Climate change futures: health, ecological and economic dimensions

110 | FINANCIAL IMPLICATIONS
BRETTON WOODS
1944: WHAT
COMES NEXT?
With Europe in shambles after two world wars and the
Great Depression, world leaders gathered in 1944 at
the Bretton Woods conference center in the White
Mountains of New Hampshire to plot out a new world
order. New rules, incentives and institutions were
needed. The League of Nations established in Paris in
1919 after World War I had been inadequate to prevent
subsequent global conflict. Under the leadership
of Sir John Maynard Keynes, the delegates crafted a
new development paradigm.
Three new rules were agreed upon:
1. Free trade in goods.
2. Constrained trade in capital.
3. Fixed exchange rates.
New institutions were established:
1. The International Bank for Reconstruction and
Development (The World Bank).
2. The International Monetary Fund.
In the same period, Eleanor Roosevelt shepherded in
the Universal Declaration of Human Rights setting new
standards and goals, and the United Nations was
formed.
The financial incentives that followed proved to be the
necessary component.
With loans from international financial institutions to
purchase oil and fund huge hydropower schemes (that
unknowingly spread diseases, such as malaria and
snail-borne schistosomiasis), many nations slipped
deeper into debt and cleared forests to plant crops to
export food to meet debt payments. The projected
“epidemiological transition” associated with development
— from tropical diseases and malnutrition to the
ills more prevalent in developed nations (such as heart
disease, diabetes and cancer) — failed to occur for
most sectors of the developing world.
By 1983, the lines had crossed: More money was
flowing out of the developing world than was flowing
in, and the debt crisis, rising inflation and belt-tightening
conditions placed on subsequent loans undermined
public sectors and weakened many nation states.
In the 1990s growth in information technology in
developed nations skyrocketed, as did the speculative
trade in currencies. (Currency transactions went from
US $18 billion a day in 1972 to US $1.9 trillion
daily today.) Then the market bubble burst.
••••
Will today’s confluence of environmental, energy and
economic crises lead to a conscious restructuring of
development priorities? One hundred and fifty years
ago urban epidemics of cholera, TB and smallpox
drove environmental reform, modern sanitation and the
creation of clean water systems. Will public health
and well being resume their center-stage roles as the
drivers for development? With laissez-faire we risk collapse
or, worse, an authoritarian response to scarcity
and conflict. The alternative is a future rich with innovation
and sustained, healthy growth.
The Marshall Plan provided funds to rebuild Europe
and regenerate robust trading partners. In the US, the
GI Bill stimulated housing construction, new colleges,
job training and jobs that combined to prime sustained
growth in the post-war period.
In 1972, however, the Bretton Woods rules came
undone. Mounting outlays for the Vietnam War
strained US fiscal balances, precipitating the abandonment
of the second and third rules: Capital as well as
goods could now be moved freely and currencies
were allowed to float. The result was that, following
the OPEC oil embargo, oil prices increased tenfold
from US $3 a barrel to US $30, and gold shot up
from US $38 to over US $600. Save for nations
endowed with “black” or yellow gold, numerous
nations dependent on oil to power their farms, industries
and transport became bankrupt.
How we develop and how we power that development
are the pivotal decisions. Making the decisions
democratically will mean including stakeholders that
were not included in Bretton Woods — women, civil
society and developing nations. Finance — with its
globally diversified portfolio, monetary instruments and
political influence — has a unique role to play in this
transition. Having appreciated the long-term trajectory
of expanding risk profiles, the financial services sector,
with civil society and the United Nations, can convene
the discussions to how best construct the scaffolding
for a more stable and sustainably productive future
(Epstein and Guest 2005).