[Editor's Note] In order to commemorate the 60th anniversary of the victory of the world anti-fascist war and seriously study the legacy of World War II, this magazine opened a column in the 8th and 9th issues of 2005, aiming at political dialysis on major issues such as the changes of the international system, the evolution of the concept of war and peace, the international mechanism and the ethical construction of international relations after World War II. After the article was published, it had a great influence on readers and achieved good results. In view of this, this issue specially selected an article to discuss the relationship between the changes of the international financial system after World War II and dollar hegemony, aiming at analyzing the problems left over from World War II from the economic level. This article is now published for readers.
[Abstract] Compared with the British-led gold standard system in the19th century, the Bretton Woods system after World War II has undergone great changes in organizational structure and operation mode. Although its operation results ensured the stability of the international financial system for a period of time, it finally maintained the hegemony of the US dollar. Therefore, even in the post-Bretton Woods era, the operation mode of the international financial system has undergone major changes, but the legacy of the Bretton Woods system still enables the dollar hegemony to continue.
[Keywords:] Bretton Woods system; Dollar hegemony; Global economic imbalance
[Author Brief Introduction] Li Xiangyang, deputy director and researcher of Institute of World Economics and Politics, Chinese Academy of Social Sciences. (Beijing Postal Code: 100732)
[China Library Classification Number] F 1 13 [Document Identification Number] A [Document Number]1006-9550 (2005)10-00/4-06.
Before the end of World War II, the United States began to establish a new international economic order, that is, to establish the International Trade Organization (later evolved into the General Agreement on Tariffs and Trade) in the field of international trade and the Bretton Woods system in the field of international finance. From a historical point of view, this international economic system led by the United States objectively promoted the stability of the global economy and avoided the power vacuum in the international field after the First World War. (1) On the other hand, no system or rule can be neutral, and the makers of systems and rules will benefit greatly from it. As far as the Bretton Woods system is concerned, the most direct benefit of the United States is the establishment of dollar hegemony. The concept of "dollar hegemony" used in this paper is not limited to the seigniorage income brought by the dollar as a world currency to the United States, but a broader concept, that is, because of its dominant position in the international financial system (as a "central country"), the United States can obtain a series of capital flow income from "peripheral countries". These benefits include: making up the domestic savings gap, and other countries bearing the burden of economic adjustment in the United States (fiscal deficit, bubble economy, current account balance deficit).
The dollar hegemony based on the Bretton Woods system did not end with the collapse of the Bretton Woods system itself. As the most important legacy of the Bretton Woods system, dollar hegemony is still the basic feature of today's international financial system. Facing the current global economic imbalance and its adjustment, dollar hegemony is facing new challenges. The debate about the "rebirth" of the Bretton Woods system has also attracted more and more attention. In the foreseeable future, dollar hegemony will continue to be maintained.
The Bretton Woods system established the hegemonic position of the dollar.
The Great Crisis in 1930s and World War II declared the collapse of the gold standard and the end of Britain as a world economic leader. However, as a victorious country and a former world economic leader, Britain naturally does not want to be excluded from the formulation process of the post-war international financial system. This led to the so-called "Keynesian Plan" and "White Horse IJ" dispute. Although the final result was based on the "White Plan", Britain's efforts were not completely in vain. Some aspects of the Bretton Woods system still reflect the position of "Keynesian Plan". Compared with the pre-war gold standard system, the operating mechanism of the Bretton Woods system has undergone major changes.
On the one hand, these changes reflected the objective requirements of the world economy at that time, such as the contradiction between the limited supply of gold and the expansion of international economic activities; On the other hand, it reflects the absolute dominant position and interests of the United States in the global economy.
First, the formation of the Bretton Woods system is a joint action among big countries. Specifically, it is a joint action led by the United States. Unlike the implementation of the international gold standard, it is a gradual development process.
1944 The Bretton Woods Conference was attended by 44 countries, and the signed Bretton Woods Agreement came into effect in 1946. During the formation of the gold standard, as the leader of the world economy, Britain failed to convene all countries to announce the implementation of the gold standard within a certain period of time. During the period of1816 ~1821,Britain had completed the transformation to the gold standard, but until 1870, only Portugal, Canada and Australia adopted the gold standard. 1867 The international financial conference held in Paris was a turning point in the international implementation of the gold standard. Representatives from 20 countries and regions such as Europe and America finally decided to implement the gold standard. However, Britain is not a representative of the Paris Conference, but only participates as an observer, and refuses to unify English units with internationally used decimal units. If the Paris Conference of 1867 is taken as the starting point of the international gold standard, it will be completed in the major world powers of 1897 (Russia and Japan formally implement the gold standard), and this process will last for 30 years. ②
Second, the Bretton Woods system not only has a set of rules, but also has a special institution to supervise the implementation of these rules, which is the International Monetary Fund (and its supporting International Bank for Reconstruction and Development, the World Bank). The ultimate goal of the International Monetary Fund is to create an environment for the liberalization of trade in goods and services or the abolition of balance of payments controls. To this end, its specific objectives include: first, through the abolition of foreign exchange controls, the establishment of a multilateral payment system based on world currency convertibility.
Secondly, maintain a reasonable exchange rate stability in an orderly manner, avoid devaluation of competitive currencies, and make necessary exchange rate adjustments. Finally, the independence of fiscal and monetary policies of member countries should be organically combined with exchange rate stability. These are unmatched by the international gold standard.
Third, although the Bretton Woods system is the compromise result of the positions of the United States and Britain, it basically reflects the interests of the United States. First of all, as an international gold exchange standard system, Keynes Plan tried to reduce the role of gold in the future international financial system, while White Plan advocated the convertibility of the future world currency and gold. Thus, the parity of 1 ounce of gold =35 dollars was established, but at the same time, gold and dollars can only be freely exchanged at the level of the central bank. This demand in Britain is also in the interest of the United States objectively. Secondly, different from the exchange rate determination mechanism of the international gold standard, in the Bretton Woods system, the US dollar is linked to gold, and other currencies are linked to the US dollar, maintaining a fixed exchange rate. At the same time, in order to take care of the interests of Britain, the agreement stipulates that member countries can adjust the exchange rate under "unspecified conditions", thus forming an "adjustable" fixed exchange rate mechanism. Finally, the third compromise is related to this. Britain requires control of currency exchange, while the United States requires full currency exchange. As a result of the agreement, the currency convertibility of member countries can be controlled under capital account, but it must remain free under current account.
The Bretton Woods system established the dollar's status as the world currency.
Formally, this is similar to the status of the pound before the war, but their maintenance mechanisms are not exactly the same. Under the gold standard, the pound is based on gold, and people will not doubt its true value. Under the Bretton Woods system, the dollar only keeps a fixed official price with gold. Once people no longer believe that the United States has the ability to maintain the official dollar price of gold, their confidence in the dollar will be lost, thus triggering a wave of gold exchange.
By establishing the status of the US dollar as the world currency, the US dollar has provided trading means and reserves for global trade, and at the same time, the United States has also benefited greatly from the hegemony of the US dollar. First of all, under the Bretton Woods system, the United States is in the position of a world banker, so its foreign investment is a natural result. Before the 1960s, the current account of the United States maintained a surplus. In order to meet the huge demand of other countries for dollars, foreign direct investment has become a major channel for dollar exports. The advantages of buying assets from other countries with overvalued currency issued by China are self-evident. Secondly, the artificially overvalued dollar puts the United States in a very special position: it can make ends meet and maintain the current account deficit without worrying about the depreciation of the dollar. Under the Bretton Woods system, the United States is basically a central region with uncontrolled capital and commodity markets. The capitals of Europe and Japan have been destroyed by the war, which constitutes a new peripheral area. In order to maintain their competitive position in the US commodity market, Japan and peripheral European countries need to keep buying dollars to avoid the appreciation of their currencies against the dollar. They choose to underestimate their local currency, control capital flow and trade, accumulate foreign exchange reserves, and use the central region (the United States) as financial intermediary financing. In the 1950s and 1960s, the Japanese yen and major European currencies were seriously undervalued, which reflected the idea of an economic development strategy: depressing domestic wages and then limiting consumption, thus expanding investment (represented by the increase of exports). In fact, the exchange rate underestimates and depresses wages, just like two sides of the same coin. Another way to calculate the real exchange rate between Japanese yen and European currencies during this period is to convert the wages of Japan and European countries into dollars. On the other hand, the United States mainly provides long-term credit to peripheral areas through foreign direct investment. At the end of the Bretton Woods system, the current account deficit of the United States began to appear, but the above pattern can still be maintained. One of the reasons is that peripheral countries are willing to reinvest their accumulated dollar reserves in the United States (such as buying US Treasury bonds); The second reason is that the mature and efficient capital market in the United States can import short-term capital and export long-term capital to provide financial intermediary services to other countries in the world; The third reason is related to the above model. In this system, the United States does not feel the pressure to adjust the economic imbalance. For the United States, it does not need to choose between butter and artillery (to some extent, this is one of the reasons why the United States finally won the arms race between the United States and the Soviet Union during the Cold War). Dollar-denominated securities are constantly absorbed by the central banks of peripheral countries, leading to a stronger dollar and a lower inflation rate. The Fed does not have to choose between economic growth and inflation (as predicted by the Phillips curve). Of course, the U.S. government does not need to deliberately restrain fiscal expenditure, and it can enjoy cheap overseas capital without increasing taxes.
Corresponding to the huge US dollar hegemonic gains, the cost that the Bretton Woods system requires the United States to pay is almost negligible, which is in sharp contrast with the multilateral trading system in the same period. In order to establish a post-war multilateral trading system, the United States once advocated the establishment of an international trade organization, which was recognized by the international community in the form of the Havana Charter. However, the US Congress rejected this plan on the grounds of damaging the legislative authority of the United States, and finally it had to evolve into the General Agreement on Tariffs and Trade.
Second, the collapse of the Bretton Woods system and the hegemonic position of the US dollar.
The Bretton Woods system is based on the hegemony of American economy in the global economy, and it has its own unsustainable problems. This is the famous "triffin dilemma". Triffin believes that if the US dollar and gold want to maintain a fixed official price and other currencies want to maintain a fixed exchange rate mechanism with the US dollar, the US current account must maintain a surplus or balance, otherwise people's confidence in the US dollar will be lost. At the same time, in order to maintain the expansion of global economy and trade, send dollars to all parts of the world and meet the world's demand for dollars, the current account of the United States must be in deficit. This "dilemma" determines that the Bretton Woods system is unsustainable. Although in the early days, the United States exported dollars through foreign direct investment, there is still a "dollar shortage" in the world. To this end, the International Monetary Fund has to use the gold paid by member countries to buy dollars and issue dollar debt in the US capital market to raise dollars.
Despite the existence of triffin dilemma, the Bretton Woods system operated normally before 1960. The real problem of American current account is 1959. Coupled with the ambiguous position of Democratic presidential candidate Kennedy on the status of the US dollar during the campaign, the international community questioned the trend of the US dollar exchange rate, which led to the first US dollar crisis (see figure 1). From 1959 to 10, before the US election, the price of gold in the London gold market once rose to $40 per ounce. The separation between the official price of gold and the market price further induces central banks to convert dollars into gold. So in 196 1, the United States, Britain, France, Italy, the Netherlands, Belgium and Switzerland jointly invested * * to set up a "golden pool" to stabilize the fluctuation of gold prices. After 1965, due to the outbreak of the Vietnam War, the overseas military expenditure of the United States rose sharply, and the current account surplus disappeared rapidly, which led to the second dollar crisis from 1968. Jinchi also collapsed, and the price of gold doubled. By 197 1 year, the "Group of Ten" of the International Monetary Fund announced that the official price of gold would be lowered from $35/ounce to $38/ounce, and other currencies would appreciate against the US dollar accordingly. Even so, the momentum of the dollar crisis cannot be contained. By 1973, the Bretton Woods system, which has been running for nearly 30 years, has actually collapsed. As for the Jamaican agreement of 1976, to some extent, it is only an ex post facto confirmation of this fact.
The disintegration of the Bretton Woods system is the embodiment of its own internal contradictions.
For the United States, this is both an inevitable result and a helpless choice. From the above evolution, it can be seen that by the late Bretton Woods system, the hegemonic gains of the US dollar from it showed a downward trend. In other words, the cost of maintaining the official price of gold is getting higher and higher.
First, other countries' confidence in the dollar status is no longer based on the hegemonic position of the US economy, but more and more concerned about the actual gold content of the dollar. Therefore, any changes in US domestic policies and international financial markets will directly induce foreign central banks to cash gold in the Federal Reserve. The United States holds 70% of the world's gold reserves around 1947. By the end of 1950s, the proportion had dropped below 50%. Due to the Suez Canal crisis, the gold reserves of the United States dropped sharply from 1958. ⑥ To 1968, the proportion further decreased to 25%.
Secondly, it is increasingly difficult to coordinate the collective actions of developed countries. The original intention of the United States to set up a gold pool is to hope that other countries will share the cost of maintaining the official price of gold. However, in the actual operation process, the coordination of collective behavior is not completely successful. Member States outside the United States only put less than 1/3 of their gold reserves into the gold pool, and the central banks of other countries still have the right to exchange gold with the Federal Reserve. In fact, during the whole gold stock period, the gold reserves held by these countries have not decreased, but have been increasing. The situation in France is the most prominent. 1965, France bought 884 million dollars of gold from the United States, and the current account surplus of that year was 61900 million dollars; 1966 is $60 1 10,000 and $390 million respectively. ⑦ The more gold France exchanges, the greater the incentive for other central banks to exchange gold with the Federal Reserve. 1968 after the collapse of the gold bank, member countries had to sign a "gentleman's agreement", stipulating that the amount of gold exchanged by other central banks from the Federal Reserve was limited to the newly added US dollar reserves, and it was not allowed to exchange the previously accumulated US dollar reserves. Even so, when confidence in the dollar was completely lost at 1970, this "gentleman's agreement" finally lost its sole binding force.
Third, the autonomy of domestic fiscal and monetary policies began to be challenged. An important source of dollar hegemony is that the United States can decide its own domestic economic policies without considering external economic imbalances. However, at the end of the Bretton Woods system, this privilege of the United States was not recognized by other countries. When the dollar crisis occurred, other countries were unwilling to share the responsibility of the United States, but asked the United States to implement a tight fiscal and financial policy to increase the value of the dollar through deflation. 1968, France publicly made this request to the United States. Without commitment, France announced its withdrawal from the vault, which led to the collapse of the vault.
Fourth, the dollar's status as a world currency began to be challenged. As the world currency, the dollar has always been the main currency of foreign exchange reserves in various countries. Although the dollar crisis broke out twice in less than 10 years, no currency can replace the dominant position of the dollar. : 1968 France first proposed to create a new world currency in the International Monetary Fund to replace the dollar's world currency status, which later evolved into the Special Drawing Rights (SDR). SDR is not a real currency, it is just a unit for official settlement of member countries. However, this shows that the status of the US dollar as a world currency has been challenged.
In view of the fact that the Bretton Woods system can no longer maintain the hegemonic position of the dollar, giving it up has become a natural choice for the United States.
Dollar hegemony in the post-Bretton Woods era
For the United States, the establishment and abandonment of the Bretton Woods system is to gain the interests of dollar hegemony. Therefore, how to maintain dollar hegemony in the post-Bretton Woods era has become the basis for the United States to reform the international financial system. The period from the collapse of the Bretton Woods system to the mid-1980s 10 was the low point of US dollar hegemony and American economy. With the economic rise of Japan and Europe, the status of its currency in the international financial field is also rising. After the 1980s, the Reagan administration's economic reform not only revived the American economy, but also caused a new round of imbalance in the American economy, with the ratio of current account deficit to gross domestic product (GDP) reaching 4%. This imbalance adjustment once again shows the hegemonic position of the dollar: through the "Plaza Accord", the yen and major European currencies were forced to appreciate sharply. As a result, the current account of the United States improved and basically reached a balance in the early 1990 s. Since then, with the rapid growth of the American economy, the current account has once again fallen into imbalance. In 2004, the current account deficit accounted for 6% of GDP, a record high. The current account deficit of the United States accounts for 75% of the global current account surplus, which is why the external economic imbalance of the United States is called global economic imbalance. At present, the direction of global economic imbalance adjustment has become the focus of international attention.
Compared with the operation mode under the Bretton Woods system, the current global economic imbalance has its own characteristics, but it reflects a basic trend, that is, the United States is still gaining the benefits of dollar hegemony.
First of all, the United States can choose its own fiscal and monetary policies without taking responsibility for exchange rate stability. Under the Bretton Woods system, the "double peg" mechanism requires the United States to maintain the stability of the US dollar exchange rate. In the era of floating exchange rate system, the United States was exempted from this obligation. Faced with the increasing foreign debt since 1990s, the United States can still implement the low interest rate policy and large-scale fiscal deficit policy after the collapse of the bubble economy.
Second, the United States can still make use of the characteristics of the "catch-up" development model of neighboring countries and implement the economic policy of "living within our means". Due to economic development and financial liberalization, Japan and European countries have completed the task of catching up with each other, graduating from the "peripheral" camp under the Bretton Woods system, while a number of "emerging market countries" such as Asia and Latin America have joined the "peripheral" camp (in the era of the Bretton Woods system, they were either excluded from the world market or insignificant in the global market). In order to achieve the goal of catching up with the economy, they chose the development model of Japan and Europe in the 1950s and 1960s: overvaluing the local currency, pegged to the US dollar, promoting exports, accumulating US dollar reserves, and reinvesting the accumulated US dollar reserves in the United States (from investing in the US capital market before the IT bubble burst to investing in US treasury bonds after the IT bubble burst). At the same time, the introduction of foreign direct investment further promotes exports and develops an export-oriented economy. In this cycle, the United States has once again benefited from the hegemony of the dollar: low savings rate, high consumption rate, low interest rate, low inflation rate and high economic growth rate coexist. This model is also called "New Bretton Woods System" by some economists. Pet-name ruby is different from the Bretton Woods system. Even after the mid-1990s, the current account deficit of the United States is still increasing, but the real exchange rate of the US dollar is still appreciating. This trend has not changed even after the United States became a net debtor and the amount of foreign debt has been expanding.
Third, the United States can transfer the burden of adjusting economic imbalances to other countries. Since 200 1, the U.S. government has adopted a policy of "goodwill neglect" (which is truly laissez-faire). As a result, the real exchange rate of the US dollar has been declining, mainly against the euro and currencies of other developed countries. Unlike the situation after the Plaza Accord in the 1980s, the depreciation of the US dollar has not narrowed the current account deficit of the United States so far, but has continued to worsen.
Although economists have different views on the future adjustment model, most people believe that the pressure of adjustment will ultimately be borne by the world. Attending the first alternative and the most ideal method is to eliminate the current account deficit at the established exchange rate level. This requires the growth rate of American trading partners to be higher than that of American economy. Only when trading partners achieve higher growth rates can they absorb more American exports. 1990 to 2004, the cumulative economic growth rate of the United States was 45%, that of Europe and Japan was 29% and 25% respectively, and the growth rates of other trading partners were higher than that of the United States. With the economic growth rate of the United States unchanged, it is difficult for Europe and Japan to make up for this growth gap. Even if it can, it only accounts for 35% of American exports, which cannot fundamentally solve the current account imbalance problem in the United States. Another way out is for the United States to reduce consumption, increase the savings rate and reduce imports, which may lead to economic recession in the United States and the world. The second way is that investors' investment preferences change, and they invest more in American assets, that is, foreign investors buy more American bonds and stocks and increase their dollar reserves. This will only bring about a temporary appreciation of the US dollar and a greater adjustment in the long run. The third way is for the United States to raise interest rates. By the same logic, if we only raise interest rates, the United States will accumulate more debts and need to pay more investment income. Facing the "twin deficits", the United States needs to raise interest rates and cut its fiscal deficit at the same time. It should be noted that reducing the current account deficit requires reducing the fiscal deficit, but reducing the fiscal deficit itself is not enough to solve the current account imbalance. The fourth way is for Asian central banks to change their decisions, stop buying dollars and reduce the proportion of holding dollars. This will be a major adjustment in global dollar demand. Among them, if the RMB is no longer pegged to the US dollar, the European currency will appreciate sharply while the US dollar depreciates sharply. Obviously, in the view of the United States, the fundamental way to solve its external imbalance is the external world. The last road related to this, and what the United States hopes most, is to sign the second "Plaza Agreement": the depreciation of the US dollar. This will not trigger a recession in the United States, but also solve the current account imbalance problem. Considering that the United States has become a net debtor, the sharp depreciation of the dollar will objectively reduce its debt burden, just as the collapse of the bubble economy in the United States will be shared by the whole world.
It can be predicted that no matter how the global economic imbalance is adjusted, the legacy of dollar hegemony left by the Bretton Woods system will continue.
Precautions:
When analyzing the causes of the Great Crisis in 1930s, charles king Ten Bosch pointed out that after World War I, Britain had lost its ability to lead the global economy and was replaced by the United States. Because Britain is incapable and the United States is unwilling to assume the responsibility of stabilizing the international economic system, the system is in an unstable state. These responsibilities include three aspects: first, to provide an open market for goods sold at reduced prices; The second is to provide long-term loans against the economic cycle; The third is to implement discount in times of crisis. "When every country turns to protect its own national interests, the public interests of the whole world will be abandoned and damaged, and the self-interests of all countries will be damaged." See charles king's translation of Ten Bosch, Song Seung Heon and Hong Wenda. 1929 ——1939 "World Economic Depression", Shanghai: Shanghai Translation Publishing House, 1986, p. 348.
② C.M.Meissner, "A New World Order: Explaining the Emergence of the Classical Gold Standard", NBER Working Paper Series, No.9233, 2002
[Australia] A.G Kenwood and A.L. Lohed, translated by Wang Chunfa: International Economic Growth: 1820 ~ 1990, Beijing: Economic Science Press, 1997, p. 234.
④B.Eichengreen, "Global Imbalance and the Consequences of Bretton Woods", NBER Working Paper Series,No. 10497, 2004.
⑤ B.Eichengreen, "Global Imbalance and Bretton Woods System", NBER Working Paper Series,No. 10. 10497,2004.
⑥ In the "Suez Crisis" of 1956, the United States took a tough stance against the military actions of France, Britain and Israel, forcing them to withdraw from the Suez Canal. This is an important reason why France opposes the dollar-based international monetary system.
⑦B.Eichengreen, "Global Imbalance and Bretton Woods System", NBER Working Paper Series,No. 1 1, 2004.
(8) Obstructed, M. and K.Rogoff, "Global Current Account Imbalance and Exchange Rate Adjustment", a paper prepared for the Brookings Economic Activity Group, 2005.
According to this view, the current global economic imbalance itself does not constitute a problem. As long as the peripheral areas continue to implement the current development strategy, the above cycle will run well for a long time. See M.P. Dooley, "Brett's theory of forest system on resurrection", NBER working paper series, No.997 1; Dooley, "American current account deficit and economic development: collateral for total return swap", NBER working paper series,No. 10727, 2004.
O.Blanehard, "Waiting for US Current Account and US Dollar" NBER Staff Series. No11137.2005.