What Enabled Bretton Woods?

What would convince Chinese leaders that they must rapidly reinforce the open global economy that enabled China’s export-driven economic rise? One such catalyst might be a financial crisis emanating from the country’s risk-laden shadow-banking system. A contest for global leadership might serve that purpose as well. Or perhaps the stimulus will be fear that the world is sliding toward protectionism, with bilateral and regional trade agreements like the deepening divisions between their participants and the rest of the world.

Bretton Woods demonstrated that it takes a major crisis to produce a political dynamic of reform. Today’s world, for all of its troubles, is simply not dangerous enough – at least not yet – for the countries at the helm of the global economy.

Harold James is Professor of History at Princeton University and a senior fellow at the Center for International Governance Innovation. Domenico Lombardi is Director of the Global Economy Program at the Center for International Governance Innovation.

Copyright: Project Syndicate, 2014.