The Rise of the American System - Liberal Leviathan: The Origins, Crisis, and Transformation of the American World Order - page 123

balances while facilitating growth-oriented means of adjustment. The Bretton Woods agree-
ments—negotiated among a wider group of countries in 1944—reflected this new consensus
and established the implementing rules and mechanisms. 28
These new attitudes—which contrasted sharply with the views of leaders in earlier
eras—were noted by Jacob Viner, a leading American economist and postwar planner, in
1942. “There is wide agreement today that major depressions, mass unemployment, are so-
cial evils, and that it is the obligation of governments . . . to prevent them.” Moreover, there
was “wide agreement also that it is extraordinarily difficult, if not outright impossible, for any
country to cope alone with the problems of cyclical booms and depressions . . . while there is
good prospect that with international cooperation . . . the problem of the business cycle and
of mass unemployment can be largely solved.” 29 What British and American experts agreed
on was that in organizing the postwar world economy, there would need to be a framework of
cooperation. The framework would provide currency convertibility and stability of exchange
rates, create international reserves to allow governments to pursue expansionary responses to
balance-of-payments deficits, and, most generally, establish new techniques of internation-
al economic management that gave governments the ability to reconcile movements of trade
and capital with policies that promoted stable and full-employment economies. 30 Political
leaders on both sides of the Atlantic embraced this compromise between open markets and
social stability.
The other aspect of the social bargain was the progressive reform developments within
European and American societies. Across the advanced industrial world—before and after
the war—domestic social reforms ushered in a new era of capitalist regulation. Social in-
surance programs for workers and retirees reflected new commitments by governments to
the management of the national economy. The governments in the Western democracies de-
veloped bureaucratic capacities for planning, economic management, and industrial policy.
The Keynesian revolution brought new thinking about how the modern state could use fiscal
policy and other tools of macroeconomic management to foster full employment and eco-
nomy stability. 31 Governments sought to reconcile commitments to economic openness with
support and protection for a stable domestic economic order. “The industrial West rebuilt
its political economies on the basis of compromise among nations, classes, parties, and
groups,” writes Jeffry Frieden. “Governments balanced international integration and nation-
al autonomy, global competition and national constituencies, free markets and social demo-
cracy. . . . Socialists and conservatives, Christian Democrats and secular liberals worked to-
gether to build modern welfare states.” 32
In the years that followed the war, governments increased spending on social protection.
By the 1950s, most of the countries within the West had programs responding to the full
range of social insecurities—unemployment, old age, health, disability, and poverty. Postwar
economic growth and the liberalization of trade went together with the construction of mod-