leading participants, most notably French President Nicolas Sarkozy and UK Prime Minister Gordon Brown, are calling for this summit to serve as a second “Bretton Woods,” referring to the famous 1944 conference in Bretton Woods, New Hampshire credited with laying the groundwork for the post-war economic legal order. 

Bretton Woods itself has achieved a somewhat mythical status and I think that its impact is generally overstated, certainly in its ability to create effective international institutions.  The global trade organization it envisioned did not formally get created until fifty years later, the IMF hasn’t been in the currency management business for nearly 40 years, and the World Bank has not exactly been winning kudos for eradicating poverty. Indeed, the IMF is today largely a lender of last resort for developing countries, and it is not even good at doing that. (But they are good at facilitating romances between their employees!!!)

Bretton Woods is probably more fondly remembered for the very real era of stable currencies and economic growth that occurred in the immediate postwar era than its institution-building.  And the causes of that era of prosperity are still not fully understood, but they probably were only partly related to the Bretton Woods system. Which is why we should be skeptical if the G-20 summit ends up proposing complex vast new international institutions or complex legal frameworks.  No doubt global cooperation is needed. But new international institutions are a highly doubtful mechanism for such cooperation.