From Bretton Woods to Financial Globalization

As already stated, the Great Depression of the 1930s led to stricter rules and a larger involvement of the public sector in the economy. In particular, with reference to the new financial rules, each nation adopted country-specific banking rules. In the USA, for instance, the authority chose a specialization model, and the regulatory approach of the New Deal limited competition in the banking and financial system to guarantee more stability. In 1927, the McFadden Act had already stiffened the rules on the establishment of a national banking system and ruled that the opening of new branches in a state other than that of the origin of the financial institution was only possible subject to the approval of the affected state. In 1933, Regulation Q set a ceiling on bank deposit rates and prevented the banks from competing in the field of retail funding. The same year, the Glass-Steagall Act classified banking institutions as commercial banks and investment banks, thus putting an end in the USA to the existence of universal bank. After World War II, the creation of the national monetary and financial frameworks was reconciled with the international monetary guidelines provided by the Bretton Woods agreements. As a consequence, the control of the international monetary order shifted from the United Kingdom — which had kept it for a long time (de Cecco, 1974) — to the United States.