U.S. Treasury Secretary Janet Yellen did something important last week, and it was mostly underrated. She reconnects trade with values.

In a speech to the Atlantic Council in Washington, the secretary called for The new Bretton Woods framework And a shakeup of the IMF and World Bank institutions, both of which hold their annual meetings this week.

She also made it clear that Vladimir Putin’s war in Ukraine and China’s failure to join sanctions against Russia by the United States and more than 30 other countries is a pivot for the global economy.

In the future, U.S. trade policy will no longer simply let the market run its course, but will adhere to certain principles—from national sovereignty and rules-based order to safety and labor rights. As she puts it, America’s goal should not be just “free and safe trade.”

Countries should not be allowed to use their “market positions in critical raw materials, technologies or products to disrupt our economy or exercise unnecessary geopolitical influence”. This is clearly a nod to Russian oil politics, but could easily cover Taiwanese chip manufacturing or China’s hoarding of rare earth minerals, or, during a pandemic, personal protective equipment.

Yellen coined a new word for this post-neoliberal era: “friend support.” The U.S. is now leaning toward “friendship support for supply chains with a large number of trusted nations” that have “a set of norms and values ??about how to operate in the global economy.”It will also seek principles-based alliances in areas such as digital services and technology regulation, similar to last year’s global tax treaties (She takes the lead).

This is not America alone, or even America first. But it does acknowledge the existence of a political economy in which free trade is truly free only when nations operate with shared values ??and a level playing field.

This is different from the neoliberal era that is passing – and in some key ways. The term “neoliberalism” was first used in 1938 at the Walter Lippmann Symposium in Paris, which brought together economists, sociologists, journalists and businessmen who wanted to find a way to protect global capital ideology from fascism and socialism.

This is a moment that echoes our own in many ways. World War I tore Europe apart. A decade of easy monetary policy until 1929 failed to cover up major political and economic changes that created huge rifts in society. The labor market and family structure are changing. A pandemic, inflation, then a depression, deflation and a trade war have battered the continent economically.

Neoliberals hope to solve these problems by connecting global markets. They argue that the world is less likely to fall into anarchy if capital and trade are linked through a series of institutions that can float over individual nation-states.

For a long time, the idea worked, in part because the balance between national interests and the global economy didn’t get too far out of hand. Even in the Reagan-Thatcher era of the 1980s, global trade in particular needed to serve national interests. As president of the United States, Ronald Reagan may have been a free trader, but he used tariffs on Japan and supported industrial policy (as most other Asian and many European countries do).

In the US, this began to change during the Clinton administration, which orchestrated a series of free trade deals that culminated in China’s entry into the World Trade Organization in 2001, in the hope that as China got richer, China would get richer. free. Of course, that didn’t happen. Now, finally, leaders around the world are acknowledging the reality of the “one world, two systems” problem.

Yellen said she hopes “we don’t end up with a bipolar system,” especially given that China itself has benefited so much from the neoliberal system. “But the real problem has arisen,” she admits. “China relies on SOEs in many ways and engages in practices that I believe unfairly undermine our national security interests.” Transnational supply chains “have become very efficient and excellent at reducing the cost of doing business, but are not resilient”. Both issues must be addressed, she said.

Today’s crossroads are not dissimilar to those faced by the neoliberal thinkers who created the original Bretton Woods system. They started not with the idea of ??laissez-faire markets working for their own benefit, but with a very human question – how to piece together a war-torn world to create a safer and more cohesive society, a liberty, liberty and prosperity will be guaranteed. The market cannot do this alone. New rules are needed.

This is where we are now. Some might argue that the pendulum shift is obsolete. Especially in the past 20 years, global capitalism has run a little too far on the domestic problems of some individual countries. Countries with vastly different political, economic and even moral frameworks do not all follow the same global rules. In this case, fair and free markets begin to crumble.

The process of forging a new Bretton Woods system has only just begun. But it’s a good place to start with the values ??that liberal democracies want to uphold.

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