Exactly seventy years ago, delegates from 44 countries were wrapping up work on a new world order. The next day, July 22, 1944, the attendees of the Bretton Woods conference agreed to regulate international exchange rates; to create the International Monetary Fund and the World Bank; and to lay the groundwork for what would become the World Trade Organization.
The trajectory of international economic co-operation (mostly) has been downhill ever since. The Seventieth Anniversary of Bretton Woods coincides with the deflation of the bubble of enthusiasm for multilateral policy making that followed the ascendency of the Group of 20 during the financial crisis.
A global economic conflagration sparked in the United States and Britain – the chief architects of the Bretton Woods accords – robbed those countries of whatever ancestral right they had to dictate global economic policy. The G20 rallied the biggest economies around the idea of spending trillions of public dollars to avoid a depression. It worked. The IMF and the World Bank were revitalized. There was talk of a "new" new world order.
This is the world in which Canada's economic interests are best served. Too small to carry much influence on its own, the country's diplomats always will do better in larger groups. In the Group of Seven, Canada is at the mercy of the United States. At the G20, the influence of the U.S. and other large players is diluted somewhat. That's why Canada traditionally has favoured the WTO over smaller trade pacts.
In a recent essay, Eric Helleiner, the chair in International Political Economy at the University of Waterloo, argues that the conventional history of Bretton Woods as a compact dictated by Britain and the U.S. at the exclusion of all others misconstrues what really happened. In the preparatory period ahead of the conference, the American hosts gave everyone a chance to provide input. Americans and Britons were the primary authors, but the others – including Soviets and Chinese – saw their contributions in the text. The Bretton Woods system succeeded – at least initially – because of the legitimacy of a process involving a large number of countries.
Prof. Helleiner's assessment is a critique of a popular sentiment that G20's poor success rate in recent years is because there are too many countries around the table to get anything done. It also is a putdown of those who celebrate the G20's primacy in global economic affairs. "It is the critics of the exclusivity of the G20 – rather than supporters – that have the more legitimate claim to invoke the Bretton Woods sentiment," Prof. Helleiner wrote.
As an organizing body, the G20 is struggling, if not outright failing, to live up to its billing as the steering committee for the global economy. Testament to its failure is the decision this month by Brazil, Russia, India, China and South Africa – the BRICS – to create their own versions of the World Bank and the IMF. The G20 was meant to give those big emerging powers a say in the running of international financial system. But the existing powers wouldn't let go of the wheel. A four-year-old promise to realign voting rights at the IMF is stalled because the White House can't persuade Republican leaders in the House of Representatives to approve the changes. The G20 might as well be the G7 – the U.S. still dictates everything.
Canada no longer is the strong advocate of multilateralism that it once was. Prime Minister Stephen Harper and his ministers still speak in favour of broader arrangements on economics, finance and trade. But they also have played up their membership in exclusive clubs. The G7 had gone dormant until former Finance Minister Jim Flaherty decided to make a spectacle of gathering his counterparts around a fireplace in Iqaluit in 2010. Mr. Harper is aggressively pursuing bilateral and regional trade agreements rather than making a vigorous defence of the WTO.
At Bretton Woods, Canada's negotiators sought to avoid becoming a "satellite" of either of the U.S. or Britain. The country's leaders wanted a global system so Canada would have options. Today, Canada is setting itself up to forever be a satellite of the U.S. because the other option – the BRICS countries – is walking away.