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NEW YORK (TheStreet) -- Last week the world got a wake-up call.

It came in a combination of slowing growth in China, and Beijing's reaction to that growth; slowing growth and integration problems in Europe; globally falling commodity prices; and problems in emerging markets.

None of these problems is in the U.S., but the U.S. is affected because global financial markets are integrated.

These offshore events make it likely that the Federal Reserve will postpone raising short-term interest rates, but that is a minor issue right now.

The fact is, last week's events were global in nature and must be treated on a global basis, but this will require global leaders and economists to shift their thinking and work together.

First, let's look at two important books: The Battle for Bretton Woods, by Benn Steil; and Money, Markets & Sovereignty, by Steil and Manuel Hinds.

Both discuss an idea that developed in the 1920s -- that countries needed to claim their "sovereignty" so that each can run an "independent" economic policy and maintain high levels of employment.

Achieving high levels of employment was important in fighting the Bolshevik revolutionary threat at the time.

John Maynard Keynes, after World War I, was a strong advocate of countries controlling capital flows and maintaining a fixed exchange rate so that they could focus on their own internal economic situations.

Eliminating international capital flows and fixing exchange rates would allow countries to follow fiscal and monetary policies best suited for their specific challenges.

In the 1930s, the drive for national sovereignty increased as protectionism entered the scene. Keynes was one of its advocates.

The international financial system for the post-World War II era was created at the Bretton Woods conference in July 1944.

One of the main conditions for the new international arrangements was that international flows of capital were to be controlled, and currency prices would be fixed against the greenback.

Note that the Keynesian idea of using government spending to supplement private-sector spending during recessions and depressions in order to put people back to work was dependent upon nations maintaining the right to conduct their own economic policies.

Something changed in the late 1950s and early 1960s. The world started to open up, and capital began to flow more freely. By, the end of the 60s, the dollar was facing problems because of the requirement that exchange rates with other currencies be fixed.

The Bretton Woods system fell apart on Aug. 15, 1971, when President Nixon floated the value of the dollar and took the U.S. off the gold standard.

Nixon's move was viewed as acceptable because it would allow the U.S. and other countries to continue to conduct fiscal and monetary policies independently. This acceptance was based on something called the trilemma of international economics.

The trilemma states that a nation can achieve only two of the following things: control over international capital movements; a fixed exchange rate; and independent economic policy.

Because the control over international capital movements no longer existed and the U.S. wanted to maintain independent economic policies, the fixed exchange rate system had to go.

Well, the world continued along, maintaining, verbally, the economic sovereignty of each nation. This idea continued for as long as it did because the U.S. was the economic hegemon of the world and managed the most important currency. So, for the rest of the 20th century, things went along reasonably well.

Still, changes were taking place. As information technology developed, financial markets became global.

The U.S. prospered from the depreciation of the dollar. In the last 40 years of the 20th century, the U.S. followed Keynesian-style economic policies but it didn't limit fiscal stimulus to only economic downturns.

Meanwhile, other nations and regions were growing up to challenge the world's economic hegemon. There was China, of course, but also the development of the single-currency eurozone. And countries such as India and Brazil were working hard to become bigger players.

That is where we are now. It would seem as if the efforts to maintain economic sovereignty have come to an end. The world is just too connected and the financial markets are just too integrated to prevent situations like the one we are going through right now.

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In this environment, countries cannot get into a blame-game. This is a global situation, and nations must work together to resolve it.

Countries also can't resort to currency wars, trying to depreciate their currencies more than those of other nations. This will only fragment the world community and lead to protectionism.

Lastly, countries can't follow Keynesian-style policies in order to restore faster rates of economic growth. The problems in the world are not cyclical in nature. They are structural, requiring structural solutions.

Right now, in the midst of global turmoil, the U.S. is one of the more solid economies. It's not growing all that fast: The compound rate of growth in six years of recovery is only 2.2%, the weakest post-World War II recovery on record.

Even the Federal Reserve does not believe that economic growth will get much higher over the next several years. Still, some growth is expected.

One factor behind this slower growth is labor productivity. Without increasing labor productivity, economic growth slows and real wages stagnate. These are issues in the U.S. and elsewhere.

In the U.S., the labor force participation rate has dropped to less than 63%, its lowest level since the late 1970s. This has caused the unemployement rate to decline.

And even though unemployment now stands at 5.3%, underemployment remains high as many people who'd like to work full time find themselves in part-time jobs.

Unemployment is even higher for people who lack a high school diploma: 8.3%. It's 5.5% for those with one, but only 2.6% for those with a bachelor's degree or higher.

The old Keynesian policies were supposed to help those with higher unemployment rates because by stimulating the economy, manufacturers and other business were supposed to hire people back into the jobs in which they were formerly employed.

This was all fine and good from the 1930s through into 1960s, because innovation was not so prevalent. In those times, a worker could pretty well spend a major portion of his/her working-life in a particular job or industry. When the economy slowed down, people were laid off from these jobs. When the economy recovered they went back to their old jobs.

Keynesian-style policies were aimed at returning them to their previous jobs more rapidly than if the economy was just left to itself.

Problem is, that world is gone. As can be seen from the figures presented above, people need educations to be employable, and they need continuing education and retraining to keep up with rapid changes in jobs and industries.

There's another issue. Physical investment by businesses has changed over the past 50 years. Businesses have redirected investment from physical capital to financial capital as finance and financial innovation have become a bigger part of the business world. This has changed the composition of the work force and the capital stock.

In terms of the capital stock, we see that its capacity utilization have dropped over the past 50 years. In the late 1960s, peak capacity utilization went up to about 90%. Yet, at the current peak in the business cycle, capacity utilization is only around 79%.

Clearly, this is an indication that there are structural problems with the way U.S. businesses now invest. What seems to have happened is that the economic policies of the past 50 years have stimulated investments in plant and equipment that have longer accounting lives than economic lives.

In other words, in the modern, changing world, businesses purchase physical capital they expect to use for longer than is economically sensible. As a consequence, they keep this legacy capital in their plans and on their books for a longer time than justified.

Fiscal stimulus to get the economy going again not only encourages the rehiring of laid-off workers, it causes businesses to use obsolete physical capital.

Thus, Keynesian economic stimulus has kept some industries and some workers in arrangements that do not help either over the longer-run. One side effect of this is that productivity and economic growth slow.

This discussion has been about what happened in the U.S. But much applies to rest of the developed world.

Other developed nations have even larger problems trying to reform problems related to social ties, government corruption, hiring practices and the rule of law. For example, Italy's current Prime Minister Matteo Renzi is struggling to get necessary reforms implemented.

The old theories do not die. We see economists such as Joseph Stiglitz and Paul Krugman continue to argue that Italy and Greece are sovereign nations and need to listen to their own people in devising solutions. Only as independent sovereign nations can Greece and Italy carry out the antiausterity programs that these Keynesian economists believe they should follow.

But the environment has changed, and nations must work in the world of the new economic era.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.