I spent most of my childhood summers in the woods of Maine and New Hampshire. Trips to New Hampshire usually meant hiking in the White Mountains, whose Presidential range is within site of the Mount Washington Hotel, a.k.a. Bretton Woods. Towards the tail end of World War II, Bretton Woods was the side of the international conference that, for better or worse, set the course for modern monetary policy and chartered the International Monetary Fund and the World Bank.
A few days ago Harold James, an esteemed economic historian at Princeton, and Domenico Lombardi, an economist at the Centre for International Governance Innovation (CIGI) in Canada, wrote a short piece in Project Syndicate on the coming 70th anniversary of Bretton Woods. James and Lombardi point out how the consensus of Bretton Woods, which comprised 44 different nations, was really carried through by a bilateral effort of the United States and Britain. Bilateral agreements, they observe, have a much better track record at producing workable results rather than fractious multilateral discussions. James and Lombardi also observe that substantial international agreements tend to be forged as a consequence of crisis, rather than forward-thinking prudence. Both of these observations strike me as very plausible. James and Lombardi suggest that the next crisis might be caused by a crunch in China’s shadow banking sector, which could prompt bilateral negotiations between China and the U.S. Let’s hope that when the next financial crisis comes, it will produce more fruitful consensus than the great crisis of 2008-2009.