Economic multilateralism 80 years after Bretton Woods

The global economic institutions that grew from the Bretton Woods conference of 1944 aimed to create a cooperative policy environment conducive to recovery, development, continuing prosperity, social stability, and democracy. Prominent in the minds of the architects were the macroeconomic and trade policy coordination failures of the 1930s, which accompanied a world depression and the march towards the Second World War. The assumption of ‘embedded liberalism’ underlying Bretton Woods gave way to a much more market-oriented system by the early 1990s, fuelling strong growth in several large emerging markets and a period of hyperglobalization—but also social tensions in advanced economies. The result has been a changed geopolitical balance in the world as well as a backlash against aspects of globalization in many richer countries, notably the main sponsor of post-war international cooperation, the United States. At the same time, global cooperation is threatened despite the emergence of a broader range of shared global threats requiring joint action. The rich industrial countries that dominate the existing multilateral institutions should recognize them as being instrumental for channelling superpower competition into positive-sum outcomes that can also attract broad-based international support. However, leveraging those institutions will require buy-in from middle- and low-income countries, as well as from domestic political constituencies in advanced economies. The future of multilateralism depends on reconciling these potentially conflicting imperatives.