The Case for a New Bretton Woods. Kevin P. Gallagher

these areas of the original Bretton Woods order, and offer concrete policies for reform that are guided by the Geneva Principles. Table 1.1 provides an illustrative list of these policies to foreshadow the discussion.

Table 1.1 Policy Instruments for a New Bretton Woods

Renewed national goals and global public goods
Bretton Woods 1.0	Bretton Woods 2.0
National goals
Full employmentStructural transformationCatch-up growthSocial security and welfarePolicy autonomy	Full and decent employmentGreen structural transformation Stable growthEquality and justiceDecarbonizationResiliencePolicy autonomy
Global public goods
Stable monetary and exchange rate systemLender of last resortCounter-cyclical and long-run financeOpen trade during recessionsInternational cooperation	Financial stabilityRelative global equalityCounter-cyclical and long-run financeLender of last resort and debt authorityBalanced tradeStable global climateInternational cooperation

The scale of the challenge of turning a global system away from fossil fuels and outsized financial interests toward mobilizing investment for a just transition to a sustainable future of clean production, economic equality, and social and environmental resilience should not be underestimated. However, on many broad macroeconomic criteria (investment shares, public spending, tax rates, wage and productivity growth, etc.), the challenge is to return to figures that were commonplace in the initial Bretton Woods era, at least in the advanced economies. A more stable international monetary and financial system with adequate liquidity provision and new mechanisms for handling sovereign debt problems would lessen the need for emerging-market and developing countries to accumulate massive foreign exchange reserves and would help lengthen investment horizons. Closing tax loopholes, shifting taxes and tariffs toward fossil fuels, and introducing regulations that steer private finance toward public goals will create plenty of resources to harness the transition through increased fiscal space, development finance institutions and multilateral development Banks (MDBs), and new commercial sector instruments. A much higher degree of coordination is required for the kind of big investment push we see as essential to moving towards real resilience. We suggest that a Global Marshall Plan can provide that push, but with room for stronger regional economic arrangements.

      Finally, the trading system has to be aligned with a renewed set of national goals and global public goods. The current system accommodates market concentration, protects footloose finance, and favors rent-seeking interests in fossil fuels, banking, and pharmaceuticals, to name a few. Under its watch, corporate profits have soared as the labor share of global income has declined. Given this, the most important reform will be to introduce a competition body into the trading system to tame market concentration and ensure that the system does not favor outsized firms – while rolling back the investment and intellectual property rules that currently favor those firms. We will need to dramatically increase tariffs on fossil fuels and drop fossil fuel subsidies, while shifting to low tariffs and high subsidies for green energy and industry. There will also need to be financing for those communities, entrepreneurs, and supply chains stranded in the transition, and new governance mechanisms that include multiple stakeholders.