No Bretton Woods – but it’s not London 1933 either

By Anthony Painter at the G20

Today’s G20 Summit deal is pivotal: the leaders had to show unity and solidarity and they did. A confidence boost is likely. In 1933 the world failed to come to agreement – split over repayment of war debt, competitive devaluation and the rising the tide of protectionism – and so it continued its meander towards catastrophe. The new administration of Franklin D Roosevelt was largely uninterested in the international dimension of its domestic economic difficulties. From a yacht in New England, Roosevelt effectively torpedoed any deal. So these summits can go very wrong indeed.

They can also go very right. At Bretton Woods in 1944 a system of pegged exchange rates was created, as was the IMF, the International Bank for Reconstruction and Development (now incorporated into the World Bank), but the new international system had more flexibility and security. It catalysed- along with post war reconstruction- thirty years of prosperity for liberal democratic nations. It allowed a massive expansion of trade, investment, and the creation of the European welfare states that we have grown used to. From London 1933 to Bretton Woods in 1944 there is a wide gulf of success.

Today’s Summit, here in the Excel Centre in London’s docklands lies somewhere in between. The deal is both meaningful and exceedingly important: beefing up the IMF, greater emergency support for emerging economies who are civilian casualties in this financial war, the beginnings of a new system of international regulation that will manage risk in global capital markets better, and moves towards better exchange of information so we can have a better picture of what individuals and corporations are doing in tax havens. This will all underpin a better system of international regulation. And a bonus was the agreement to coordinate a global fiscal expansion and a new trillion dollar stimulus through the IMF and other international institutions (5 trillion dollars was in the system already). In this, the leaders have gone slightly further than expected.

The notion that this conference is superfluous or superficial just does not stack up. It is a substantive deal. The G20 standing united and taking substantive measures on top of what has been agreed already is an immediate confidence boost. So the nay-sayers are faintly ridiculous. What are they suggesting? That this Summit shouldn’t have happened? They are not on this planet I’m afraid- perhaps their minds are stuck in 1933.

This summit has been intriguing and critical. It has not been history making for either the right or wrong reasons. It will neither be a catastrophic missed opportunity nor the moment that 30 years of prosperity was ushered in. It will be a constructive moment and, whether it’s recognised domestically or not, a moment of personal achievement for the Prime Minister for which he will deserve enormous credit- and as his fellow leaders most particularly the US president have acknowledged. If he has to wait for history for that, it would be a pity.

Anthony Painter is author of Barack Obama: the movement for change and is blogging for G20 Voice at anthonypainter.co.uk.

Picture courtesy of London Summit.