With super-Boomer (and now Nobel laureate) Paul Krugman advocating slapping a 25% tariff on Chinese imports and with Obama’s new “National Export Initiative” targeting a doubling of U.S. exports in five year come hell or high water, one senses a seismic shift in the geopolitical firmament. It’s not just the prospect of protectionism and trade wars I’m talking about. Yes, this is a huge danger—and could force the global economy back to the ER in a heartbeat. But there’s something bigger here: The disintegration of the Bretton Woods consensus, built by the G.I. (born 1901-1924), that formed the basis for global trade and power for 66 years, 1945 to 2011–that is, for three turnings.
The Boomer (born 1943-1960) parents created a global system (Bretton Woods, fixed exchange rates, IMF, World Bank, NATO, and regular rounds of tariff reductions were all part of it) in which America’s national purpose was global prosperity, not just our own prosperity. We set up all these global rules and then we promised not to game them. Even more, we promised not to care very much if other nations, who really were just focused on their own prosperity, tried to game them. (At one time or another, this included nearly every OECD country, esp Japan.) America was “above all that.” Throughout the postwar era, every single U.S. Commerce Secretary used to complain that while the German or Italian governments made swinging huge export deals for their own companies a national priority, we always subordinated the interests of our workers and companies to broader global political goals. Again, we were America. We were above such parochial concerns. We needed to keep the rest of the liberal democratic world healthy and prosperous in our “long twilight struggle” against Communism. Somewhat surprisingly, this Bretton Woods consensus outlived the fall of the Soviet Union by 21 years, 1990 to 2011—that is, one turning—though there have been growing strains. One might attribute this to generational inertia. Enough Silent (born 1925-1942) were still in power, the Boomers were still finding their voice, and the Generation X (born 1961-1981) were still on the sidelines.
Now that may all be changing. The Silent, who are the last generation to recall, from their childhood, *why* we created Bretton Woods, is passing from power. The Boomers will not rest until they see the last edifices of their parents’ institutions reborn in their own image. And now the Xer influence is rising. To many Xers, the idea that America is “above all that” is a joke. Every since they were kids in the OPEC-stagflation ‘70s, they’ve been hearing that America is in crisis, has reached its last days, and is sliding into no-growth irrelevance and decadence (of which their generation btw is a prime example). For Xers, the hubris and complacency of the G.I. worldview has been replaced by survivalism and revanchism. Yes, we got the message: America’s empire is over. America is just one more desperate player in a dog-eat-dog world. So why not go after our share? I hurt. I need a job. I do not want my life to sacrificed on some insane alter of global stability and progress.
The G.I.s believed in Bretton Woods because it was *their* system. They built it and trusted it. For decades thereafter, younger generations deferred to their institutional confidence. I think that may now be coming to an end. From this perspective, how America emerges from the decline of Bretton Woods will depend hugely on the rising Millennial (born 1982-200?). What new global system will they erect? Will it work? Will it be built in time?
These idle generational reflections were prompted by the following essay (from Stratfor) on the outlook for the Chinese economy. According to Zeihan, the single biggest consequence of the dismantling of Bretton Woods will be the meltdown of the Chinese economy. No more “Chimerica” (to use Niall Furgeson’s phrase). And that meltdown, in turn, will have huge global repercussions.