You probably won’t be surprised to hear we’re living in a time of global income inequality on a scale never before seen in history. Money is concentrated in the hands of an increasingly tiny number of people around the world, and they increasingly have more of it than ever. According to the 2018 World Inequality Report, the richest 0.1% of the global population have increased their combined wealth by as much as the poorest 50% since 1980. The combined net worth of all 2,208 of the world’s known billionaires is twice that of the poorest 2.5 billion people. By 2030, the richest 1% of the global population are projected to hold 64% — a full two-thirds — of the world’s wealth.
It wasn’t supposed to turn out this way. When the world’s top economists sat down in Bretton Woods, New Hampshire in 1944 to figure out how to prevent the world economy from ever again becoming as destabilized as it was in the years leading up to World War II, they envisioned a global financial system that would stop countries from manipulating their exchange rates, curtail unrestricted international cash flows, and lock speculative capital behind national borders.
And at first, financial globalization—which formed international institutions like the World Bank and the International Monetary Fund, and tied currencies to the U.S. dollar, which was tied to gold — worked exactly as intended, laying the economic foundation for a period of unprecedented prosperity and stability in the second half of the 20th century.
But this is a very different century — and in the decades since Nixon deflated the dollar’s value in gold in 1971, leading to a return of the old unregulated order and our current floating exchange rates, the Bretton Woods system that was created 70 years ago has fallen apart. (more...)
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