Bretton Woods (to which Keynes contributed significantly, although the final arrangements differed from his proposals in important ways) had three main formal aims: to promote and fund postwar European reconstruction, in Germany and France especially; to secure the political stability of debtor nations (the UK in particular, whose finances the war had left in tatters, deeply indebted to American finance and the US state); and to stabilize the international monetary regime, which was (correctly) understood to be crucial to the first two goals. Forty-four nations, including the most powerful states in the world and led by the US (which emerged from the war the clear capitalist hegemon), signed the agreements. According to their architects, the institutions would work as follows:

The IMF, using funds contributed by all nations, would provide low-interest loan coverage to debtor states to prevent default during reconstruction and reconversion (the shift from a war-economy to a "peace-time" economy). The World Bank would provide loans or grants for the reconstruction of European (and, eventually, Japanese) economies, a flow of funds greatly enhanced by the US's Marshall Plan, which rebuilt German industry remarkably rapidly in the 1940s and 1950s (the US wanted German demand for its intermediate and consumer goods, so reconstruction was essential). To make all this possible, the international monetary regime was stabilized via a system of "fixed" exchange rates between all major currencies, so all capitalist nation-states had the value of their moneys "pegged" to specific rate against the US dollar (unsurprisingly, China and the Soviet Union were not signatories). The foundation of the system lay the US dollar's anchor to a gold standard. In other words, its value was pegged to gold, which made the US responsible for the stability of the regime as a whole. Every US dollar was to be backed by--exchangeable for--gold: 1 troy ounce for every 35 US dollars, to be precise.

Although the term "Keynesian" has come to describe the deficit-financed welfare function of the state, as discussed in Chapter 2, it is in some ways quite far from what Keynes' theory suggests and the policies he endorsed. While he recognized the temporary need for state debts, he was no fan of permanent welfare mechanisms. Indeed, the massive infrastructure of the modern welfare state would have almost certainly alarmed him.

• Low unemployment levels empowered labour, which demanded a bigger income share [...] thus reducing profit and slowing innovation.
• High capacity utilization the proportion of productive resources actually in use) and growth increased demand and stressed supply, causing inflation.
• Europe and Japan [...] "caught up" with the US, challenging the Bretton Woods political economic hierarchy, which was explicitly structured with the US on top.
• Existing technologies were pushed to their limits, reducing the Long Boom's unprecedented rates of productivity growth.
• The isolation of planned economies [...] allowed them to grow also [...] fanning domestic opposition in the capitalist core.

This underlines the fact that how we explain the crisis of the 1960s and 1970s is not merely "academic". On the contrary, it is enormously important today, both politically and economically, because we are constantly struggling over what lessons the past teaches. Different interpretations of the past lead to different conclusions regarding what can be done at present. But we must not reject orthodox explanations just because they are orthodox. In fact, capitalist reason provides some very helpful tools for understanding capitalism. There are aspects of contemporary economic life that appear to be very well diagnosed by conventional tools. Rather than rejecting orthodoxy because of its ideological predisposition to posit capital as the engine of historical progress, even in periods before capitalism itself existed, and to see workers and noncapitalists as "backward" forces, hindering progress, we need to see it for what it is: a set of ways of understanding the world that is a product of the very world it is trying to explain. Capitalist reason is embedded in and emerges from a particular, ideologically saturated world. Recognising the embeddedness of "reason" in its time is about as close to truth as we are ever going to get with respect to actually existing human communities. We have to resist the desire to dismiss it out of hand, and search instead for the truth in it, truth of which that reason might not itself be aware.

[...] It has never been interested in upsetting capitalism or its key institutions. If the UAW had its way, the Long Boom would have been Longer, ideally Eternal. [...]

[...] the crisis that ended the good ol' days of the Long Boom was a distributional struggle. Orthodoxy almost never says this explicitly, but it is right there in its account of the history of capitalism. This struggle had two fronts: (1) a struggle between labour and capital over the distribution of income--an increasingly empowered labour-force wanted more of it; (2) a struggle between nationally based capitalists over the distribution and control of productive power and international market share. One might also add: (3) conflicts between highly developed rich countries and resource-rich but less powerful countries. [...]

[...] It put capital back on top of the political economic hierarchy--it had never really been usurped, but it had been forced to cater to the rabble--by choosing domestic conflict management option (b) above: clamp down by reducing government spending, raising interest rates, suppressing wages and benefits, and tightening up the supply of money and credit in circulation. This hurt capital in the short term, and support among business people for this radical economic restructuring was by no means unanimous, but in the long term it was one of the most brilliant moves it ever made. This turn to inflation control marks the consolidation of the neoliberal capitalist state in the industrialized world.

One of the more common paths this transition took--in Canada, the US, and the UK among others--had three basic steps:

1. [...] the government [...] tried to inflate and/or stimulate the way out of it [...] By the early 1970s, increasing inflation proved this tactic ineffective on its own.
2. By around 1972 or 1973 [...] they made inflation against the rules, via wage and price controls like those used during World War II [...] union commitments to reduce wage demands and employer commitments to keep prices from rising at such rapid rates. This did not work, and pleased no one.
3. In the mid- to late 1970s, the state gave up trying to please both sides, abandoned labour and small business, and embraced finance-friendly Chicago-style economic policy: jacking interest rates and slashing government spending.

The best known example of step 3is the so-called Volcker coup of 1979-83. Paul Volcker was appointed chairman of the Federal Reserve [...] at the end of Jimmy Carter's single presidential term, and remained through most of Reagan's term of office. The Volcker coup is best described as the use of US monetary authority to squash inflation no matter how many jobs, how many social services, or how much human welfare it cost. [...]

[...] Nixon's attempt to inflate his way out of crisis was not only directed at domestic problems. He was also effectively trying to export inflation, and reduce the real value of the US foreign debt [...]

Most states issue both "government bonds" [...] and "sovereign bonds"

we will assume a "zero-coupon" bond, meaning that all the investment risk is calculated into the difference between par value ($100,000) and the discount Brazil must offer to attract investors

[...] bond yields also have a massive impact on domestic interest rates. Domestic bands will lend to local enterprises only at rates competitive with what they can earn by investing their money elsewhere. If they are confident they can get 12 percent return on their money buying bonds, they are going to need a lot of convincing to lend to a local firm for less.

[...] during the crisis that led to the Volcker coup [...], US interest rates skyrocketed, and other nations had to follow suit, just to prevent international finance from dropping their currencies and bonds in favor of those of the US--and in the process killing non-US exchange rates and economies. So, with the Volcker coup, the rest of the world had to raise their rates to comparable levels, meaning the Fed's vicious recessionary monetary policy rapidly diffused across the globe.

One of the better-known results of this process was the Latin-American debt crisis. [...]

Neoliberalism is a term currently used only by its critics; its champions, including the leaders of most capitalist countries, do not proclaim themselves "neoliberals."

1. Liberalization (drop tariffs, subsidies, capital controls, export restrictins, etc.)
2. Privatization (sell state holdings, which in many cases are substantial)
3. Stabilization (allow currency to float at its "natural" [usually lower] exchange rate)

As this outline of the neoliberal policy package shows, neoliberalism is [...] a description of at least two powerful and intertwined contemporary economic dynamics: globalization and financialization. Neoliberalism can be understood as the historical conjuncture, and political legitimization (via both coercion and consent) of these two processes. Globalization is the integration of the international economy via trade. The original version of liberalism certainly involved globalization, but without the kind of financialization we have today with _neo_liberalism--or at least, back then, finance played a different and subordinate role as investor in productive enterprise.

[...] this definition of neoliberalism is helpful since it allows us to [...] understand the differences between what is sometimes called the "first era of globalization"--British free trade imperialism in the nineteenth century--and what we call globalization today (by which we mean something more specifically neoliberal).

spatial problems that used to seem insuperable are increasingly understood in terms of their temporal features

Neoliberalism is the ongoing effort, in an inevitably uneven global political economy, to construct a regulatory regime in which the market is the principal means of governance and the movement of capital and goods is determined as much as possible by firms' short-term returns.

[...] Neoliberalism is not just about getting rid of rules, or "deregulation." Removing tariffs, capital controls, currency pegs, restrictions on foreign ownership, and so forth are all essential elements of neoliberal regulatory programs, abolishing rules that limit firms' opportunity to maximize short-term returns. But states and firms and international institutions need not only to eliminate rules, they must also create new ones, imposing, extending, or deepening regulatory or legal structures where they were previously underdeveloped or nonexistent. For example, countries the world over have established intellectual property rights regimes for everything from medicinal plants to corporate logos, often where no such legal frameworks existed before. That is not deregulation by any stretch of the imagination. Jamie Peck and Adam Tickell were among the first to point out these complexities in "actually existing neoliberalism," which they label "roll-back" (deregulation) and "roll-out" (reregulation). Neoliberalism has always involved both.