Summary
Overview
This episode provides a deep historical analysis of global trade policy from post-WWII through today, examining how decisions made at Bretton Woods, Nixon's China opening, and China's WTO entry led directly to working-class decline and the rise of populism. Anthony and Katty trace the evolution from the balanced Bretton Woods system that protected workers through the 1990s hyper-globalization that hollowed out manufacturing communities, ultimately fueling support for figures like Donald Trump and Brexit.
The Bretton Woods System and Post-War Trade Architecture
In July 1944, 28 nations gathered at Bretton Woods to design the post-war economic order with strong unions, stable currencies, and protected labor. The U.S., with 50% of global output but only 2% of population, deliberately created an unbalanced trading system allowing other nations protections while keeping American markets open. This wasn't altruism but strategic—raising global living standards to prevent communist expansion while funding the Marshall Plan's $250 billion equivalent to rebuild Europe and even former enemies like Japan.
- Bretton Woods Treaty established strong unions and limited foreign competition through currency stability
- U.S. had 50% of world's output with only 2% of population, creating asymmetric trade terms
- Marshall Plan provided equivalent of $250 billion to rebuild Europe and Japan
- System was designed to prevent communist expansion by raising living standards
" The idea was allow for strong unions, which will keep the population happy because you want real good living wages. You want rising wages across income levels. "
Nixon's 1971 Decision and the End of Bretton Woods
In August 1971, Nixon met with economic advisors at Camp David facing unsustainable Vietnam War deficits and French demands to exchange dollars for Fort Knox gold. On August 15th, Nixon announced the dollar would no longer adhere to the gold standard, becoming fiat currency. This destabilized the economic system, ended Bretton Woods, and ushered in the high inflation of the 1970s with meat boycotts, power cuts, and the beginning of manufacturing outsourcing as companies sought cheaper labor.
- Nixon ended the gold standard on August 15, 1971, making the dollar fiat currency
- This destabilized the Bretton Woods system and caused high inflation in the 1970s
- 1970s saw meat boycotts, power cuts, and the beginning of manufacturing outsourcing
- The 1970s planted the seed of populism as the old social compact broke down
" The populous seed was actually planted. People felt that the old deal was breaking down. The Bretton Woods deal and the compact with each other that we were going to help each other. "
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