Chinese factory managers have cut their orders for raw materials. The Baltic Exchange Dry index has plummeted. Currencies climb up and down, but the stock exchange indices look like the altimeter of an aircraft in freefall. Stock markets across the planet look to the Central Banks of Euro-Land and the U. S. for some guidance, and then shy away, taking cover under the flimsy shields of their own governments. The Sovereign Funds of the Gulf States prefer to park their substantial petro-dollars into their own infant stock exchanges, since they have already burned their fingers in New York and London.
Part I: Wealth’s Apostles.
Petrified by the imminent collapse of the entire financial architecture, the Finance Ministers of the Group of Seven (G7) countries hastened to Washington for an emergency meeting, summoned to their Rome, to find a quick solution. The smiles that littered the faces of the ministers in their February meeting in Osaka were absent. Instead, they reverted to type. America’s Henry Paulson had a pinched nose in the official photograph, as he frowned toward the camera as it to say, get this over with, and get me out of here. Two of the men in the room had been bred in the left, only to have walked right-ward: Britain’s Alistair Darling, once a 4th Internationalist and now another Scotsman for Brown, walked around with the typical smug look of New Labour, while Italy’s Giulio Tremonti, once of the Italian Socialist Party and then of Berlusconi’s disreputable Forza Italia, walked around at a forward angle, as if to display his eagerness to please with his body’s slant. Tremonti, at least is an intellectual, one who has perversely adopted some of the anti-globalization rhetoric to smash the remnants of Italy’s social wage. France’s Christine LeGarde trained as a labor lawyer, but gave little of herself to the working-class. A twenty-year career in the Chicago law firm of Baker & McKenzie trained her well for her job in the Sarkozy cabinet, pushing an agenda to make the French worker “work harder.” But she is the opposite of Tremonti, having said early into her term that like her boss, she believes that the French think too much and don’t do enough. No intellectualism or big ideas from her desk. But at least she could say as much. The Japanese Finance Minister, Soichi Nakagawa, has a thing for the bottle, and it might be expected that the tension sent him in search of the nearest bar. This is the cast of characters that wants to determine the destiny of our times.
Germany’s Peer Steinbruck looked ill. A long-time SPD man, now in charge of his country’s checkbook in this grand alliance of hard right and right, Steinbruck came to Washington having made the strongest statement on the crisis. “The world will never be as it was before the crisis. The United States will lose its superpower status in the world financial system.” The system would, he argued, “become more multi-polar.” These are fierce words, and it is doubtful that Steinbruck earned any smiles from Paulson or his team. World Bank president Robert Zoellick, the stooge of James Baker who took an active role in stealing the 2000 election for Bush, was seen in his company. Zoellick’s smile is like a cattle-prod, a warning to get in line. Any other dissent could not be brooked. IMF Chief, the Frenchman Dominique Strauss-Kahn said of the crisis that it is “the result of regulatory failure to guard against excessive risk-taking in the financial system, especially in the U. S.” (September 22). A few days after the October meeting, Strauss-Kahn faced charges that he had, what the Japanese call, a “lower half problem.” The IMF began investigations into an affair Strauss-Kahn had with a senior official of the IMF’s Africa division, Piroska Nagy. The dirty tricks squad released its file on him.
Paulson’s defiant laissez-faire was broken down by events, by his commitments to his Wall Street brethren, and by pressure from the few elements of social democracy that linger in the hearts of Euro-Land. The October 10 statement from the Finance Ministers and their Central Bankers laid out a five point plan, three of which, at least, pointed directly toward the partial nationalization of the banks, otherwise anathema to Paulson. “Take decisive action and use all available tools,” said the statement, “to support systematically important financial institutions and prevent their failure.” To “unfreeze credit and money markets” and to ensure that banks can raise capital “to re-establish confidence,” it was imperative that the government’s take a stake in the banks themselves. This was the mantra from the Europeans and the Japanese, and it had to be heeded by the floundering U. S. Working Group on Financial Markets (this was the push that moved Paulson and others into the Cash Room at the U. S. Treasury on October 14 to announce that the government would take an equity stake in the banks).
From Euro-Land came another suggestion, that the powers convene a New Bretton Woods. A spat broke out between Paris and London, as Sarkozy and Brown debated who had first called for such a conference. At the UN General Assembly in late September, Sarkozy called on the states to “rebuild together a regulated capitalism in which whole swathes of financial activity won’t be left to the sole judgment of market dealers. Let’s rebuild a capitalism in which banks do their job, and the job of the banks is to finance economic development, it isn’t speculation….Let’s build a capitalism in which the credit agencies are controlled and penalized when necessary…There is so much opacity today, we find it difficult even to understand what is happening.” Trying to reconcile the irreconcilable, Sarkozy took refuge in the comfort of civilizations: he called this the end of the “Anglo-Saxon era,” and with a whiff of condescension opened the door toward the Gallic era.
The lugubrious Gordon Brown could have joined in with this civilizational-racial angle, claiming his Celtic heritage against the Germanic Anglo-Saxons. But instead, he made the call for a “New Bretton Woods” a pissing contest, raising it as if a new idea at an October meeting of European leaders in Brussels. But really the call is an old one. Familiar as well to Giulio Tremonti who made the proposal in early March on Rai Due, saying globalization was invented “by a group of madmen, of mad illuminati,” people who “invented techno-finance, sold mortgages, packaged them and sold them around. Now all this has failed. Globalization has failed.” Instead, he proposed “we are thinking about an agreement among large nations, like the one in Bretton Woods: a new Bretton Woods.” Even Tremonti is not the first to say so. France’s ATTAC did so, and so have the bulk of the states of the United Nations since the debt crisis punished Mexico in 1982. But till now, no-one took them seriously.
Part II: The Lion’s Den.
Bretton Woods is the name of a small town in the beautiful White Mountains of New Hampshire. As you drive along Route 302 from Vermont, you pass by the road that can take you to Franconia, where Robert Frost wrote some of his best verse (“Stopping by the Woods,” but also the 1916, “The Line Gang,” with the unforgettable “With a laugh, an oath of towns that set the wild at naught, they bring the telephone and telegraph”). You brush by Bethlehem, where the pollen count is so low that people used to come here to shelter before antihistamines. And then, before you can breathe, you enter the area of the mountains, the Crawford Notch region that brings you within sight of Mt. Washington. Little wonder then that in the early 1900s, the railways ran a service that linked the barons of New York, Boston and Philadelphia to their own private Switzerland. Joseph Stickney wanted to build a major hotel on an immense plain between Crawford Notch and Twin Mountain. To design the hotel, he hired Charles Alling Gifford, already a pioneer of the “millionaires’ cottages” on Jekyll Island, Georgia. Gifford designed well for the landscape, and a series of “busy Italians” built the Mount Washington Hotel, a “mountain colossus” (Among the Clouds, August 13, 1901). Grandness embossed the hotel. One guidebook from the time gushed, “There is an indoor scene comparable in brilliancy with a reception to the diplomatic corps at the White House or a levee at the Court of St. James”
FDR’s set knew the hotel well. They learnt to Golf there, and enjoyed the fresh air when they got away from their busy pursuits of money and intrigue. When FDR wanted to convene a conference to take charge of the reconstruction of international finance after World War II, he decided to hold it at this hotel. Since 1936, the Mount Washington found it hard to make a profit, having lost custom to the turmoil of war (during the Depression it did fine). An influx of government money allowed it to refurbish itself. The hotel had been segregated (but for the musicians, such as “a colored orchestra with banjos, taps and drums” to play the Danse de la Forêt in 1916). It would now have to welcome delegates from China, Ecuador, Egypt, Greece, India, Iran, the Philippines and elsewhere. The wait staff didn’t care. Later, one elevator operator told a reporter from the Littleton Courier, “The delegates wouldn’t tip. The most liberal elevator passenger was a Chinaman.” The Americans and the Europeans were the most parsimonious.
Lord Keynes held forth (his wife, the prima donna ballerina Lydia Lopolava was the rage at Bretton Woods). He had not wanted to invite the rest of the world, as it were. They, he wrote acidly, “clearly have nothing to contribute and will merely encumber the ground.” If they were allowed, the Bretton Woods conference would be “the most monstrous monkey-house assembled for years.” There was only one woman at the table, Mabel Newcomer (a Vassar Professor of Economics). The delegates from the darker nations could not help set the agenda, for the few that came where were there at the sufferance of their colonial masters (such as the Indians and the Filipinos) , while the free people (such as some Latin Americans and the Chinese) were shown the door when the real deliberations began. The Chinese delegate, to be fair, was Dr. H. H. Kung, a descendant of Confucius and husband of Ailing (“Pleasant”) Soong (whose sisters had married Dr. Sun Yat Sen and Generalissimo Chiang Kai-shek). The richest man in China at that time, Kung didn’t seem to do much to pave the way for the reconstruction of a devastated Chinese mainland.
The delegates from afar had to be there in the Gold Room to put their impressions on the final communiqué. No surprise then that the two major institutions that came out of Bretton Woods, the International Monetary Fund (IMF) and the World Bank (WB), had to be run by an European or an American respectively. No-one else would have a turn. Keynes’ disdain for those not like himself was shared by others, and it was this that moved them to disenfranchise the world from the governance of the IMF and the WB (the main votes on their Boards of Executive Directors are held by the U. S. and Europe). The silence of the colonized and semi-colonized meant that the new monetary policies favored those who had already seized the world’s wealth, and the trade policies that followed set inequality in stone. Chastened by the economic warfare of the 1920s and 1930s that not only brought on the hostilities of World War II, but also contributed to the prolongation of the Depression, the major powers now created a currency regime that would be less volatile. The WB was created to help manage the reconstruction of war ravaged Europe (not Asia, nor Africa, both also burnt to the crisp by European ambitions). The IMF emerged as an institution to tide over countries that had a balance of payments or short-term liquidity problem. There is no mandate to poverty reduction or to the elimination of the vast global inequalities that marked the end of the colonial era. The IMF and the WB were institutions for the maintenance of colonial domination by other means.
For that reason, the countries that had been shut out of the creation of the IMF-WB built their own project and their own institutions. The main organization was the UN Conference on Trade and Development, UNCTAD, created in 1961 by the bulk of the UN nations, newly freed from colonial dominion of one kind or another (these are countries that wedded themselves to the Third World project, as I outline in The Darker Nations). In the 1980s, the IMF and the WB began to use the debt crisis as leverage to transform the politics and economics of the poorer world. Structural adjustment policies weakened whatever mild gains had been made over the course of the past fifty years. The lack of effective democracy in the IMF-WB and their promiscuous relationship with Europe’s capitals and with Washington, DC, allowed them to skew their policies against the needs of those who make what is so acquisitively enjoyed by those in power.
When Tremonti says that he is thinking of an agreement “among large nations” I’m sure he doesn’t mean “large” in terms of demography. Otherwise China, India, Indonesia, Brazil and Pakistan would join the United States in setting up the new rules (Tremonti’s Italy only has .9% of the world’s population, while China and India house over 36% of the world’s population). Gordon Brown’s opinion piece in the Washington Post, “Out of the Ashes” (October 17) is populated with the royal “We.” “We must deal with more than the symptoms of the current crisis,” he writes, and then hastens to add, “European leaders came together to propose the guiding principles that we believe should underpin this new Bretton Woods.” The ideas are fairly straightforward, including transparency, sound banking, responsibility, integrity, and global governance. But these could mean anything: responsibility of whom, and toward whom? The same with integrity. There is similar hoopla about global this and global that (“the global problems we face require global solutions”) except the only ones who seem to count in the drafting of the project are the Europeans and the U. S. (with Japan). No-one proposes to call a genuine world-wide conference, to revive the project of the UNCTAD, to ask Beijing and New Delhi, N’Djamena and Quito. Brown quotes Dean Acheson who said of Bretton Woods that he was “present at the creation.” India and China might have been there, but they were absent: their input was minimal, and it remains marginal.
If Brown asked those involved in the Bolivarian experiment, he’d get a set of concrete proposals that would be just the tonic needed for a tired planet: their principles, derived from the Third World project, would call for capital controls over hot money, firm obligations for foreign direct investment to remain for the long-term, better ability for states and regions to protect the value of their currency, construction of trade policies consonant with the needs of the population and not the imperatives of transnational corporations, and finally the revival of the United Nations Centre on Transnational Corporations (which led a much abused life from 1973 to 1993). These and more would be the kind of proposals that would come from the South. But Brown’s ear is turned toward Paulson, and he can’t hear what Chavez is saying.
While in the White Mountains last week I casually asked someone if he knew anything about the Abenaki Indians. He didn’t. Nor are their any signs to indicate that they were ever alive. Except a ski resort named for them. The Abenaki were exterminated by the plague of 1616-1618, then the slow, painful encroachment of the Massachusetts settlers up the Merrimack River (including a series of wars that devastated the Abenaki and other peoples: King Philip’s War, 1675-78, Lovewell’s War, 1723-25 and the French and Indian War, 1754-63, during which Major Robert Rogers conducted his bloody raid of the village of St. Francis), and by finally by the long cultural war that fully cleansed the landscape of them. Bretton Woods was built on the homeland of the Abenaki, taken by the colonialists for its resources (the trees became raw material for the ships) and for the land. It is fitting then that Bretton Woods, built on colonial amnesia, is the name of a conference that the G7 wants to revive, once more forgetting the silenced billions.
By all means a conference, but not one that shuts out the many. Chavez gets this. After meeting Sarkozy in Paris in late September, Chavez told the press that such a meeting must “not be confined to the Group of Eight.” He’s having a good laugh. Reflecting on the equity stake in the banks, Chavez said, “Comrade Bush is to the left of me now.”