The Economic System at Stake

"The Bretton Woods system is dead." How often has that remark been made in the last year? Like most clichés, it blends truth and error and the problem is to know in what proportion. The ending of the dollar's convertibility into gold and its devaluation can certainly be taken to mark the end of the monetary system with which we have lived for most of the postwar period. But only some parts of that system worked as envisaged at Bretton Woods, New Hampshire, in 1944. Other key attributes developed quite differently. Whatever monetary system comes next-perhaps it will bear the name of Nairobi where the International Monetary Fund meets in the fall of 1973- will certainly alter some of the Bretton Woods rules and practices but may also have some features closer to the original design than to the dollar standard of the past decades.

Money was only one of the things that concerned the designers of the Bretton Woods world (as it may be called since it has no other name). Trade, agriculture, capital movements and many other matters came into their plans and not least the problem of relating the domestic economic policies of a country to its international economic position. The basic principle of the Bretton Woods approach was that as many problems as possible should be dealt with by continuing multilateral coöperation, much of it carried on through a series of international organizations each of which was the center of a cluster of rules governing the behavior of member countries. The formula sounds banal. We take these principles for granted even when we do not always observe them. Yet the general acceptance of this idea and the creation of at least some of the institutions that embodied it made the Bretton Woods world different from anything that had preceded it. The salient question today is not whether the Bretton Woods world is dead, but whether what comes next in international economic affairs builds on it or reverts to that form of chaos called economic nationalism.