When History Rhymes

IMF Blog, November 5, 2018

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Mark Twain: “History never repeats itself, but it does often rhyme.”
Heads of state gathering in Paris on the 100th anniversary of the end of World War I should “listen closely to the echoes of history and avoid replaying the discordant notes of the past.”
The IMF and other post‑World War II institutions (United Nations, World Bank) are part of a legacy formed to provide durable solutions to shared global problems.

The 50 years leading up to the Great War featured:
- remarkable technological advances: steamships, locomotion, electrification, and telecommunications.
- previously unprecedented global integration—often called the first era of globalization—where goods, money, and people moved across borders with relatively minimal impediments.
- between 1870 and 1913, large gains in exports as a share of GDP in many economies—a sign of increasing openness.
Distributional outcomes in that era:
- Great wealth creation accompanied by severe inequality.
- In 1910 in the United Kingdom the top 1% controlled nearly 70% of the nation’s wealth—a disparity never reached before or after.
Contemporary similarities called out:
- dizzying technological advances, deepening global integration, and growing prosperity that has lifted vast numbers out of poverty, but has also left many behind.
- rising inequality and uneven gains from technological change and globalization have contributed to political backlash.

Historical lesson: when rising inequality and uneven gains prompt a backlash, countries may prioritize national advantage over mutual cooperation, leading to zero‑sum behavior.
Consequence in the early 20th century:
- scramble for national advantage, forsaking cooperation, culminating in catastrophe as modern technology was deployed toward war.
Post‑war failures:
- In 1918, leaders “failed to draw the correct lessons,” retreating from trade, attempting to recreate the gold standard, and eschewing peaceful cooperation mechanisms.
- John Maynard Keynes argued that imposing financial ruin on Germany would eventually lead to disaster.

The post‑World War II system was designed to adapt:
- examples of evolution include the move to flexible exchange rates in the 1970s and the creation of the World Trade Organization.
The IMF positions itself as part of institutions that can evolve to sustain global cooperation.

A new multilateralism is advocated that is:
- more inclusive,
- more people‑centered,
- more accountable.
Scope of the new multilateralism should address a broader spectrum of challenges, including:
- financial integration and fintech,
- the cost of corruption,
- climate change.
The IMF highlights recent research offering policy ideas:
- macroeconomic benefits of empowering women,
- modernizing the global trading system.

Each leader and every citizen has a responsibility to contribute to rebuilding cooperative systems.
Core assertion: “The peaceful coexistence of nations and the economic prospects of millions depends squarely on our ability to discover the rhymes within our shared history.”

Source: Christine Lagarde, “When History Rhymes,” November 5, 2018.

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