Governing Systemic Risk in the Shadow of Bretton Woods

The fragile political foundations of global finance are exposed at moments of crisis. This was well understood by the key negotiators at Bretton Woods, when they formally agreed to coordinate their macroeconomic policies in a pegged exchange rate system and to limit capital movements to supporting trade and productive investment.  If they came back seven and a half decades later, though, they would observe floating exchange rates, widespread political acquiescence in the face of expanding international capital flows, and the resurgence of systemic risk.  They would also witness the evolution of an informal global capacity to manage that risk as well as the adaptive persistence of the International Monetary Fund. The continuing drive to render emerging governing practices coherent and legitimate across still-distinctive risk-cultures reflects the interaction of crisis response, regulatory competition, and policy spillovers. The normative and institutional legacy of Bretton Woods still informs debates over sustainability in this key sector, but so too does the spectre that haunted New Hampshire’s Mount Washington Hotel in 1944.

Louis W. Pauly is the J. Stefan Dupré Distinguished Professor of Political Economy in the Department of Political Science at the University of Toronto.  He is cross-appointed to the Munk School of Global Affairs, where he serves as Interim Director of the Centre for the Study of Global Japan.  A graduate of Cornell University, the London School of Economics, New York University, and Fordham University, he was named a Fellow of the Royal Society of Canada in 2011. With Emanuel Adler, he edited the journal International Organization from 2007 to 2012. In 2015, he was the recipient of the Distinguished Scholar Award in International Political Economy from the International Studies Association.  He has been a visiting fellow at the WZB Berlin Social Science Center, Oxford University, Northwestern University, the University of Munich, Osaka City University, and the Institute for Fiscal and Monetary Policy in Japan’s Ministry of Finance.  Earlier in his career, he held management and staff positions at Irving Trust Company, The Royal Bank of Canada, and the International Monetary Fund. His publications include Power in a Complex Global System; Hong Kong’s International Financial Centre: Retrospect and Prospect; Global Ordering: Institutions and Autonomy in a Changing World; Global Liberalism and Political Order; Complex Sovereignty: Reconstituting Political Authority in the Twenty-First Century; Governing the World’s Money; Democracy beyond the State?; The Myth of the Global Corporation; Who Elected the Bankers? Surveillance and Control in the World Economy; and Opening Financial Markets: Banking Politics on the Pacific Rim.

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Artwork: Forme bleue (1935) by Sophie Taeuber-Arp