This chapter presents a fleeting history of key changes in global trade and finance in the post-war period, organised around the themes of crisis and cooperation. The first section of the chapter discusses the key themes. The second section considers the emergence of the post-World War II Bretton Woods regime. The third section outlines the rise of private capital in the 1970s through to the debt crisis of the 1980s. The fourth section considers discussions of global financial architecture in the 1990s to the 2000s. The fifth section discusses changes in the last fifteen years, focusing on how the trade regime has stalled and the financial regime has been partially rolled back. Finally, the concluding section reflects on the ever-present need to foster cooperation in the global financial and trade architecture.

This chapter describes the IMF and the World Bank, the two big international financial institutions created after World War II to stabilize the global economy. The two have similar goals and mechanisms but work with different instruments and in different contexts. Both pool the resources of their members and use the money it raises to make loans to governments with specific needs. The IMF lends to countries experiencing critical balance-of-payments problems. It makes short-term loans of foreign currencies that the borrowing country must use to finance the stabilization of its own currency or monetary system. As a precondition to the loan, the Fund generally requires that the borrower change its policies in ways that the Fund believes will enable monetary stability in future. The World Bank makes longer-term loans to pay for specific projects related to development or poverty reduction. Most Bank loans are tied to a particular project undertaken by the borrowing government. The Bank and the Fund are twinned institutions in the sense that they share a common origin and many structural features, but their practices and purposes are very different. As a result, they contrast each other in ways that are useful for exploring the mix of law and politics in global affairs.

This chapter argues that Chapter Two of the Economic Consequences contains a much more important piece of economic analysis than is generally recognized, namely the Ramsey model of economic growth. It is well known that Keynes helped Ramsey to explain that model in the Economic Journal in 1928. But I show here that Keynes had himself given an exposition of the model, nearly a decade earlier, in this chapter. What is more, Keynes then generalizes this model in order to help him think about Europe’s growth process within the global economy, and why it was so fragile. I claim that the analysis in this chapter provides the underpinning for Keynes’s famous criticism of the reparations imposed on Germany. The chapter also makes clear that Keynes is starting to realize what he will need to do to get to the General Theory in 1936. And there are the beginnings of the ideas which would lead to the Bretton Woods conference in 1944 and to the rebuilding of the international monetary system after World War II. Understanding these connections helps us to visualize the arc of Keynes’s discovery, one which stretched all the way from 1919 until his death in 1946.

Just over a century old, John Maynard Keynes’s The Economic Consequences of the Peace (1919) remains a seminal document of the twentieth century. At the time, the book was a prescient analysis of political events to come. In the decades that followed, this still controversial text became an essential ingredient in the unfolding of history. In this essay, we review the arc of experience since 1919 from the perspective of Keynes’s influence and his changing understanding of economics, politics, and geopolitics. We identify how he, his ideas, and this text became key reference points during times of turbulence as actors sought to manage a range of shocks. Near the end of his life, Keynes would play a central role in planning the world economy’s reconstruction after World War II. We argue that the “global order” that evolved since then, marked by increasingly polarized societies, leaves the community of nations ill prepared to provide key global public goods or to counter critical collective threats.

Chapter 4 reconstruct how the zeitgeist, the political and economic practices, and the geopolitical and societal circumstances of the war times guided Western Europe to a path of deeper international and regional cooperation focused on free trade and valuta convertibility. During exile and occupation, European governments fleshed out plans and schemes for post-war cooperation, primordially in the domains of socio-economic and the financial-economic planning, in greater (practical) detail. Initially, however, the step from grand designs and lofty models for a post-war Western order that could ‘win the peace’ to the practices of policies of cooperation was taken via the institutional engineering in the Atlantic world, most prominently through the ‘system’ envisioned in Bretton Woods. However, the original ideas behind Bretton Woods soon proved a bridge too far in practice, which complicated global ambitions as well as the proper build-up of Atlantic-wide institutions—and pushed Western Europe to think and act ‘beyond Americanisation’.

By the end of the Second World War, the professional class presided over a massive alignment of national and global institutions with virtue capitalism. This global ‘welfare state’ moment makes it seem that virtue capitalism went hand in hand with state control. However, professionals were often ambivalent about their connection to the state. When Canada first ventured into nationalised healthcare, for example, doctors in Saskatchewan went on strike to avoid it. Despite often rejecting state interference, which many professionals feared might impede the integrity of their work, professionals held a moral relationship between knowing and doing, where they sought to use expertise to effect material change in the world and in individual lives. Such technocratic planning was fundamentally moral, embedding into mid-twentieth century capitalism the internalized, disciplining practices known as governmentality. Professionals were, to use Giorgio Agamben’s framing of the governmental economy, angels of the state. Human capital investment entangled industry, military, and education but, perhaps most importantly, led to an internalized, universal industriousness. The material effects of this ‘angelic’ work were sometimes deeply damaging, building social and economic ‘dependencies’ through the economy that mirrored, in individual lives, the hierarchies constructed by the colonial world.

In the second half of the 1960s, Austria seized on the Italian gas-for-pipe initiative and closed a deal with the Soviet Union. This presented a peculiar problem for the country’s small economy. Under the hegemony of convertibility of the US dollar, as well as the competitive, liberalizing impetus initiated in the establishment of the EEC, Austria feared that the coming large outlays in purchases of Soviet gas would not in turn be spent in Austria. The Soviets were pressuring Austria to liberalize its markets and do away with the strict balancing of trade that had been the norm during Bretton Woods through the technology of negotiated, long-term trade lists. They were right to fear. The Soviets were eager to spend the convertible currency earned through gas exports as profitably as possible. Years before military exports and Petrodollar recycling resolved a similar problem for the United States and Western Europe, Austria struggled to maintain the kind of accounts-balancing, barter exchange with the socialist world it had enjoyed in the postwar period. Market integration seemed inexorable. And the face of that inexorability was the Soviet Union.

Italy is not often featured as an important actor in the geopolitical map of the Cold War. And yet the country played an important role in breaking up a number of strictures that had kept the Soviets at bay from Western Europe. Italy’s fast growing businesses were often the first to reach out to the Soviets for large deals. Fiat very prominently sold a factory to the Soviets in the mid-1960s, representing that decade’s largest turnkey project. But this chapter argues that the more historically consequential initiative was ENI’s suggestion of a gas pipeline running from Ukrainian gas fields to the north of the Mediterranean country. This would have somewhat of a novel payment arrangement: the pipeline would be paid in gas. This arrangement effectively expanded repayment periods well beyond previous, Bretton Woods–era practices, which usually involved short-term loans that covered the time required for barter arrangements to transact. The Soviets saw an opportunity to change the temporal order of Bretton Woods, and suggested a much larger gas-for-pipes deal that would link their newly discovered gas reserves in Western Siberia to Western Europe. Italy balked initally for lack of industrial and capital resources, but others would literally capitalize on the new possibilities Italy had opened.

Despite reports to that effect, the grain crisis of 1963 did not introduce the Soviet Union to global trade. The crisis, however, did epitomize the kinds of problems the Soviets encountered in their drive to intensify their engagement with global exchange. Coming as it did in the compartmentalized world of Bretton Woods, the negotiations to import large amounts of grain from Canada and the United States subjected the Soviets to deal-making practices that ran through political agents rather than market agents. It illustrated for the Soviets the gains that could be made in setting these practices on a market basis. It also showed the extent to which the creation of the kind of market relations the Soviets aspired to undermined North American labor interests, a dynamic that became a feature of the post–Bretton Woods era – and which had the Soviet Union for an ally.

West Germany finally realized the energy project Italy had begun and Austria had advanced. West Germany made material, through the capitalization of a durable infrastructure, the relationship the Soviets had sought with Western Europe for so long. In 1962 the United States had vetoed a series of oil-for-pipes contracts that would have brought Soviet energy to the heart of Europe. This chapter recounts how half a decade later, with the groundwork having been laid by its two southern neighbors, West German business, local governments, and finance assembled the technopolitical coalition that would redraw East–West politics and labor relations throughout Europe. With the vast, capital intensive construction that West German industrial and financial power made possible, the Soviets could draw on further reserves of capital backstopped by a nigh-irrevocable, material infrastructure.

Italian state and business agents, having initiated the changes in East–West relations that this book follows, then proceeded to stall on the gas-for-pipe deal. This coda documents how it was only after West Germany jumped on the project that the Italians followed, as junior partners, through the door they themselves had opened many years before. As they did so, they entered a world of proliferating finance, debt creation, and market integrations. Closing the door behind them, they left behind the world of exchanges politicized in a Cold War key, a kind of politicization they had skillfully used throughout the 1950s and 1960s to negotiate better terms from the Soviets because of the risk to the American–Italian relationship that used to entail. What they entered was precisely the world the Soviets had fought for, one where market logic and discourse was overriding.

The Soviets deployed a performative politics of the market everywhere they went, but they used with particular insistence in Great Britain. The British economy had performed well in the postwar period, but its industry was losing out to competitors in continental Europe and Japan. This was something the Soviets liked to point out, and often. But Great Britain had a unique advantage: a still international currency with relatively deep captial markets. It is in this ambit that the British sought, in 1964, a competitive edge over its allies for Soviet business. In order to counter rising competition – and against strong American pressure – the British offered to liberalize parts of its national economy and to offer better and temporally longer finance for Soviet purchases of British industrial products. In doing so, they breached financing practices from the 1930s. The Soviets then used these new terms to pressure other European countries into better financial arrangements for their deal-making. The promotion of market practices of competition, the Soviets understood, could be achieved through financial competition in the absence of integrated global markets for industrial commodities. British financiers would be the bearers of the political transformation the Soviets sought and strove for in the world economy.

France offers a contrast to the ways in which finance and energy, and by extension economic life, was governed elsewhere in Europe. The French state, as keen as the Soviets to develop material exchanges beyond the hegemony of American stricture, sought to institutionalize these exchanges through a series of committees and working groups that would govern talks and practices. This was successful to a degree. But despite pressure from the Soviets to liberalize French trade and finance, the French state did not consider it urgent to get a hold of Soviet energy. Instituting working groups in the second half of the 1960s that would meet regularly to discuss trade and finance had been fruitful for the Soviets at the height of Bretton Woods and the technologies it purveyed, such as trade lists and long-term trade agreements. They were still, in many ways, the backbone of the economic relations the Soviet Union maintained with its Western neighbors. What they were not, however, was the future the Soviets envisaged. In Franco-Soviet relations, it was the Soviets that insistently pushed the temporal and material limits. And the French, reluctantly, followed.

This introduction develops some ideas for thinking about the compartmentalized nature of international political economy under Bretton Woods and the institutional settlements of energy and finance that made it possible. After initial institutional failures, this compartmentalized global architecture came to oversee a politics of growth that eventually incorporated the Soviet Union as an enthusiastic participant. The Soviets likewise participated in the dismantling of that architecture precisely by helping rearrange the relationships of energy and finance that had established it in the first place. This book shows that a history of the development of post–Bretton Woods capitalism requires the inclusion of the Soviet Union as one of its architects.

This chapter examines the embedded liberal perspective of the Anglo-American thinkers who played a lead role in designing Bretton Woods order, including John Maynard Keynes and Harry Dexter White. These thinkers endorsed the broad liberal goals of boosting global prosperity, international peace, and individual freedom, but they argued that these goals could only be met with a new kind of institutionalized liberal multilateralism that would make an open world economy compatible with various kinds of active public management of the economy. The roots of embedded liberalism can be found in efforts to reformulate the international side of classical economic liberal thought earlier in the twentieth century, including by thinkers such as Jehangir Coyajee.and John Hobson. The promoters of embedded liberalism at Bretton Woods sought to accommodate not just new ideas of domestic social security and activist macroeconomic management in Western Europe and North America but also the Soviet Union’s commitment to central planning and neomercantilist views prominent in many less industrialized regions. At the same time, they made much less effort to engage with the perspectives discussed in the second part of this volume.

The centrality of the Bretton Woods international conference (1944) in the reshaping of international economic and financial institutions in the post-war world has always seemed obvious. In this story Keynes has been recognised as a key player, given his central role as a key advisor of the British government (despite his now precarious health). The mythology of Bretton Woods has often focussed on a supposed clash between a ‘Keynes Plan’ that sought to introduce the concept of ‘bancor’ as an international currency, and a ‘White Plan’ that was the brainchild of the leading US economist Harry White. But this way of telling the story misses the fact that ‘bancor’, for all its suggestive implications, was never put to the conference as an option. Instead we see Keynes – sadder and wiser than in Paris perhaps – accommodating all along to an American view that ‘a deal’ had to be struck. It was one that crucially involved Britain in paying for the benefit of Lend-Lease by adopting the mantra of ‘non-discrimination’. So here is a revealing example of the priority for expediency over truth in a real-world situation.

Chapter 9 introduces the metaphor of a pendulum to characterize the sharp swings in Brandt’s policies toward European integration; the chancellor frequently backed ambitious EC projects that proved premature and unworkable. In 1970, fierce debates arose among the six EC members concerning how to pursue economic and monetary union (EMU). Brandt’s point person on Europe, Katharina Focke, sympathized with the French desire to tighten monetary cooperation among the EC partners right away. Bonn’s economy ministry under Karl Schiller took a more cautious line, insisting that macroeconomic convergence was necessary first. An EC agreement on EMU in early 1971 favored the French line; but soon thereafter a currency crisis prompted Brandt’s cabinet to “float” the mark, putting the EMU project on hold. Bonn’s policies helped the Nixon administration as it sought to stabilize the remnants of the Bretton Woods system – much to the dismay of French president Georges Pompidou. Afterwards Brandt worked to mend fences with France, and at a summit of the newly expanded EC in 1972 they pledged to form a European Union complete with a unified currency by 1980.

If West Germany had one unique asset, it was the bedrock stability of its currency, the Deutsche Mark. Chapter 4 introduces the principal defenders of German stability – the economy and finance ministries, the Bundesbank, and the Council of Economic Experts. In fall 1965, Chancellor Erhard identified the maintenance of price stability as the foundation of German policy – with enormous repercussions for foreign relations. In 1965-66, development aid programs, restitution to Israel, and offset purchases from the United States would all be scaled back in order to keep Bonn’s budget balanced and avoid stimulating inflation. German monetary experts worked closely with U.S. officials to uphold the Bretton Woods monetary system; but Lyndon Johnson was furious that Erhard had broken his offset pledges, particularly since West Germany remained reluctant to send personnel to Vietnam. In spring 1966, Erhard’s cabinet tried to unthaw relations with the USSR by issuing a “peace note” calling for mutual renunciation-of-force declarations; but the Soviet bloc rejected the approach as inadequate. When West Germany slipped into recession, Erhard’s coalition collapsed in failure.

With the forming of a Grand Coalition, headed by Kurt Kiesinger (CDU/CSU) as chancellor and Willy Brandt (SPD) as foreign minister, West Germany sought equidistance between France and the United States and pursued a new Ostpolitik in parallel with de Gaulle. As Chapter 5 explains, the project proved highly unstable; de Gaulle could do little to aid Bonn vis-à-vis Poland, and Brandt wound up preferring direct contacts with the Soviets. Disputes over Britain’s accession to the EEC further soured Franco-German relations, and Paris was hardly pleased at Bonn’s renewal of its offset promises toward London and Washington. But the U.S.–German relationship also came under strain as the United States and USSR negotiated a non-proliferation treaty (NPT) that would force West Germany to accept a permanently inferior status. Kiesinger and Brandt used their leverage with Washington to force significant changes to the NPT in the areas of nuclear research and commerce; but they also consulted with other nuclear have-nots, such as India and Iran, and contemplated Germany’s future as a middle-sized power. Increasingly, West Germans identified technology exports as a significant source of prestige.

Chapter 12 shows how the Federal Republic’s booming economy created new challenges and expectations. Currency crises wracked the West, leading to the final breakdown of the Bretton Woods order. Together with other leaders of the newly expanded EC of Nine, Brandt and finance minister Helmut Schmidt instituted a “joint float” of European currencies (excluding Britain, Ireland, and Italy). The Nixon administration tried to slow the EC’s momentum by proposing a “Year of Europe” that would cement U.S. leadership; Bonn was again caught between the United States and France, with both countries fearing that West Germany had become “Finlandized” as a result of its Ostpolitik. Brezhnev’s visit to Bonn, along demands raised by Yugoslavia, Poland, and Romania, showed that West German prosperity had raised expectations of financial generosity. Brandt’s Germany began to play a more visible role in Middle Eastern diplomacy, and in September East and West Germany were finally able to join the United Nations. The EC-9 undertook steps toward greater coordination of foreign policy, particularly at the UN, and Brandt insisted that West Germany was there to act as a European power.