Looking back to Bretton Woods
TEXT OF STORY
Kai Ryssdal: President Bush is set to meet at Camp David with French President Nicolas Sarkozy and the President of the European Commission tomorrow. On the agenda is the beginning of what could be a re-shaping of the international financial system. The Europeans are pushing for a global summit on the issue in the next couple of weeks.
Today, the White House said, not so fast. There probably won’t be a firm date for a worldwide get together coming out of this weekend’s meetings. Still, a place well known in the history of international finance keeps popping up.
Marketplace’s Jeremy Hobson explains.
Jeremy Hobson: In July of 1944, Bretton Woods, New Hampshire, became the center of the financial world as delegates from 44 nations gathered to coordinate global monetary policy.
Tape from 1933 news broadcast: Invited by President Roosevelt for the first major world financial meeting since the London conference of 1933.
The delegates at Bretton Woods created a system that pegged foreign exchange rates to the dollar.
They also created the World Bank and the International Monetary Fund. Michael Bordo, an economist at Rutgers University, says the lesson for future global financial coordination is: The U.S. has to be on board.
Michael Bordo To the extent the Bretton Woods system worked, it worked because the Americans were behind it.
But it broke down in the ’70s when U.S. needs trumped the desire in Washington for a global agreement.
The U.S. still has concerns about losing control over its financial system. And even if the Bush Administration were on board for a new global financial framework, it’s unlikely a lame duck President could get anything done in the next three months.
Still, says Sebastian Mallaby at the Council on Foreign Relations, worldwide financial reforms are needed — and fast.
Sebastian Mallaby: What’s not so clear is whether these should take place on a multi-lateral level or whether frankly national governments can do much of what needs to be done without complicated international coordination.
European leaders don’t seem to agree. British Prime Minister Gordon Brown says a lack of transparency and coordination is letting financial problems get out of control before they can be dealt with.
In New York, I’m Jeremy Hobson for Marketplace.
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