Over the weekend, The Atlantic published my latest feature, this one about John Maynard Keynes and the lessons of the 1944 conference at Bretton Woods. It’s long — read the whole thing! — and I’m not going to summarize it all here, but I will point to a couple of the big ideas involved.
First, when most people today think about globalization, they’re thinking about a project that began in the 1990s — NAFTA, the WTO, Seattle, China, etc. And when they get angry or enthusiastic about globalization, they’re getting exercised about an essentially deregulatory project. The idea was to get the nations of the world to agree not to meddle with the power of financial markets to generate prosperity and progress through the pursuit of profit and comparative advantage.
The architects of the 1990s form of globalization dressed all of this up in language about humanity coming together, people being free, barriers breaking down, everyone holding hands in peace and harmony. One of Bill Clinton’s early pitches for NAFTA described it as a sister project to the 1993 Oslo Accord. Six years later, when Clinton spoke about China joining the WTO, he talked about bringing “political freedom” to China. Free trade would encourage world peace and democracy — that was the plan, anyway.
It’s important to understand that a lot of the people who said this stuff really believed it. There are always some bad actors in politics who lie to help powerful people and corporations. But the idea that there is a deep connection between free trade and human cooperation is very old — the Western strains of it go back at least to the 18th century French philosopher Montesquieu. And it was an especially popular theme for intellectuals at the turn of the 20th century, although the optimistic rhetoric was often out of tune with an era of high tariffs, financial domination enforced with gunboats, and very straightforward imperial rivalry.
These empirical, ah, disturbances aside, the idea that commerce fosters mutual understanding between different peoples still makes a great deal of intuitive sense. When we learn more about another person, we understand the ways that person is both like and unlike ourselves — we can celebrate our similarities and appreciate our differences. We don’t like everyone we meet, but it’s easier for people who understand each other to get along. We also learn to appreciate the way foreign arts and ideas enrich our lives — there’s just more cool stuff to do. This is why people like to travel.
John Maynard Keynes grew up infatuated with this multicultural economic ideal and never really gave it up. But at the outbreak of World War I, he began having doubts about the significance of international finance and mass-market industrial production to those high principles about art and culture. By the time World War II arrived, he had basically abandoned the idea that a world free of tariffs and financial regulations would bring about political harmony.
He came to believe instead that the world could adopt a globalization program without embarking on a mass deregulatory agenda. The Bretton Woods Accord was an attempt to do just that. It encouraged international trade and did indeed help stabilize political relationships between the countries that ratified it. But it was not about liberating financial markets from the constraints of democratic governments — on the contrary, it regulated trade and finance in the interest of international harmony.
That matters today, I think, because when we look at the various failures of globalization — accelerating climate change, the breakdown of the relationship between the U.S. and China, ongoing human rights abuses all over the world, financial crises, you name it — it can be tempting to believe that nationalism is the only alternative to the system world leaders constructed in the 1990s. But that isn’t true. The world could simply pursue a different form of globalization, one more like Bretton Woods and less like WTO, in which nations come together to regulate what needs to be regulated.
The second point is that while Bretton Woods was indeed an impressive diplomatic achievement, it wasn’t a miracle. There were all kinds of diplomatic subterfuge, realpolitik strongarming and horse-trading involved. The final pact fell far short of Keynes’ dreams, and the Soviet Union ultimately backed out of the entire project. But Bretton Woods did establish a model for international economic reform that I think could be revived today — one that may be the only realistic way out of the climate crisis.