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Dear Peter and Gerald, Your Committee for a New Bretton Woods sets out many central
planning, industrial policy, etc. proposals that have failed the test of
history. You are right that China, having almost 19% of the world’s population
was a major contributor to growth and the decline in poverty following the
liberalization and increasing privatization of its economy in the 1980s. But
with or without China the increase in living standards and decline in poverty since
the industrial revolution have been DRAMATIC. There is a huge amount of data
documenting this but here are three representative tables. https://www.humanprogress.org/dataset/real-gdp-per-capita/ https://www.humanprogress.org/dataset/share-living-in-extreme-poverty/ https://www.humanprogress.org/the-great-decline-in-poverty-over-time/ However, as a member of the existing Bretton Woods Committee
and retired staff of the IMF, let me focus on banking and public sector banks. While
I have led or participated in many IMF technical assistance missions to countries
suffering from the inefficiency and corruption of state-owned banks, the Soviet
Union is the only country I know of that had a system of central bank
allocation of credit of the sort you seem to recommend. Hopefully I needn’t comment on how that
worked out. Governments have an important role in any country. My contention,
strongly supported by historical experience and economic theory, is that the appropriate
role is to provide the legal/regulatory framework in which private actors can
do their thing. This includes the enforcement of property rights and contracts,
accounting and transparency rules and such things that promote market
competition (infrastructure, education, and safety net financing). Economic
growth requires allocating resources most profitably and an environment that
rewards useful innovations. With the proper legal foundation, this is (and historically
as been) achieved best by private actors. If a private bank lends to friends and
relatives, it will lose to its competitors if its friends do not make the best
use of that credit. Sadly, this has not been true of very many state-owned
banks (the closest proximation to your central bank monopolist lender). One
after another struggling country has giving up their state-owned banks and the
misallocation of the country’s resources that have contributed to their slow growth
and continued poverty. Unlike private banks, which suffer loses when they lend
to poor borrowers, state owned bank losses (favors to relatives and friends)
have been underwritten by the state (i.e. by tax payers). Such concentrations of power at the top attract leaders who
enjoy exploiting such power. The historical evidence is overwhelming. Create it
and they will come.
Sincerely, Warren Coats
Dear Mr. Coats, I believe the idea is that if “we [were] part of a global revolution against economic empire,” then Putin wouldn’t be directing it. A national bank with the power to create credit/money for public investment is certainly vulnerable to corruption; but how is our privately owned and controlled banking system doing? Your point still stands, but it is most persuasive only when the baseline is an imagined ideal, not our present reality. And even were this proposed national public investment bank to match Wall Street’s impressive level of corruption, we’d at least get some public wealth creation out of the deal. More accurate than “[t]he growth of global trade has dramatically reduced global poverty” would be to say that the current global economic system has seen some poverty reduction, but that is overwhelmingly due to the contribution from China. The proportion of people in extreme poverty has been marginally reduced, but in absolute terms, worldwide there are more people in extreme poverty today than there were decades ago. You are no doubt familiar with the so-called elephant graph, but look what happens when you exclude China. For an opposing view to the celebratory narrative on poverty reduction – what we hear often from the NYT, “The” Economist, TV pundits, etc. – I recommend Jason Hickel’s The Divide. It’s essentially just a summary of reams of important research, but it is presented in a very readable narrative form. As with any argument, it may be wrong, but the ball is in the court of those propounding the celebratory view – and to my knowledge, they still have not offered any serious rejoinder. All the best,
Peter Peter Beattie Assistant Professor; Assistant Programme Director, MSSc in Global Political Economy The Chinese University of Hong Kong +852 3943 9794 Social Evolution, Political Psychology, and the Media in Democracy: The Invisible Hand in the U.S. Marketplace of Ideas (Palgrave Macmillan, 2019) Dear Mr. Belsky, Yes, we do need to resist America’s bullying and empire tendencies. But your approach goes in the wrong directions (e.g. a National Bank that controls credit is a time tested receipt for corruption). The growth of global trade has dramatically reduced global poverty. Reshoring-buy American would bring that to an end without improving our own economy—quite the opposite. You note that “ a new economic order, based on development and justice, is already being discussed among Russia, China, India, and the "BRICS-Plus" nations.” You seem to suggest that we should follow such a centralized and politically driven model. I don’t want Putin direction my economy or my individual life. Such people raise to the top of such systems.
What is "screaming nuts" about establishing a New Bretton Woods economic system, when the current Trans-Atlantic financial system is hopelessly bankrupt? The system will collapse either through a hyperinflationary blowout or a deflationary collapse as the central banks raise interest rates, causing mass bankruptcies. Something new is needed, especially if we are concerned with the "General Welfare", not protecting the speculative bubble of a relatively few billionaires. In addition, the question of a new economic order, based on development and justice, is already being discussed among Russia, China, India, and the "BRICS-Plus" nations. In so far, as the legacy of America, going back to the Declaration of Independence, is of an anti-imperial nature, shouldn't we be part of a global revolution against economic empire, instead of acting like the British Empire? Also, in so far as this question of a new just economic system that works for all nations, ourselves included, is directly related to the question of stopping the drive toward global nuclear war, I would urge you to watch the Schiller Institute Conference, Sun., July 3, "This July 4, Declare a New Bretton Woods": This July 4, Declare for A New Bretton Woods!! | The Schiller Institute | This July 4, Declare for A New Bretton Woods!! | The Schiller Institute |
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