The Divide: A Brief Guide to Global Inequality and its Solutions

by Jason Hickel

But then the Great Depression hit, followed by the Second World War. In the wake of the war, when Western powers gathered at the Bretton Woods Conference in New Hampshire to decide how to prevent such a catastrophe from recurring, they set up the General Agreement on Tariffs and Trade (GATT). John Maynard Keynes, the key figure at the conference, argued that the rise of protectionism across the industrialised world had contributed to low aggregate demand: people weren’t buying enough stuff because prices were too high, and the economy ground to a halt. For Keynes, excess protectionism was a primary driver of the Great Depression – a depression that had caused such misery in Germany and Japan, for example, that it had eventually given rise to the fascist politics that led to the war. Keynes believed that demand could be revived by carefully relaxing trade tariffs. This would allow prices to fall, people would start consuming again and the economy would be jolted back to life. The goal of the GATT was to reduce tariffs across the board through collective bargaining among industrialised countries. The system was designed to be beneficial to all, in the spirit of unity and solidarity, so the rules were not rigidly applied: member states could negotiate to avoid policies that would cause their economies significant harm.

So Keynes good, Hayek bad, but Keynes caused the first ceack in Global South development?