Framing Crashed (10): “A New Bretton Woods” and the problem of “economic order” – also a reply to Adler and Varoufakis

Davos 2019 was a downbeat affair. That at least is how regulars described it To a newcomer it did not seem that way. Indeed, that gloomy assessment would seem to call for a reality check. Most thoughtful people are a lot gloomier than the folks you bump into at Davos. The 2019 meeting may not have had heroes to celebrate. The luster may have come off crypto. But if Davos lacked pizzazz, neither was it overshadowed by the sense of fundamental crisis that should surely color any realistic assessment of the current world situation.

It may sound paradoxical, but is it not the case that our sense of what is realistic is as much defined by mood (Stimmung) as it is by specific empirical facts?

In this sense the mood of Davos is profoundly unrealistic. What sets the tone is a Vegas-style festival of corporate PR and self-presentation, adorned with a barrage of exhortatory slogans worthy of a Mao-era pep rally. Amongst the most crass this year were the following:

“Goal 17 Partnership Space” – #Solvable – the venue for an amorphous grouping whose projects included “building an economy that works for 8 billion”.

A message from Philip Morris International: We are delivering a smoke-free future, but we can’t do it alone. We ask the world’s leaders to join us in a conversation: 1.1 billion cigarette smokers deserve better options

As Politico commented, at Davos it is no longer enough to offer “a mere space, lounge, cafe, chalet, house, church, school hall, center, sanctuary, hub, lodge, or even a dome. People wanted more.” They wanted pavilions. Perhaps the most loony of all, organized by an group called Broadlights, offered a “Wisdom Accelerator for Youth”.

Meanwhile, a “Global Talent Competitiveness Index” launched at a local museum. And the 25th Annual Crystal Awards honored “exceptional artists and cultural leaders” whose contributions are improving the state of the world best represent the “spirit of Davos.”[2]

If you aren’t used to it, the sheer pace of self-celebration is exhausting. The bombardment is so relentless and multi-directional that it is easy to feel that there is no place to which to with withdraw. No place from which to launch a critique. Searching for a hook I turned to the manifesto that opened the conference. This appeared under the name of World Economic Forum (WEF) founder Klaus Schwab and it was, in its own right, remarkable testimony to a solution-orientated approach to world affairs. Calling on world leaders to set about building “Globalization 4.0”, Schwab invoked the “postwar” moment in which world leaders “came together” to build a foundation for decades of growth.

The manifesto was a document so provocative to a historian, that through the hangover of my first WEF meeting, I felt moved to offer a reply. My guiding question being: How does Davos-talk relate to thinking realistically about the history of global order?


My hot take, which appeared in Foreign Policy last week started as follows:

Klaus Schwab, impresario of the World Economic Forum, released a manifesto in the run-up to this year’s annual meeting at Davos in which he called for a contemporary equivalent to the postwar conferences that established the liberal international order. “After the Second World War”, Schwab declared, “leaders from across the globe came together to design a new set of institutional structures to enable the post-war world to collaborate towards building a shared future … The world has changed, and as a matter of urgency, we must undertake this process again.” …

Schwab is not the first to make this kind of appeal. Since the financial crisis there have been repeated calls for a “new Bretton Woods”—the conference in 1944 at which “leaders from across the globe came together to design” a financial system for the postwar era, establishing the IMF and the World Bank in the process. It was the moment at which American hegemony proved its most comprehensive and enlightened by empowering economist-statesmen, foremost amongst them John Maynard Keynes, to lead the world out of the postwar ruins and the preceding decades of crisis. Under Washington’s wise leadership, even rancorous Europe moved towards peaceful and prosperous integration.

This is a story with wide support in places like Davos. It’s also one that deserves far more scrutiny. Its history of the founding of the postwar order is wrong; more important, its implicit theory about how international order emerges—through a collective design effort by world leaders “coming together” to reconcile their interests—is fundamentally mistaken. What history actually suggests is that order tends to emerge not from cooperation and deliberation but from a cruder calculus of power and material constraints.”[4]

As I went on to point out, the Bretton Woods conference of 1944 was not in fact a postwar conference, but a wartime gathering of the Allies.

The meeting was not so much a cooperative discussion as an argument over the extent of American power. Furthermore, most of the blueprints devised at Bretton Woods were doomed to remain on the drawing board. The International Trade Organization was abandoned and replaced by the lumbering GATT. Amidst postwar crisis and the onset of the confrontation with the Soviet Union, the Bretton Woods system was stillborn in 1947. Even the basic exchange rate system did not come into operation until 1958 and within ten years it was clear that it faced a terminal crisis. Genuine tariff reduction did not start until the Kennedy round of GATT in the mid 1960s and it proved counterproductive from the point of view of the stability of Bretton Woods.

The world economy as we know it today was not born out of “postwar agreement” but out of the chaos of the disintegration of Bretton Woods in the 1970s. It was that collapse that gave us fiat money, floating exchange rates and unfettered capital mobility.


Of course, this kind of point scoring is an easy game for a historian to play. Given that the history of the postwar moment has been exhaustively investigated, the real question is what gives the saccharine Davos-version of the “postwar moment” its currency.

Is the WEF’s voluntarism a reflection of the fact that they exist in a bubble of upbeat policy-talk? Or are they simply in bad faith? Surely they cannot actually believe that they can deliver what their slogans promise. Perhaps all the do-gooding rhetoric serves simply as window-dressing for a junket that serves other purposes.

Thanks to the success of the Davos meetings, Klaus Schwab’s WEF has grown into a medium-sized global enterprise. Its annual budget now stands at $338 million a year. It would be easy to conclude that the real business of Davos are not Schwab’s manifestos, but the parties, the “bilateral” side-meetings, the occasions for grandstanding enabled by the extraordinary concentration of global media in one place for one week.

This kind of critique is biting and perhaps realistic but it also has the effect of reducing the talk at Davos to mere window-dressing. It denies the sincerity and purpose of the WEF organization and the dozens of NGOs who attend. Perhaps then, the problem is different. The references to the “postwar” are, in fact, sincere, but they are an instance of false memory. The postwar that Davos truly hankers after is not the aftermath of World War II, but the aftermath of the Cold War, 1995 not 1945.

May 1995 — Peter Sutherland congratulates Renato Ruggiero, his successor as Director-General of the WTO, against the backdrop of the murals that once decorated the ILO’s headquarters.

1995 not 1945 was the moment when one might talk of globalization not only in itself but for itself. 1995 was when the WTO – the reincarnation of the ITO aborted in 1950 – actually came into existence. But this postwar too was not a moment merely of cooperative leadership. 1995 too was the product of a power struggle. Not for nothing is it remembered as the unipolar moment. It was unipolar in a double sense: the collapse of the Soviet Union and the humbling of organized labour in the West. It was indeed a remarkable moment of globalizing grand designs.[5] But it was not the grand designs that founded our current age of globalization, but the massive concentration of power on the US and its allies.

In the end, there simply isn’t any serious way of thinking about international order without thinking about power. Indeed, so tautological is the relationship that one is tempted to say that order is a particularly addictive euphemism for power. And that, once more, forces the question. What is Davos doing when it talks of the need for a global gathering to settle the terms of globalization 4.0? Who does it imagine will convene that meeting and who will set its terms?

I concluded the Foreign Policy piece with the following:

Since 2008 that new order has come under threat from its own internal dysfunction, from oppositional domestic politics and the geopolitical power shift engendered by truly widespread convergent growth. The crisis goes deep. It is not surprising that there should be calls for a new institutional design. But we should be careful what we wish for. If history is anything to go by that new order will not emerge from an enlightened act of collective leadership. Ideas and leadership matter. But to think that they by themselves found international order is to put the cart before the horse. What will resolve the current tension is a power grab by a new stakeholder determined to have its way. And the central question of the current moment is whether the West is ready for that. If not, we should get comfortable with the new disorder.

What matters in assessing the future prospects of world order, to be blunt, are the web of economic, technological, political and security policy relationships around China and its relations with the other major powers i.e. the United States, Europe, Japan and Russia.


In the immediate aftermath of Davos, I was too harassed and addled by jet lag to realize the connection between the Foreign Policy piece and the theme of the workshop on realism, which Matthew Specter and Daniel Bessner assembled at Duke this weekend. But when a twitter buddy summarized the gist of the piece as follows:

“If Davos had a realistic account of how order came about they would be less enthusiastic in calling for a new one.“

… the penny finally dropped.

If it were not operating in euphemisms, the question posed by Davos would be the question posed by E.H. Carr in the 1930s.[6] When the balance of power shifts, how does one engineer a peaceful adjustment of international order? This is not merely a matter of brute force, but power cannot be eliminated from the equation. In thinking about the problem of order dividing our intellectual options between realism and “idealism” or “liberal internationalism”  is as unhelpful now as it was when Carr refused that alternative. What he tried to do in his Twenty Years’ Crisis was to articulate a synthesis. Surely that is the minimum to which we should aspire both intellectually and practically.

E.H. Carr (1892-1982)

The kind of power shift that Carr had in mind was preeminently a question of nation states and empires. Today that is articulated above all around the Sino-US relationship. No new global order can emerge without at least the tacit consent of both of them. But it is not just geopolitics and security that are at stake. What talk of Bretton Woods foregrounds is the relationship between geopolitics and geoeconomics and the question of political economy i.e. the relationship between private economic interests and the state system.

In ruminating on this question I found myself drawn back not only to Carr, but also to the intellectual tradition of the Frankfurt school.

Starting out as a historian of Germany, I learned to be skeptical about talk of economic orders by reading Franz L. Neumann and his colleagues on the political economy of interwar Germany and above all Neumann’s Behemoth: The Structure and Practice of National Socialism 1933-1944.

The basic insight of the Frankfurt school legal theorist – that there is no natural harmony between developed capitalism and legal, political and social order; that modern capitalism is a fundamentally disruptive force that constantly challenges the rule of law as such – could hardly be more germane today. As William Scheuermann puts it in Frankfurt School Perspectives on Globalization, Democracy, and the Law (Routledge Studies in Social and Political Thought) (p. 2-5).:

“As a first step, we need to allow that structural attributes of neo-liberal economic globalization, as Neumann would have predicted, engender deep impediments to the establishment of the rule of law, despite the fact that most scholars on both the left and right tend to expect otherwise. If we interpret the rule of law as requiring that state action should rest on norms that are relatively clear, general, public, and prospective, the emerging legal substructure of economic globalization suffers from a paucity of rule of law qualities.”[7]

The basic insight developed by Neumann, Kirchheimer and their colleagues was that:

“the transition from competitive or classical liberal capitalism to contemporary monopoly or organized capitalism, in which large corporations gained a quasi-oligopolistic status and many traditional “free” market functions declined, inexorably undermined clarity, generality, publicity, and stability in the law. ….

As the social presuppositions of the modern rule of law in competitive capitalism decayed, large corporations increasingly tended to favor legal regulations having a vague and open-ended character. Given their power advantages vis-a-vis other social actors, vagueness and ambiguity in the law were best exploited by them, and loopholes in parliamentary legislation permitted privileged economic actors to subvert the intent of the lawmaker.“[8]

In Franz Neumann’s work, the problem of order is conceived above all in relation to law. But the characteristics of “clarity, generality, publicity, and stability” that define the ideal of the Rechtsstaat can also be seen as features characterizing the system of economic order more generally. And Neumann’s basic intuition that the alignment between advanced capitalism and order is anything other than obvious, can be fruitfully brought to bear on the problem both of the Bretton Woods era and our contemporary world.


Rather than thinking of 1945 as a singular moment of enlightened cooperation it seems more realistic to see it as an extreme moment in the uneven and combined development of the world system. And those tensions manifested themselves in several ways at Bretton Woods.

Harry Dexter White and John Maynard Keynes at Bretton Woods, 1944

Most fundamentally the American delegation refused to accept Keynes’s intrusive system of a truly global International Currency Unit (ICU). At a moment of predominance why should the US abandon the central role conferred on it by the dollar? Why should the US, the dominant financial power of the future, allow itself to be bound by a currency system – Keyne’s ICU – designed by the British to cushion their decline from imperial status?

But Neumann’s critique alerts us also to another dimension less frequently commented on. Bretton Woods was a meeting about the future order of the world economy, but it was a meeting between governments. The discussion was led by Treasury officials. Even central bankers played second fiddle. In this respect, Bretton Woods was a key moment in the construction of that peculiar entity, the national economy, as an object of modern governance. What is surprising is how innocently so much commentary on Bretton Woods mirrors this historical contingency, faithfully reproducing the focus on macroeconomics rather than political economy i.e. the relation between state power and private actors.

The question that is begged is where was Capital in the Bretton Woods moment? Where were private businesses, the actual agents of capital accumulation?

To the extent that business was absent from the Bretton Woods scene, this was an effect of the massive extension of state power in the course of World War II. Or perhaps one should say the re-articulation of state-business relations (much of the “state” apparatus was after all run by businessmen and managers). But that state-centered model did not last. Soon Bretton Woods faced a heavy backlash led by Wall Street and its friends in the US Treasury. Eric Helleiner’s excellent book States and the Reemergence of Global Finance: From Bretton Woods to the 1990s (Cornell University Press, 1996) is particularly worth revisiting on this score.

What freewheeling bankers wanted in the postwar were not the capital controls and financial repression of the 1950s, but the market free-for-all created in the largely unregulated, off shore Eurodollar market hosted by the City of London. There they revealed themselves, just as Neumann would suggest, as subversive agents of disorder already in the 1950s.

Source: Policytensor 2013

As a macroeconomic reading suggests, fiscal deficits and trade imbalances destabilized the Bretton Woods system. But if its foreign exchange controls had not been constantly under assault from private speculation, the system might have survived. The story of the rise and fall of Bretton Woods cannot be told without accounting for the gradual decay of the wartime regime of national economic regulation and the reemergence of private finance as a force of creative destruction after 1945.

Given this backdrop, the breakdown of Bretton Woods was predictable. As was the blunt force effort to restore, if not order, then governability from the 1970s onwards. After a decade of inflation and a falling dollar, the shock to global interest rates, exchange rates and employment delivered unilaterally by Paul Volcker’s Fed was key to restoring order. But neither should it be surprising that that dispensation, which Ben Bernanke dubbed the “great moderation”, itself proved unstable and untenable.

There was much talk in the 1990s, in the unipolar moment, of a new order. But once again this reckoned without capitalism’s capacity for creative destruction. It was David Harvey who early on diagnosed the basic duality that defined the new order of neoliberalism.[9] It had both an ordering side and an ad hoc interventionist side. The former could not exist without the latter.

The financial crisis of 2008 revealed this dualism on a truly world historic scale. Reading the macroeconomic imbalances in the early 2000s, pundits imagined that the crisis would come in the form of a meltdown between the US and China. They imagined a geoeconomic-geopolitical crisis that would end with the collapse of the creditworthiness of the US government. Instead 2008 was a private sector crisis, sparked by the collapse of private mortgage securitization, the incoherence of financial business models, the inability of market instruments to offer adequate risk management, the tendency of cut throat competition to generate insolvent “bad actors” and the sudden collapse of confidence in collateralized money markets that produced an implosion in the private credit system of unprecedented scale.

Unsurprisingly, the 2008 crisis inspired much talk of a new Bretton Woods. The UN appointed Joe Stiglitz to head a commission. More consequential was the proposal from China’s central bank to convene a new Bretton Woods so as to end the dominance of the dollar. But neither proposal gained traction in the face of increasingly assertive management of the crisis by the US authorities.

The actual crisis response to 2008 involved a remarkable ad hoc fusion of business and state authority. If there ever has been an executive committee of the American bourgeoisie it convened on the afternoon of 13 October 2008 at the Treasury building to coordinate the distribution of TARP funds for the recapitalization of the major US banks. It was both a remarkably effective crisis-fighting measure and an astonishingly blatant example of the impossibility of upholding the conventional norms of regular, law-bound governance in the face of the crisis.

The congressional appropriation of $700bn had failed on its first attempt thanks to the resistance of right-wing republicans and left-wing democrats. TARP had passed on the second attempt festooned with promises to assist homeowners and guarantee congressional oversight. Now the Fed and the Treasury, headed by a former investment banker, were redirecting those funds as part of a recapitalization effort that was comprehensive in scope but actually designed to rescue the ailing commercial banking giants, Citigroup and Bank of America. The result was the partial nationalization of the commanding heights of US finance, but one which the clique of crisis-fighters declared would not be used to actually exercise command over America’s financial system. The Federal government was an essential but reluctant shareholder. One could hardly ask for a more direct expression of Neumann’s basic diagnosis: the survival of oligopolistic capitalism requires adhocracy. When the going gets rough, as it inevitably does, order goes out the window.

The counterpart at the global level to America’s crisis-fighting clique was the cooperation between central bankers and the network of liquidity swap lines through which the Fed supplied dollars to the global banking system. Behind them stood the great power cabal of the G20 leaders summit. In its new format the G20 convened for the first time in DC in November 2008. It is a self-constituted ad hoc grouping that in questions of economic governance has sidelined the UN. The membership of 20 was picked on the basis of GDP and population statistics in the late 1990s, by second tier officials working for the governments of US and Germany as part of the G8 forum.

Through technocratic bodies such as the Financial Stability Board and the Basle Committee, the G20 has authorized a new regulatory system for global banking, known as Basel III. Its core is the identification of a group of so-called Globally Systemically Important Banks, GSIBS. This group of 30 of the largest banks have been placed under the direct supervision of regulators and central banks. Their accounts and business models are subject to a negotiated form of direct supervision. In a striking confirmation of the basic prediction of Frankfurt School political economy, financial governance post-crisis has thus come to rely on an unmediated relationship between national central banks, global regulators and an oligopolistic cluster of giant transnational banks.


How should progressive politics relate to this baronial model of economic governance?

As Scheuermann shows, faced with the disintegration of legality under conditions of oligopolistic capitalism, Franz Neumann declared that the rule of law embodied normative values – generality, transparency, predictability etc – that progressives should defend. In the context of the capital labour struggles, which were at the heart of Frankfurt school jurisprudence, this makes perfect sense. The problem posed by the crisis of 2008, however, was different. What was at stake was not the long-term balance of class forces but a sudden circulatory collapse of the global economy. Faced with this kind of financial heart attack, the question of governance appears in a rather different light. Indeed, it is tempting to postulate an inverse relationship between the effectiveness of intervention and the commitment to order. Where it was conducted in the form of ad hoc and unprincipled emergency medicine, the crisis response was effective. The more closely intertwined the political and economic elite the more rapid the response and the smaller the collateral damage. Where elites were less tightly articulated, as in the eurozone, and there was an effort to employ a rule-bound approach the results were disastrous.

To a degree this comparison of American and European approaches to the crisis is unfair. One should allow for the fact that coordination problems are bound to be more serious in a complex organism like the EU. One should allow also for the particularly self-defeating ideology that informed the rules that the Eurozone attempted to apply – composed of a toxic mixture of legalism, fiscal conservatism and a misplaced attention to “sustainability”. But the point nevertheless holds. As Keynes recognized, a general theory of capitalist governance must be able to account both for conditions of stability in which law like behavior is the norm, and moments of crisis, when ad hoc intervention is called for. To recognize only the former and not the latter is a recipe for disaster.[12]

It is relatively easy to conceive of how to politicize rule-bound systems. One can debate the underlying norms, procedures etc. The question of how to politicize ad hocery is more tricky. What are the norms to apply in an exceptional situation? One possible opening is to highlight and to exploit the fissures in ideological conformity that the crisis produces. The crisis of 2008 and its aftermath exposed the fact that many if not all of the taken for granted assumptions of economic policy in the 1990s were poorly founded. Perhaps most spectacularly the IMF has abandoned its rigid advocacy of the absolutely unfettered mobility of capital. The Bank of International Settlements has become the source of a critique of standard international macroeconomics that points the attention of policy-makers squarely at transnational banks as key concerns of financial stability policy. And from there the net is widening to take in asset managers too.

Piggybacking on such technocratic discourse may seem like a poor substitute for genuinely radical politics. But another lessons of the crisis of 2008 and after are the limits of such politics under conditions of extremity. If globalized capitalism under conditions of partial democratic legitimation is the only game in town, the majority of the population, the “99 percent” may have an existential interest not in debating Ordnungspolitik, but in energetic and unprincipled discretionary action by technocratic crisis-managers, intimately connected to the business oligarchy. It is no doubt a third best option, but the alternatives may be even worse.


Of course, not everyone agrees with this skepticism about the notion of economic order, not everyone is as willing to give up the Bretton Woods and what it stands for. The most thought-provoking reaction to my Foreign Policy piece came from Diem25 the pan-European party for which Yanis Varoufakis is the charismatic figurehead.

Since the publication of Varoufakis’s memoir Adults in the Room I have been engaged in an on and off discussion with Varoufakis and several other contributors about what the experience of Syriza in 2015 and Varoufakis’s account of it, tells us about the limits for radical politics in the Eurozone.

It was pure coincidence, but not completely surprising, therefore, that the appearance of my piece in Foreign Policy critiquing Davos’s false memory of the postwar moment was followed a day later by a piece in the Guardian by David Adler and Varoufakis calling for …. you guessed it … a refounding of the Bretton Woods institutions. In fact, it was the second of two essays by Adler and Varoufakis in the Guardian making the case for a return to the postwar moment.

On twitter Adler described my Foreign Policy piece in very flattering terms but commented that it ended on a “flat” note. I think this means that I didn’t offer a positive agenda. What is to be done?

The answer that Adler and Varoufakis give in their Guardian pieces is that the Bretton Woods institutions – the IMF and the World Bank – must not only be protected against the depredations of the Trump presidency. Adler and Varoufakis argue that the Bretton Woods institutions offer the left a valuable antitdote to provincialism. The IMF and the World Bank, along with the ILO, should be repurposed as instruments for a global progressive agenda.

In fact, Adler and Varoufakis argue, this would involve returning them to their original progressive purpose. The Diem25 pair are keen on the heritage of mid-century progressivism. They call for a Green New Deal. They take inspiration from FDR, Morgenthau (Henry not Hans) and Keynes. They want to return to 1944 and restage the battle over the future of the international financial system. This time they argue that a truly global, post-American order should prevail. A digital currency issued by the IMF should form the anchor of a new global currency order. It is a vision also favored by Joe Stiglitz and the UN Commission back in 2008-2009. Adler and Varoufakis want to mobilize its resources for a giant spending program to decarbonize the world economy.

All of this sounds attractive. But what, one must surely ask, distinguishes it from the voluntarism of the Davos crowd and their calls for a global gathering to shape globalization 4.0?

The Diem25 authors invoke the language of political mobilization. And their movement has done an impressive job gathering 98,000 members. But they are spread thinly across Europe. In May 2019 Diem25 will do well if it gains representation in the European parliament. This is hardly a political platform from which to mount the global institutional restructuring they propose.

Even assuming that Diem25 could gain some purchase on European policy, what bearing will that have on the politics of the IMF and the World Bank at this moment? Precisely because they are global, the main shareholder in the Bretton Woods institutions is the United States and the key issue of the present with regard to the governance of these institutions are not European calls for their democratization, but greater representation for China and other emerging markets, the concerns of whose policy-makers are hardly likely to align neatly with those of Diem25. Is there an unspoken hope that India’s democracy or China’s authoritarian leadership will sign up to the agenda of global institutional change?

This is not out of the question, of course. In Adults in the Room Varoufakis described his efforts to cut a deal with Beijing to relieve financial pressure on Greece in 2015. But he also describes how that tactical maneuver ended in disappointment when Berlin put its foot down. Neither Beijing nor Moscow wanted to antagonize Berlin over the politics of the Eurozone. Already in 2011 during the most critical phase of the Eurozone crisis, the German central bank made clear its opposition to financial experiments based on the IMF. With the full weight of the rest of the G20 upon her, Merkel stood firm and vetoed any attempt to leverage IMF resources for a Eurozone bailout fund.

Adler and Varoufakis end with a rousing appeal: “Internationalists must realize the power of these (Bretton Woods) institutions to transform the world for the better, and reclaim them as our own. The alternatives – the technocratic status quo and the strongman unilateralism that has emerged to challenge it – are simply unacceptable.”

Of course it is not the job of politicians to offer realistic narratives of the likely future. In this sense it is not their job to be realistic. Their task is to rally support around visions of how things might be different. That presumably is the spirit in which Adler and Varoufakis’s intend their appeal to refound Bretton Woods. The difficulty is to distinguish it from wishful thinking.


In the end the more important criticism of Adler and Varoufakis is not that they are unrealistic in their ambition, but that they are unrealistic in their conception of where power lies in the global system. Once more the problem is their focus on Bretton Woods.

For the Diem25 authors as for Schwab and the WEF, Bretton Woods serves as a cipher for an imaginary moment of historic purpose and decision. It is a Punctum Archimedis – the point from which they imagine applying a lever to change the world. But this is a fiction. Nor is it an innocent one. It reflects a deeply rooted unitary and centralistic vision of sovereign power.

To move forward we need not only to rally substantial political forces and figure out international coalitions that have some chance of actually exerting leverage. We also need a theory of power that allows us to think beyond the sovereigntist mirage of Bretton Woods.

Late 20th and early 21st-century social theory offers us various alternatives but the most obvious is Foucauldian. Where progressive politics needs to be directed, on this view, would not be towards counterposing some new order to the anarchy of capital. Nor should it focus on a vain battle to seize what might appear to be the “commanding heights”. It should instead seek to gain influence over the lower levels and mechanisms of power where what passes for the regulation and governance of global capitalism actually takes place.

We should learn the lesson of the recent crisis: There was no new Bretton Woods in 2008 and that absence is telling. The world economy today is not divided up into national economic zones structured by the imperatives of mid-century total war. It really is the amorphous global conglomerate that we for so long have been saying it is. To hark back to earlier moments of concerted government-led cooperation under present circumstances is to indulge in gestural rather than real politics.

A profound reshaping of governance did take place after 2008. But it took the form not of a new Bretton Woods but of central bank negotiation and the new banking regulations of Basel III, known collectively by the moniker of macroprudential regulation. The branch of economics that addresses itself to the logic of those regulations and the financial flows they seek to tame is not macroeconomics but macrofinance. It, finally, takes the balance sheets of massive private corporations seriously as drivers of macroscopic economic dynamics.

The world of macrofinance and macroprudential regulation is a world dominated by bankers, central bankers, banking experts, lawyers and financial economists. It is where truly consequential regulations are shaped. It is in this zone that the critical balance between rule and discretion has to be worked out. It is a zone out of sight of mainstream politics, but not immune to politicization and to publicity. Publicity may be a disinfectant. It may also simply be employed as a threat. It is in this zone that expertise and politics can be most productively harnessed and may actually make a real difference.

There are a number of scholar-technician-activists already at work in this space. Most notably the indefatigable and brilliant Daniela Gabor (UWE) and her campaign for the regulation of shadow banking. The recent report on the shadowy Eurogroup by Bejamin Braun and Mariane Hübner of the Max Planck Institute released this week by Transparency International EU is another case in point. Varoufakis needs no instruction on the need to bring transparency to such institutions. He has done more than anyone else to politicize their operation.

Rather than making Quixotic gestures to a new Bretton Woods, it is precisely interventions of this kind that we should be seeking to reinforce with real political clout. Of course the World Bank and the IMF may be venues for this kind of work. But progress is more likely in an incremental form and from within.

This is not, however, a blanket argument for ad hocery. It may very well be that in questions of labour law, consumer protection and environmental standards the assertive promotion of the rule of law is the best bet for progressive politics. The argument is simply that progressive politics should not limit itself to Ordnungspolitik because remaining too wedded to the vision of a new order when faced with the concentration of power, its constant shifting and the sheer volatility of oligopolistic capitalism is unrealistic. And to that extent the invocation of the “postwar” and the memory of Bretton Woods are an unhelpful guide to the possibilities for progressive economic policy in the present.


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