At a time when pundits repeatedly invoke Bretton Woods as an inspiration for a solution to the financial crisis, the Europe-Asia summit that took place in the past days are a significant step in the direction of dismantling Bretton Woods.
To make sure, Bretton Woods is the name of a winter resort in New Hampshire where the US and the allies agreed on a new financial world order to re-establish the world economy after Second World War. It was a system based on the simple fact that the US had emerged from the war as the unchallenged economic superpower of the world. The US was the ultimate backer of a system that built on an idea of free trade, fixed exchange rates, abolishing tariffs and capital controls, the World Bank, and the IMF.
With USA as the main economic backer (and main military power) there were no objections to the fact that Washington called the shots. At least in the beginning. As time passed the system has been shocked several times, and most profoundly as the USA abolished the gold standard in 1971. Nevertheless, the US has held on to its position as the main force behind the global financial order.
Over the past decade, the USA has done much in order to undermine her own position. Prudence in the banking system was replaced by ideologically inspired deregulation leading to the current banking crisis (as admitted by Alan Greenspan). USA squandered its position as the world’s largest creditor and handed that position over to emerging China. Instead, US became the world’s largest debtor, thus depending on the world’s savers to finance the ever-escalating current account deficit. In Iraq, the limits to the military might of the world’s only superpower was clearly demonstrated.
All of this has led to Europe and China together calling for an overhaul of the world’s financial system – at a summit where the US was not invited. Russia was not a formal participant, but there is no doubt that Russia will sign on to the idea, particularly as Russia and China through the Shanghai Cooperation Organisation have been diligent in clearing away strategic differences. Obviously there are not details on the table yet. It is, however, possible to guess what will be proposed, and it will all amount to serious curbs on the American way of doing banking. That is less important than the fact that the summit has taken place and concluded in a very clear demonstration of agreement. It is an outright challenge to the USA’s position as the world’s economic superpower.
We are thus moving closer to what my friend William Engdahl doubtlessly would call “Halford Mackinders Nightmare” – a situation where all significant powers on the Eurasian continent agree on their common strategic interests. For more on this, consult William Engdahl’s website http://www.oilgeopolitics.net/ .
It is ironic that this happens a few weeks before Zbigniew Brzezinsky via a probable democratic election victory will semi-officially be elevated to the “Eminence Grise” of American foreign policy. Brzezinsky has on several occasions written about how the US has as an overriding foreign policy priority to make sure that no alliance is established between the major powers on the Eurasian continent. This representative of Realpolitik will certainly bring an acute understanding of the new global agenda to the new administration.
If the unlikely should happen, and a Republican president be elected, the message will not be wasted on the new administration. It is my guess that the rather enigmatic reports that US Treasury Secretary Paulson forced all of the nine largest US banks to accept government stakeholding even if they swore not to need this “help”, has a lot to do with preparing for this coming fight for global financial dominance.
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