The Case for a New Bretton Woods

Amid the devastation of World War ll, the United Nations Monetary and Financial Conference convened in Bretton Woods, New Hampshire with the goal of designing an interdependent economic architecture for mutual prosperity. Based on a set of common principles of peace, equity and employment, the International Monetary Fund (IMF) and precursors to the World Bank and World Trade Organization were established to support the provision of global public goods, institutions that in their present form have loomed large in the global economy since their inception.

But the disjointed nature of the response to the COVID-19 pandemic as well as further deferment of crucial climate action, reveals the multilateral system is in need of fundamental reform. In echoes of the 1930s, the international community cannot coordinate well enough to provide global public goods for stability and prosperity or to combat right-wing populism and footloose finance.

Now, the book ‘The Case for a New Bretton Woods,’ by Kevin P. Gallagher and Richard Kozul-Wright makes the case for a new Bretton Woods moment, wherein the international economic institutions of the 20th century undergo sweeping reforms to promote a more prosperous, just and sustainable world economic order, fit for the 21st century.

Published by Polity Press, the book outlines a set of principles for a new multilateralism and a blueprint for change across three critical areas of global economic governance: the international financial system, trade and investment and development finance.

Key recommendations:
  • Principles for a new multilateralism
    • Global rules should be calibrated toward the overarching goals of social and economic stability, shared prosperity and environmental sustainability and be protected against capture by the most powerful players.
    • States should share common but differentiated responsibilities in a multilateral system built to advance global public goods and protect the global commons.
    • The right of states to policy space to pursue national development strategies should be enshrined in global rules.
    • Global regulations should be designed both to strengthen a dynamic international division of labor and to prevent destructive unilateral economic actions that prevent other nations from realizing common goals.
    • Global public institutions must be accountable to their full membership, open to a diversity of viewpoints, cognizant of new voices and have balanced dispute resolution systems.
  • Reform the international financial system
    • Regulate and steer private capital flows toward productive economic activity that is low-carbon and socially inclusive.
    • Massively expand the scale and scope of the so-called “Global Financial Safety Net” of emergency liquidity facilities to help countries anticipate and mitigate financially instability in a manner that accelerates green and inclusive prosperity—including a system of sovereign debt-restructuring.
    • Reform governance and cooperation across the international financial system and align it with shared climate and development goals.
  • Align the international trade and investment regime
    • Curtail market global monopolization and global rent-seeking through strong global competition rules
    • Re-orient global trade and investment incentives away from fossil fuels and toward green and inclusive globalization.
    • Replace privatized dispute resolution systems so disputes are resolved by nation states and stakeholders.
  • Scale up development finance
    • Mobilize a stepwise increase in development finance toward a 21st century Marshal plan for green and inclusive prosperity.
    • Condition new financing on alignment with shared climate and development goals.
    • Support massive green industrialization and employment efforts, as well as significant adjustment financing for those in fossil fuel intensive industries.
    • Foster equitable cooperation among development finance institutions to coordinate for shared and sustainable prosperity.

A Bretton Woods moment is urgently needed to avoid further health, climate and financial crises and to build a new trajectory toward sustainable, inclusive prosperity. The required reset of the international system to face contemporary economic and environmental challenges will not succeed through backroom diplomacy and grand summitry. Rather, such a moment should be part of a global conversation with voices from Bali, Bogota, Buenos Aires, Berlin, Brazzaville, Beijing, Bangalore, Boston and beyond.

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