Re: Why economists do not care about high rates of unemployment w

["Anthony D'Costa" <dcosta@xxxxxxxxxxxxxxxx>]

What is the connection between the breakdown of the Bretton Woods system
and
the emergence of Euro markets flush with petro dollars?  Is this also not
a contributory factor to the breakdown?

Anthony D'Costa

On Sat, 16 Apr 1994, Doug Henwood wrote:

>
>
> On Fri, 15 Apr 1994, Paul Davidson wrote [with deletions]:
>
> > The question you ask as to why the Bretton Woods system broke down is a good
> > one as is your prior complaint that the IMF and World Bank become tools of
> >  "political power of the rentier".
> > (Mitchell uses a more emotionally charged lexicon.)
>
> Damn. I'm falling down on the job!
>
> >          You are willing to suggest that Bretton Woods broke down because of
> > the "weakening preeminence of US in the global economy". This does suggest that
> >  you recognize that, at least in the US, the capitalist system could push for
> > global reductions in the major faults of unemployment and inequality. (Mitchell
> > apparently would not agree that the entrepreneurial system can be designed to
> > permanently (if only the Us hadn't weakened) or even better if only the
> > strengthening entrepreneurial economies of Europe, etc) had followed the
> > designs for solving inbalances in intenrationl payments as the US did
> > after WWII.
>
> I do not recognize any such thing. The decline in US preeminence was the
> result of the rise of Japan and Western Europe as economic powers - not
> really a rise de novo but a restoration of their pre-war status. The US
> did not design or fund the Marshall Plan out of any charitable instincts
> - it was a clear attempt to prevent the spread of red, pink, or
> nationalist-capitalist approaches. Internal US government documents and
> press commentary of the time are quite clear in professing the Marshall
> Plan a failure, and thus the military budget became the chosen instrument
> for the revival of world trade. That of course led to a massive outflow
> of dollars and the eventual collapse of the fixed-rate system, but it was
> a good ride while it lasted.
>
> > continued global economic growth. Keynes specifically states that the basic
> > fault with all convertible international payments systems -- whether fixed
> > or flexible -- is that the entire burder of adjustment is put on the
> > deficit nation. Success requires, according to Keynes,shifting a majority of
> > the onus of adjustment to the creditor position. Thats what Keynes's original
> > bancor plan did, thats what the Marshall plan and foreign aid (tmporarily) did,
> >  and that is embedded as a permenant attribute of the new international
> > payments system that I m advocating in PKMT and the JPKE.
>
> What incentive to the surplus countries have to put the burden of
> adjustment on themselves? None, of course. The political naivete of this
> recommendation is on a par with the notion that the rentiers will consent
> to their own demise.
>
> >      Finally Doug raises the question of why is there no political momentum
> > to restore it. First, I think the attempt to move to a unified monetary system
> > in the European Community is a piecemeal attempt. But it does show some
> > political momentum.
>
> The ERM is a wreck. Its wreckage came about because it was an attempt to
> throw together in economic and political union countries at very
> different levels of development. There may be some political momentum
> remaining for EMU, but it's coming mainly from Brussels and the City of
> London - a long way from the kind of democratic ideal PD recommended in
> his posting the other day on incomes policies.
>
> Doug
>
> Doug Henwood [dhenwood@xxxxxxxxx]
> Left Business Observer
> 212-874-4020 (voice)
> 212-874-3137 (fax)
>
>
>