With war raging across the globe in July 1944, ministers from all 44 Allied nations met at the imposing Mount Washington Hotel in Bretton Woods, New Hampshire, to thrash out a set of rules that would govern world finance once Hitler was defeated.

Gordon Rayner - 08 Oct 2008

Knowing that greater international trade would help to prevent future wars, and determined to avoid another Great Depression, the delegates signed the Bretton Woods Agreements, creating the International Monetary Fund and the World Bank. It was a big vision, driven by grand historical figures: Winston Churchill, Franklin D Roosevelt and the British economist John Maynard Keynes.

But a system that was designed 64 years ago has, not surprisingly, proved ill equipped to deal with the fiendishly complex practices of 21st-century banking that led to the current worldwide crisis.

Neither the IMF, the World Bank nor any other institution has the power to police the global financial system in a way that might have prevented the excessive risk-taking which led to the sub-prime mortgage crisis and, in turn, the credit crunch.

A more recent creation, the G8 group of industrialised nations, looks hopelessly out of date without the emerging economic giants of Brazil, India and China among its ranks. And the “beggar-thy-neighbour” policies of guaranteeing savings that have sprung up in Germany, Greece and Ireland in recent days have shown that even in Europe, co-ordinated economic policy is a myth.

“The current system is in crisis and we have an environment where dog eats dog,” said Bob McKee, of the economic consultancy Independent Strategy. “Electorates will expect more regulation, and politicians will push for it.”

The new Business Secretary, Peter Mandelson, argued last week that new global solutions are needed because “the machinery of global economic governance barely exists”, adding: “It is time for a Bretton Woods for this century.”

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Tags: Bretton Woods, Economic Collapse, IMF, One World Government, World Bank

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