Debate About the Significance of the Collapse of Bretton Woods Focuses on Two Main Issues

Significance: Debate about the significance of the

collapse of Bretton Woods focuses on two main issues:

why it happened and what it led to. For many commentators,

the end of Bretton Woods reflected a decline in US

hegemony (Gilpin 1987). For hegemonic stability theorists,

a hegemonic power is one that is willing and able to

act in ways that allow other states to make relative gains,

so long as these help to sustain the liberal economic

order. However, confronted by the rise of Japan and

Western Europe and facing a growing balance-ofpayments

deficit, the USA opted to place its national

interests before those of the liberal world economy.

Others, nevertheless, argue that the end of Bretton Woods

was not so much an example of declining hegemony but

an exercise of audacious hegemonic power in its own

right. In this view, the USA had become a ‘predatory

hegemon', willing to dismantle a system of global governance

that no longer served its interest. This process was

completed in the 1980s by the establishment of the

‘Washington consensus'. For economic liberals, however,

these changes had less to do with hegemonic power and

more to do with the futility of trying to regulate a market

capitalist system. From this perspective, Bretton Woods

was doomed to collapse, sooner or later, under the weight

of its economic contradictions: markets and regulation are

simply not compatible.