Sixty-Seven Years on, the Heirs to Keynes Return to Bretton Woods
Blanchflower, David, New Statesman (1996)
For three weeks in 1944 the economic world came to New Hampshire to talk to John Maynard Keynes about the new economic order that was to be established once the Second World War was over. Representatives from 44 countries headed to the Mount Washington Hotel in Bretton Woods. The hotel sits in the panoramic valley below the mountain, which, at 6,288ft, is the highest peak in the north-eastern US and home to some of the world's worst weather: in April 1934, observers measured a wind gust of 231mph. It seems Keynes didn't much like the heat of New York in July.
I recall some eight years ago--before the hotel had been refurbished--coming to visit and being captivated by the Keynes Room (this is now sadly gone and all the artefacts are in storage). Indeed, on my visit it was closed off but I couldn't resist climbing over the barrier to take a closer look. As the only English professor of economics in the state, I thought I had a pretty good excuse if the alarm bells rang and the police arrived to arrest the intruder. But they didn't and nobody came.
On 8 April 2011, however, the world of economics did come to the Mount Washington Hotel for "Bretton Woods II" to discuss where economic theory goes from here.
Pain for Spain
New Hampshire, with its state motto of "Live Free or Die", seemed the right place to be for this conference, organised by the Institute for New Economic Thinking, which the billionaire financier and philanthropist George Soros helps to fund.
Speakers included Gordon Brown, Paul Volcker, Adair Turner, the economics Nobel laureates Joseph Stiglitz and George Akerlof, plus Ken Rogoff, Niall Ferguson, Robert Skidelsky, Larry Summers and Paul Volcker. A big chunk of the UK economics commentator pack was there, too. Me? I was there as a hack.
As the conference opened, there was the real possibility of a US government shutdown over the weekend, but at the final hour this was averted. However, the budget debate will continue; fortunately the US system is such that any deficit cuts take a while to be implemented, which means the likelihood of making a major macroeconomic mistake, as has happened in Europe, is minimised.
Speaking about events this side of the Atlantic, Rogoff, a former adviser to George Osborne, poured scorn on the idea that the European sovereign debt crisis was over now Portugal had asked for a bailout. Concerns that the crisis will spread to Spain persist and the European Central Bank's decision to raise interest rates this month did nothing to allay that fear. There are likely to be further rate rises that could impact on the Spanish housing market, not least because most home loans are based on variable-rate mortgages. House-price falls would be disastrous for many European banks.
Gordon Brown was the main keynote speaker and, strikingly, for the first time he apologised for the fact that the regulation of our financial system was inadequate. …