80 Years after Bretton Woods

Contents

1. Bretton Woods at 80. Back to the Future

   Fabio Masini

2. Section 1 Challenges to Multilateralism and Prospects for Regional Monetary Cooperation

   1. Introductory Statement

      Bernard Snoy

   2. Welcome Address: The Importance of Regional Monetary Arrangements

      José Antonio Ocampo

   3. Towards a Regional Approach for Rebuilding the International Monetary System

      Christian Ghymers

   4. The Prospects for Regional Monetary Unions in a Changing Global Context

      Jean-Claude Brou

   5. Sharing Power in the International Monetary System: A Concrete Step

      Renato G. Flôres Jr.

   6. 80 Years after, towards a New Green and Fair Bretton Woods

      Luiz Awazu Pereira da Silva

   7. The International Monetary System: Building the SDR as a Reserve Asset

      Anoop Singh

   8. Relaunching Multilateralism through Regional Monetary Unions

      Andrew Sheng

   9. Relaunching Multilateralism through Regional Monetary Unions

      Clara Raposo

3. Section 2 The State of Regional Economic and Monetary Cooperation: Lessons from the Past and Issues for the Future

   1. 80 Years after Bretton Woods. Opening Remarks

      José Luís Cardoso

   2. The State of Regional Economic and Monetary Cooperation in Africa: Lessons from the Past and Issues for the Future

      Zenaida Maria Lopes Cassama

   3. The Escudo Monetary Zone and Monetary Cooperation in Africa: Lessons from the Past and Issues for the Future

      Maria Eugénia Mata

   4. The Impact of Geopolitics on Fiscal Policy

      Vitor Gaspar

   5. Building Multilateral and Multi-layered Global Economic Governance: The Role of Regional Integrations

      Fabio Masini

   6. De-dollarization via Local Currency Cross-Border Payments: Democratization and Fragmentation of the Global Payment System

      Hung Tran

   7. Where Do We Go from Here? What Kind of Initiative Would Robert Triffin Promote?

      Ousmène Mandeng

   8. Bretton Woods in a New World

      Marc Uzan

   9. Summing up of the Debate

      Bernard Snoy

   10. Concluding Remarks

       Fabio Masini

4. Attendees’ and Authors’ Profiles

Bretton Woods at 80. Back to the Future

Fabio Masini

The year 2024 marks the 80th anniversary of the international monetary conference held at Bretton Woods (BW) in New Hampshire (USA) from 1st to 22nd July 1944, where the foundations of a new international economic and monetary order were laid down. WWII had not yet come to an end, the Operation Overlord was just reversing the hegemonic ambitions of the Nazi Germany over Europe, and the USA were about to demonstrate to the whole world their technological supremacy in military weapons, which would culminate in the nuclear bombing of Hiroshima and Nagasaki in August 1945.

In October 1945 the United Nations (UN) were established and in December 1945 two global economic institutions, agreed upon at BW, were born under its aegis: the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), later become the World Bank (WB).

The system crystallized the US supremacy in economic and financial matters, relying on fixed-exchange rates based on a grid of bilateral parities with the US dollar, placed under the monitoring and short-term assistance of the IMF (whose decision making was under the control of the USA), and on the pivotal role of the dollar in international payments and reserves, being the British pound de facto subordinate reserve currency. The IBRD was meant to support long-term assistance to reconstruction and development projects and a negotiation process was initiated to reduce barriers to international trade within the General Agreement on Tariffs and Trade (GATT, since October 1947).

Despite the US supremacy in global institutions, the UN struggled to design an increasingly multilayered system of economic cooperation, based on five regional bodies to allow for greater convergence in economic policies and setting of broad macroeconomic goals; this is how the United Nations Economic Commission for Europe (UNECE) (its role was complemented in the context of the Marshall Plan of 1947 by the Organization for European Economic Cooperation, which became the OECD in 1961), the ones for Latin America and the Caribbean (ECLAC, better known with its Spanish acronym CEPAL, in 1948) and for Africa (ECA, in 1958), and the Economic and Social Commission for Asia and the Pacific (ESCAP, in 1947) and for Western Asia (ESCWA, in 1973) were born.

One of the main protagonists of such regional cooperation processes was Robert Triffin, first hired by the IMF, designer of the European Payments Union (EPU, to multilateralize clearing within the Marshall Plan), and by OEEC until 1951, when he was hired as a Professor of Economics at Yale. Apart from the European attempt, on which he invested most of his advocacy skills, he had previous and subsequent extensive experience in regional integration advisory, especially in Latin America and East-Asia. Triffin was the single most important economist to advocate for a multilayered system of global governance, with both regional and global institutions, firmly believing in the need to compromise between centralizing a few key economic regulatory and policy framework and decentralizing, to a multipolar system of regional safety nets, the financial stabilization that he deemed to be impossible at the global level, under the US hegemony.

While in the post-WWII world, characterized by increasing international trade and liquidity requirements to support national paths to reconstruction, it seemed that dollars would soon become scarce, as balance of payments deficits had to be settled in dollars (or gold), in October 1959 Triffin noted before the US Congress that the twofold role of the dollar as a national currency and as provider of international liquidity was bound to fail, as it involved an inherent contradiction. Liquidity, required by increasing trade and domestic goals, could only be provided by a structural deficit in the US internal and external balance, thus eventually jeopardizing the credibility of the dollar pledge to convertibility into gold, and ultimately the functioning of the entire system.

The subsequent debate on the possible reforms of the international monetary system increasingly involved academics and policymakers, until the Group of Ten and the Bellagio Group were established to provide suggestions. The liquidity (credit expansion) versus adjustment (austerity measures) options led to the compromise emerged in 1969, with the first amendment to the Articles of Agreement of the IMF, in which a new reserve asset was designed, the Special Drawing Right (SDR), meant to supplement the dollar as a reserve asset. And to the establishment of a stricter system of conditionality through Stand-By Arrangements (SBAs), based on Polak’s monetary approach to the balance of payments.

In 1970 a first tentative, small-scale general allocation of SDRs was implemented. Its amount and administrative constraints made it impossible to accomplish the task it had been designed for: saving the system. Triffin, disappointed by this evolution, had already resorted to attempt fostering regional monetary integrations, trying to advocate the establishment of a European Reserve Fund (Triffin 1970), and an Asian Monetary Fund (Triffin 1969). Regional integrations might have provided, in his thought, the necessary infrastructure to make global financial-assistance sustainable and more equitable in a two-tier logic.

These proposals came too late and lacked authoritative political ownership. In August 1971 the dollar convertibility with gold was suspended, leading to the adoption of generalized floating exchange rates since 1973. The Yom Kippur war and the subsequent rise of oil prices led to mounting global imbalances, with oil-exporting countries asymmetrically financing with balance-of-payment surpluses the current account deficits of oil-importing countries. This created a first dramatic clash of interests between the IMF and the USA, with IMF Managing Director Witteveen supporting a supranational solution to such imbalances through the intermediation of the IMF and the use of SDRs in energy invoicing, while the USA preferred to pursue a weaponization of the dollar and implemented bilateral agreements with a few oil-exporting countries, with the complacency of most Western allies who traded off their security against the dollar hegemony.