Globalisation is not the real problem

The other main character in the story of the Bretton Woods conference is John Maynard Keynes.

John Maynard Keynes

John Maynard Keynes was the son of a Cambridge (UK) economics lecturer, Neville Keynes, and Florence Brown, a successful writer and social reformer. Keynes received an English “upper class” education at Eton, and then Kings College, Cambridge University. Originally Keynes studied mathematics, but swapped to economics.

Keynes’ early adult live is typified by his many homosexual love affairs until he met and married a Russian ballerina, Lydia Lopokova. They remained happily married until his death in 1946.

The first significant event in Keynes' career is his work with the British government at the Treaty of Versailles and his 1922 book that claimed the reparation being paid by Germany was too high.

John Maynard Keynes economic theories from then on established him as a giant in the area economics, and his theories gave rise to a new form of economics know as Keynesian economics, in particular the new field of macro-economics.

He died of a heart attack in 1946. At the time he was trying to negotiate amendments to the Bretton Woods agreement to bring about fairer outcomes for world trade.

Bretton Woods

Keynes contribution to Bretton Woods was a proposal for a central bank with the ability to create money like any other bank and which would oversee the world economy. The World Central Bank would create a world reserve currency called the “Bancor” and all international trade would be conducted in this currency. The most obvious advantage of a world currency is that no one nation would own it.

Within the central banking system there were proposed incentives for nations to avoid imbalances in trade. The system also involved a central clearing house for international trade.

The two factors that seemed to have worked against Keynes proposal was that it was too radical for the times; and the US had all the economic clout and were not about to become one among equals. America owned 75 per cent of the world's existing monetary gold and was by far the world's largest military power. America had become an irresistible force.

The Bretton Woods conference was in reality a sham. It was convened only to ratify negotiations between the USA and Britain that had been going on for two years. Because of world circumstances few countries were able to send proper representation. Many could not speak English, the official language of the conference; and most had not had the opportunity of reading through two years of complex negotiations between Britain and the US.

It is ironic that the original British plan had been developed in 1941 by Keynes as a counter to a monetary “New Order” put out by Germany as their model for the world economy after they had won the war. In the British model the USA was not included until after Pearl Harbour.

There are three initiatives that came out of Bretton Woods that make up the un-holy trinity of world economics, the IMF, the World Bank, and the WTO.