ISEA – Center for Studies in Applied Economics – is pleased to announce the release of the new book titled “A New Bretton Woods for a New World“, written by Professors Giovanni Tria and Angelo Federico Arcelli, both Senior Fellows at ISEA.
The volume, which examines the relevance and evolution of the international monetary system 80 years after the historic Bretton Woods Conference, offers an in-depth reflection on the current and future challenges facing the global financial architecture. The authors analyze how today’s economic, political, and technological context, shaped by digitalization and increasing global competition, is influencing the role of central currencies and international institutions, highlighting the urgency of new governance.
A New Bretton Woods for a New World. Reflections about the Future 80 years after the Bretton Woods Conference will be presented on October 22, 2024, in Washington, DC, during a joint event with the Center for International Governance Innovation (CIGI). Following this, further events, both in person and online, will be organized, aimed at the general public and the scientific community.
The book will soon be available for free download on the official ISEA website.
Abstract
A new Bretton Woods for a new World – Reflections about the Future 80 years After the Bretton Woods Conference
The Bretton Woods system established in the aftermath of the Second World War afforded the United States an “exorbitant privilege” as the owner and sole issuer of the world’s central currency, the U.S. dollar. The role of the U.S. dollar (and somehow, in recent years, that of the euro) gave, and still gives the United States and its allies powerful leverage to influence competing powers and affords the West a position of indisputable leadership beyond military and geopolitical factors. But China’s rise and its determination to compete for global leadership could also include efforts to dominate international trade and payment settlements. Growing tensions among major powers and the advent of new digital tools, including payment instruments and crypto assets, have created a challenging environment for central banks.
Since then, the international monetary system has evolved and we may be on the verge of significant change, driven by the changing nature of globalization, led by de-risking priorities, and by the digital revolution, with all its consequences. These two forces will recast the global economic landscape. The digital revolution is silently influencing all agendas. The shift in the available set of payment tools that it represents is putting such pressure on central banks worldwide that the idea of developing CBDCs is gaining traction. The development of CBDCs could be also seen as a defensive move aiming at maintaining the full control of monetary policy.
In the analysis, drawing on a previous work, the authors will start by recalling, in the first two chapters, the historical background that led to the Bretton Woods agreements and the continuous quest for stability and efficiency in the exchange rate system and international trade.
In the following three chapters, some reflections are presented both on the weaknesses of the system agreed at Bretton Woods, that led to its collapse in August 1971, and on the reasons which led, de facto, again to a U.S. dollar-centered international monetary system, even after the creation of the single European currency and the China’s accession to the WTO. They also describe in these chapters how even this de facto system, by some referred to as the Second Bretton Woods, preserves much of the characteristics and, consequently, of the weaknesses of the system established in 1944, while in a different global macroeconomic and political context. Moreover, many factors which allowed it to survive until now are expected to weaken, even due to current de-globalization and protectionism trends which represent growing factors of uncertainty.
In the last three chapters will be analyzed more how the conditions which have enabled the dollar to be kept as a linchpin of the international monetary system over the past few decades are weakening, endangering its sustainability, beyond its contested desirability, also in the face of the challenges posed by the spread of new digital currencies and means of payment. Finally, the authors propose some ideas about the desirability, if not the necessity, of a shared path for the reform of the international monetary system, to govern the future evolution also to mitigate the uncertainties, and of the international institutions, both to regain authority and legitimacy, and to ensure a sustainable new agreement.