A Break from ‘Mercantilism’

On my drive to Montpelier on route 302, I caught a glimpse of Mount Washington hotel, where the Bretton Woods system was devised in the winter of 1944.  Delegates from allied countries hammered out the design of the new world order even as WWII raged on.

The animating reason for the Bretton Woods institutions was a justified fear of repeating the past.  After WWI, the harsh terms of the Versailles Treaty punished Germany excessively.  Reparation payments were unreasonable, the Americans erected high tariff walls, effectively nipping German exporters in the bud, and Germany was stripped of all of its colonial possessions.  In retrospect, it’s no surprise that debtor nations after WWI became autocratic and authoritarian (Germany, Italy) whereas creditor nations remained democratic (US, Britain, France).

In the post WWII-setting, the allies established the Marshall Plan, the IMF, and the ITO in order to stave off the crisis sparked by the economic depression after WWI.

And Bretton Woods delivered the goods: stable prices, exponential trade growth, and rapid economic development.  War-torn Japan and Western Europe experienced unprecedented growth and quickly joined the US and Britain.

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