Working Paper: NBER ID: w29114
Authors: Michael D. Bordo; Catherine R. Schenk
Abstract: In 1919, John Maynard Keynes wrote his famous tract The Economic Consequences of the Peace. In that work, he anticipated the collapse of the first era of globalization that began in the mid-nineteenth century. He admonished the short-sighted assumption that these years of relative peace and prosperity for many was a permanent norm, interrupted only briefly by the Great War. The diplomatic failures, lapses in leadership, and promotion of narrow interests and vision outlined by Keynes underpinned his prediction of a backslash of economic nationalism, trade protectionism, and recession.\nThe paper revisits the turning points in the evolution of the global economic system since 1919 by focusing primarily on the evolution of the international monetary system and policy cooperation/coordination. We identify three disruptions and examine how each prompted a change in the underlying ideology about how the international monetary system should organize: World War I, Bretton Woods, 1970s Great Inflation and Managed Floating. Each turning point was characterized by different forms and institutions of cooperation, how rules (either explicit or implicit) were designed and implemented, and the crucial importance of the historical context.
Keywords: No keywords provided
JEL Codes: F02; F33; N10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| World War I (N44) | end of the first era of globalization (F69) |
| globalization (F60) | rising nationalism (F52) |
| interwar gold exchange standard (F33) | economic turmoil of the 1930s (N14) |
| World War I (N44) | instability of the gold standard (F33) |
| instability of the gold standard (F33) | abandonment of free trade (F13) |
| World War I (N44) | rise of economic nationalism (F52) |