From Wall Street to Bay Street by Joe Martin & Joe Martin

Author:Joe Martin & Joe Martin [Kobrak, Christopher]
Language: eng
Format: epub
Publisher: University of Toronto Press
Published: 2018-05-06T04:00:00+00:00

CHAPTER FIVE

The Short Pax Americana: 1945–2000

Continuity and Discontinuity after the Second World War

Being left to the mercy of an all-powerful United States was intolerable, particularly as the U.S. government had been determined to show its people that American boys had not been sacrificed to perpetuate the moral abomination of empire. Yet here at Bretton Woods was the American Treasury Secretary tethering the historic event to the mast of his country’s superpower ambitions. The British had been anxious to see themselves as partners with the Americans in creating the ground rules for the postwar order, yet at every step to Bretton Woods the Americans had reminded them, in as brutal a manner as necessary, that there was no room in the new order for the remnants of British imperial glory.

Benn Steil, The Battle of Bretton Woods

The financial history of this period is in some respects easier for the authors to tell and for readers to understand than those of previous chapters. Many aspects still colour our financial landscape and current events. But in other respects, communicating the importance of this period is more difficult. Finance became a much larger part of our economies, even more interwoven with other countries by giant multinational firms, and more influenced by complex and quickly developing economic theories and technologies. The borders between and among financial institutions became increasingly blurred and various activities intertwined in complex ways. While we have divided this chapter into chronologically organized sections, many connections between the sections require the reader to go back and forth in time and across functional activities.

Like the interwar period, the second half of the twentieth century witnessed distinct macroeconomic and political phases, with changes to North America’s financial architecture and the relationship between Canada and the United States. Although these environments were essentially more conducive to sustainable growth and stable finance than those of the interwar period, they too shifted abruptly, challenging financial and political actors. World trade became a more important part of world GDP by growing at a faster rate. As a consequence exports represented 17.2 per cent of world GDP by the mid-1990s, up from 5.5 per cent in 1950.1 Between 1950 and 1975, world GDP grew, albeit from a low base, 3.1 times. In the next twenty-five years the world GDP increased 2.2 times.2 For those same quarter-century periods Canada grew, again from a low base, 3.2 times, while U.S. GDP grew 2.4 times. In the last quarter of the twentieth century both countries’ economies more than doubled, but the U.S. economy grew slightly faster than did that of Canada3 (see appendix 5.2).

For most of the period from 1945 to 2000 the United States was by far the world’s most important economic and political player, but its macro- and microeconomic performance fluctuated a great deal.4 Nevertheless, by most macroeconomic measures, the twenty years following the end of the Second World War compared favourably with the preceding years and many of the decades that followed, if not in economic growth alone, which tended to slow, but as measured by volatility and financial crises.

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