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March 2000

Understanding the End of Bretton Woods

Email: The End of Bretton Woods: Context:

Is there a good account of the history and effects of different types of Capital Controls and their effects since Bretton Woods. Just listened to an interesting discussion by Chomsky online at the Z magazine Website. It was his claim that when Nixon and associates worked to dismantle the Bretton Woods treaty and its fixed exchange rates, it was asserted at the time that the results would be increased market volatility, a slowing of world wide growth rates, and extended concentrations of wealth. Do all you economists out there know a where there is a good empirical discussion of the historical record.

My Comment:

Well, increased volatility yes--especially once everyone got straight Rudi Dornbusch's argument in his "Expectations and Exchange Rate Dynamics." But a whole spectrum of people--from Milton Friedman all the way through to John Kenneth Galbraith, if I recall correctly--thought that the result would be faster growth: that the need to defend one's exchange rate parity would no longer lead central banks to choke off economic growth in the so-called stop-go cycle, and that countries could then exercise their freedom to set their monetary policy as they wished. (Yes, it was mistaken, but that was the belief.)

Extended concentrations of wealth... not seen as an issue. Nothing like the enormous upsurge in income and wealth inequality inside the industrial core was forecast in the early 1970s. And in the early 1970s people were much more optimistic about the ability of third-world governments to establish social democracy and rapid economic growth than they are today. Back in the 1970s people still believed that real political democracy would become the most common form of government in the third world, and that a combination of public investments, social insurance and welfare-state redistributions, and aggressive stimulative macroeconomic policy could repeat throughout the third world the same kind of economic miracle that southern Europe had experienced in the generation after World War II. So people expected the world distribution of income to become more equal.

Of course, it hasn't happened: the lost decade of the 1980s in Latin America, the collapse of economic development in Africa (see, for example, Wole Soyinka's The Open Sore of a Continent; or Robert Bates's Markets and States in Tropical Africa). One way (in fact, my favorite way) to view neoliberalism is as a counsel of near-despair. It is an admission that state structures and political controls in developing countries are such that governments cannot perform the kinds of growth-promoting and income-redistributing missions that we take for granted in the social democracies of Europe, that attempts at social democracy tend to collapse into corruption and kleptocracy, and that the best shot at development is to try to cut the interface between government and economy--privatize businesses, diminish regulation, abandon independent monetary policy for currency boards, bet that the most rapid road to increasing incomes and productivity is to make one's economy hostage to the good opinion of foreign investors...

(I do happen to believe that "global neoliberalism" is the best live political option today; but I also believe that that isn't saying much--like saying that it's better to be tarred, feathered, and ridden out of town on a rail than to be hanged, drowned, or shot.)

Brad DeLong


Unless we have another devastating world wide war, we will be locked in a cycle of economic competition for the foreseeable future.

My Comment:

Ummm... International trade is not a war. It is a positive sum game. The richer and more productive are our trading partners, the more of our stuff they buy and the cheaper their stuff is for us to buy. We as a nation are a lot richer--not poorer--because of the successful modernization of western Europe and Japan.

Slavery in America and Its Consequences: Was Sally Hemings a Sex Slave Edition?

Slavery in America and Its Consequences:


I don't know how others will react, but I find it offensive to refer to Sally Hemmings as a "sex slave."

My Comment:


They had sex and she was a slave. Her choices were... limited. You may find it offensive, but that doesn't keep it from being true...

It seems to me that our modern-day term "sex slave" is an attempt to say that a relationship between X and Y is like the relationship between... Thomas Jefferson and Sally Hemings.

I think that William Freehling got it right (writing long before DNA testing) in his Secessionists at Bay, pp. 128-9:

One episode at Monticello illustrates the master's [Jefferson's] genius at evasion. Sally Hemings, Monticello's most celebrated slave, put Jefferson to the test as few trustees have been tested. No trustee more successfully evaded his examination. Most historians, emulating Jefferson's contemporaries, have narrowed the Sally Hemings issue to one question: Did Jefferson sire her five mulatto children?

The circumstantial evidence does not serve Jefferson well. Hemings, whitish daughter of Jefferson's father-in-law, was long a household servant within the Big House. Jefferson was always in residence nine months before she gave birth. Jefferson manumitted some of her children and freed no black without a Hemings connection.

This evidence, to some, will always convict Jefferson. Others will urge that these circumstances could point towards other member(s) of Jefferson's white family as sire(s). Furthermore, the fact (at last a fact!) that Jefferson's father-in-law sired Sally Hemings perhaps explains why only Hemingses were manumitted.

This futile debate over circumstances obscures the undebatable point about dissimulation. Jefferson never faced or resolved the moral mess in his mansion.... And morass miscegenation was, as Jefferson defined morass, the most 'unnatural' morass infecting the 'natural aristocracy'.

As Jefferson knew, miscegenation, however common in the Old South, was not commonly that luxuriant in southern Big Houses. Multiplying mulattoes were also uncommonly 'obscence' in so uncommon a mansion as Monticello. This was supposed to be the utopian Big House, the model on the mountain for an adoring South to emulate. A morally enlightened trustee would have had to act, however unpleasant the action...

Jefferson preferred to avoid the unpleasant.... Jefferson chose to do nothing. Or, more accurately, he probably never allowed himself to think about the choices.... Jefferson's love of balanced surfaces and inclinations to forget unbalanced foundations explain why he failed almost as much as manumitter as he failed as Sally Hemings's trustee. That 'almost' is crucial. Jefferson freed some 10% of his over 100 slaves. 10% per generation could water down slavery. So, too, Jefferson's voluntary surrender of 10% of his property shows some commitment. Latter-day intellectuals who can see only commitment to slavery might ask themselves how often they have sacrificed 10% for their ideas.