Monday, May 29, 2023

Chartbook 216: When was the era of Bretton Woods? — Adam Tooze

As Perry Mehrling has recently argued in his intellectual portrait of economic historian Charles Kindleberger, the true undergirding continuity of international finance were not inter-governmental arrangements about national currencies, but the interlocking balance sheets of private finance stretched between the City of London and Wall Street. These made the Bretton Woods system increasingly unworkable by the late 1960s but they also ensured that the end of the system in the early 1970s did no produce a bottomless collapse of the dollar.


So this question - when was the era of Bretton Woods? - is, in fact, anything but simple. And its implications for how we think about global political economy are clearly non-trivial.

This is at least a should-read for those into monetary systems or global finance. The conventional view of Bretton Woods is unrealistic, as is the conventional view of just about everything. Adam Tooze attempts to set the record straight in terms of the history.

Tooze shows how Bretton Woods was implicitly doomed from the outset since fixed exchange rates are not compatible with modern growth. Class structure and the resulting power distribution were incompatible with it. And global asymmetries resulted in disruptive effects. 

The conclusion is that a flexible system was needed to adapt quickly to changing conditions, but adopting too much flexibility simply accommodates the issues of class structure and power distribution, as well as global asymmetries. This affects the world system economically, politically, and socially in adverse ways. So a satisfactory solution was not attainable within the bounds of the Bretton Woods system. The breakdown did not happen at once but was a gradual affair until it was finally recognized that the system was unworkable for the major players and their interests.

The reality is that every solution has its pros and cons so adaptation is a constant requirement. A major con is that powerful forces are afoot and perverse incentives prevail. Hence, adaptation is not always benign for the world system.

For those wondering why my light posting lately, there are several reasons. First and most immediately, I was out of town for a week and had no opportunity. I just got around to reading this, for example.

Moreover, some of my current projects are requiring more of my time than previously. 

Concerning the longer term, the era of blogs is going the way of email, being replaced by social media, Twitter and Facebook, and subscription services like Substack. That is to say, blogs are "losing market share."

 My focus in econ and finance is MTT, and there is little new being put up on blogs on MMT. Moreover, the political orientation is growing and the theoretical is shrinking. I am interested neither in keeping up to date on the other venues nor do I have the time. So in the future, I will only be calling attention to things I think are should-reads or must-reads on MMT and related subjects. So expect only occasional posting unless conditions change.

Chartbook 216: When was the era of Bretton Woods?
Adam Tooze | Shelby Cullom Davis chair of History at Columbia University and Director of the European Institute.


Peter Pan said...

Are you being productive?
Are you producing value?
Are you being entertained?
Are you going to go the way of O. Henry, called away in mid-sentence?

Btw, Substack is a platform for blogs. It is designed to be financially immune to censorship.
It will of course be targeted, undermined, and destroyed.

I still use email. I don't use Twitter or Facebook.
I read blogs that are entertaining.
Sad to see you moving on, Tom. This place is crickets without you.

Peter Pan said...

Another odd fact about Substack. Unless you restrict yourself to only reading content you are subscribed to, it isn't a subscription service. Most of the content is free. Most people can't afford to support every writer they read. So Substack is a gift economy model, masquerading as a subscription service.

Socialists may want to take note that only a small number of people are able to make a living from today's existing gift economies. Free riding is rampant, and economies of scale are dependent on the content creator's popularity. For most, obscurity is an obstacle that will never be overcome.

Footsoldier said...

The Russians get it ...

David said...

I've had posts blocked and deleted on Jude Wanniski's old site, Warren Mosler's old site, Mark Thoma's old site, Brad Delong's site, and this site.

This was only site that the host never sent an email explaining why my post was blocked. I figured it had something to do with a hard scramble upbringing lacking an education in manners......... so I understand. So I quit posting,

I was always shocked by the graciousness of the other hosts.

Thank you Tom for your perspective.

MMT will likely fade into the backwaters of economic thought as it seems to have happened many times throughout history. Eventually it will be 'rediscovered' once the truth becomes impossible to hide. Another cycle to be noted.

Peter Pan said...

Deleted posts are usually a glitch.

David said...

Yes, I’ve experienced probs with posting types of deletions. This site used to be pretty buggy.

In particular I was asked to elaborate on a theory of Bitcoin purchases by Elon Musk. My original post along with the response and my follow up response were all deleted with no explanation. Given the theory has held up over time, it wasn’t so far fetched as to require ‘reigning in’.

I also appreciate your insights PP.

Tom Hickey said...

@ David

I don't recall any posts being deleted from MNE other than obvious spam. While it is possible, it is rare if at all.

I used to go through the spam filter and fish things out when people complained, but I haven't done that in quite a while. So it is possible that some things went into spam through the spam filter.

Tom Hickey said...

@ Peter Pan

Our experience with Substack is apparently different.

David said...


It was actionable investment advice, I never thought you might have done the deletion.

I took a screenshot before it was deleted. Email me if you would like a pic.

Shown on pic:
Request for more information regarding my post was:
Jan 11, 2021 at 9:03am
My response was
Jan 11, 2021 at 9:25am

Tom Hickey said...

@ David

Noted. It was one of the rare cases I said was possible. As you say, I did not initiate it and don't recall it.