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A cru­cial eco­nomic sum­mit in 1944 ush­ered in 28 years of growth and sta­bil­ity

The Australian - The Deal - - First Up -

The cru­cial Bret­ton Woods sum­mit in 1944 ush­ered in an era of above-av­er­age growth and sta­bil­ity

Ed Con­way, Lit­tle Brown, 453pp, $ 35.

THE cen­te­nary of World War I has filled book­shop shelves with com­mem­o­ra­tive ti­tles like never be­fore but this is one such book that’s def­i­nitely worth read­ing be­cause it of­fers im­por­tant in­sights into post war eco­nomic his­tory and the eco­nomic chal­lenges faced by the global econ­omy to­day.

Con­way, the London-based eco­nomics ed­i­tor of Sky News, has writ­ten this book to mark the 70th an­niver­sary of the Bret­ton Woods sum­mit, which took place over 22 long days and nights in July 1944. The re­sult is an ab­sorb­ing and de­tailed work rather than a re­heated his­tory aimed at the com­mem­o­ra­tive mar­ket.

As well as record­ing th­ese events in an en­gag­ing and ac­ces­si­ble style, this is a his­tory book that has great rel­e­vance for the prob­lems fac­ing Europe and the US to­day. Amid calls for a new Bret­ton Woods, this book is an im­por­tant re­minder of what world lead­ers were able to achieve at a time when the fu­ture of Europe was hang­ing in the bal­ance.

Con­way takes read­ers inside the marathon meet­ings of 700 rep­re­sen­ta­tives from 44 coun­tries at Mount Wash­ing­ton Ho­tel, Bret­ton Woods, New Hamp­shire, where the del­e­gates ate, drank and dis­cussed a new world eco­nomic or­der un­til late into the night. The sum­mit not only cre­ated the In­ter­na­tional Mon­e­tary Fund and the World Bank (also known as the In­ter­na­tional Bank for Re­con­struc­tion and De­vel­op­ment), but it de­signed a post-war for­eign ex­change sys­tem that ended the gold stan­dard and the cur­rent ac­count im­bal­ances that it had gen­er­ated.

Con­way says it achieved a great deal, and de­liv­ered un­ri­valled sta­bil­ity, growth and pros­per­ity. Eco­nomic growth av­er­aged 2.8 per cent from 1948 to 1970, which is more than dou­ble the growth achieved un­der the gold stan­dard and one per­cent­age point higher than the pe­riod from 1971 un­til the 2008 fi­nan­cial cri­sis. What’s more, the in­stances of fi­nan­cial crises and bank fail­ures were lower un­der Bret­ton Woods than ever be­fore, Con­way ar­gues.

The agree­ment lasted un­til Au­gust 1971 when pres­i­dent Richard Nixon ended the US dol­lar’s con­vert­ibil­ity to gold, which in turn col­lapsed the sys­tem of fixed ex­change rates linked to the US dol­lar. Bret­ton Woods was re­placed by a “hodge podge” of float­ing and fixed ex­change rates. The rise of cur­rency as a com­mod­ity has reached the point where the global turnover of for­eign-ex­change mar­kets has reached $5.3 tril­lion a day, Con­way points out, and the prob­lems in Europe are a prime ex­am­ple of what hap­pens with flawed cur­rency sys­tems.

“The Euro­pean sin­gle cur­rency has pro­vided the world with the best ex­am­ple to date of what hap­pens when one tries to re­in­state the gold stan­dard in the mod­ern world. The Euro­pean cur­rency may not have gold as its an­chor but it is akin to the gold stan­dard in almost ev­ery other way,” he writes.

The sum­mit be­gan just one month after the D-Day land­ing. World War II was far from won and the at­ten­dees had their minds fo­cused on a new world or­der that would avoid the blun­ders made with the Treaty of Ver­sailles.

Bri­tain’s del­e­ga­tion was led by John May­nard Keynes, who had been scathing of this 1919 treaty and the eco­nomic im­bal­ances that fol­lowed in his in­ter-war post-De­pres­sion work, The Eco­nomic Con­se­quences of Peace.

The main fo­cus of the sum­mit was to over­come the dam­age done by the gold stan­dard, which had forced weaker coun­tries to pur­sue aus­ter­ity mea­sures. Ger­many had been es­pe­cially vul­ner­a­ble to th­ese poli­cies, and this in turn led to the rise of Nazism. The big is­sue raised by this book is whether the global econ­omy needs a new Bret­ton Woods. San­tos boss David Knox per­son­ally asked Wei­den­bach to write this book to mark the 60th an­niver­sary of the company’s in­cor­po­ra­tion. Wei­den­bach is not a re­sources or business writer but she was a good choice be­cause her work is fo­cused on the out­back, and the story of San­tos is very much an out­back story. San­tos be­gan as a pi­o­neer­ing company that made its luck by search­ing for oil and gas in the most re­mote and in­hos­pitable parts of Aus­tralia. The name stands for South Aus­tralian North­ern Ter­ri­tory Oil Search. Wei­den­bach rel­ished the op­por­tu­nity, hav­ing writ­ten a biog­ra­phy of the Birdsville mail­man that sold 100,000-plus copies, and a biog­ra­phy of the ge­ol­o­gist Reg Sprigg, who helped to found San­tos. Knox at­tended a talk that she gave on the Sprigg book and that prompted him to ask her to write this book. The book’s strength is its abil­ity to vividly cap­ture the spirit of the out­back in the early days of San­tos, be­fore its na­tional and in­ter­na­tional ex­pan­sion. It must be said that this is an of­fi­cial his­tory, even though San­tos ex­ec­u­tives told Wei­den­bach they wanted a “warts and all” ac­count. Wei­den­bach was paid as a con­sul­tant to write it and she sub­mit­ted drafts for vet­ting to a team of three San­tos staff. This ar­range­ment is clearly a dou­ble-edged sword. One of the most grip­ping parts of the book re­counts how a hand­ful of Bris­bane-based ex­ec­u­tives drove the push into “un­con­ven­tional” gas on the Dar­ling Downs and beyond, even though the Ade­laide­based man­age­ment was highly scep­ti­cal. The book as­sures us that San­tos has vast ex­pe­ri­ence in CSG, de­spite the im­mense size and com­plex­ity of th­ese projects. The China boom has fu­elled a pub­lish­ing tsunami and Brown has been at the front of this wave. He has writ­ten or edited 10 books on China since 2009, and has five com­ing out this year. New

Em­per­ors tells the story of the “princelings” who re­ally mat­ter in China and how their net­works work. Brown be­gins with the con­cept of what a net­work in China is and looks at how they op­er­ated dur­ing the lead­er­ship tran­si­tion that took place be­tween 2011 and 2013. Much of the fo­cus is on the seven mem­bers of the Polit­buro Stand­ing Com­mit­tee who were the “win­ners” from this power strug­gle, and what their po­lit­i­cal ide­ol­ogy means. The cen­tral ques­tion that Brown tries to an­swer is where China as a polity and a so­ci­ety might be headed, and what this means for neigh­bour­ing states and the world as whole.

Bri­tish econ­o­mist John May­nard Keynes, cen­tre, at the Bret­ton Woods sum­mit

Blue Flames, Black Gold The story of San­tos Kristin Wei­den­bach, San­tos Ltd, 450pp, $ 35.

The New Em­per­ors Kerry Brown I.B. Tau­ris, 244pp, $ 42.95.

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