Bretton Woods Conference

• 1. Economic Chaos Before 1944

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  The autumn of 1923 saw prices in Germany rise by 41 percent every single day. A single U.S. dollar bought about four trillion German marks during that crisis. Citizens could no longer use money for daily transactions and had to resort to bartering goods directly. This hyperinflation contributed to the financial collapse that eventually allowed Nazism to take power. Leaders remembered how trade wars spread the Great Depression globally after nations abandoned the gold standard. They sought a new system to prevent such economic disasters from happening again. John Maynard Keynes published The Economic Consequences of the Peace in 1919 to warn against harsh reparations. His work highlighted the dangers of leaving countries without resources to recover from war debts.

• 2. Keynes Versus White Plans

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  John Maynard Keynes proposed an International Clearing Union with its own currency called the bancor. He wanted to charge interest on both trade deficits and excessive surpluses to balance global commerce. Lionel Robbins described the idea as having an electrifying effect on government thought throughout the apparatus. Harry Dexter White represented the United States Treasury Department and rejected the plan entirely. White stated they were perfectly adamant on that point and took the position of absolutely no. Instead he proposed an International Stabilization Fund that placed the burden of maintaining trade balances on deficit nations only. Rich countries could accumulate unlimited surplus under his proposal while deficit nations faced strict limits. The final agreement at Bretton Woods resembled White's plan much more closely than Keynes's original vision.

• 3. Commissions At Mount Washington

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  The conference convened at the Mount Washington Hotel in New Hampshire from July 1 to 22, 1944. Seven hundred thirty delegates attended representing all forty-four allied nations present for the meeting. Commission I dealt with the IMF and was chaired by Harry Dexter White himself. Commission II focused on the IBRD and was led by John Maynard Keynes who served as British economic adviser. Eduardo Suárez chaired Commission III which handled other means of international financial cooperation outside the main two bodies. Every country sent delegates to all meetings but some subcommittees had restricted membership for efficiency. Work generally proceeded through negotiation and informal consensus rather than formal voting procedures. The U.S. delegation held the largest influence because their nation was the world's biggest economy at the time.

• 4. Creating Two Global Banks

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  Agreements signed during the conference established the International Bank for Reconstruction and Development later known as part of the World Bank Group. These institutions were designed to manage exchange rates and fund post-war reconstruction efforts globally. Member countries pledged to make their currencies convertible for trade-related transactions though transitional provisions allowed indefinite delays. Widespread current account convertibility did not become operative until December 1958 when Western European members joined. Governments could revise exchange rates by up to ten percent from the initially agreed level without objection. The IMF could deny access to resources if a member exceeded that threshold significantly. Voting power in both institutions depended on formulas giving greater weight to countries contributing more capital quotas.

• 5. Norwegian Challenge To BIS

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  The Norwegian delegation presented evidence that the Bank for International Settlements participated in war crimes during the conflict. This bank formed in 1930 originally intended to settle financial obligations arising from First World War peace treaties. During the Second World War it helped Germany transfer assets from occupied territories across Europe. Commission III considered Norway's proposal for liquidation of the Bank for International Settlements at the earliest possible moment. The proposal passed Commission III without objection and became part of the Final Act of the conference. Momentum for dissolving the institution faded after U.S. President Franklin Roosevelt died in April 1945. Under Harry S. Truman top U.S. officials most critical of the BIS left office. By 1948 the liquidation effort had been put aside entirely despite earlier strong support.

• 6. Ratification And Soviet Absence

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  Articles of Agreement signed at Bretton Woods did not come into force until ratified by countries holding eighty percent of capital subscriptions. That threshold was finally reached on the 27th of December 1945 when enough nations approved the terms. Institutions were formally organized at an inaugural meeting held in Savannah Georgia from March 8 to 18, 1946. Notably absent from Savannah was the USSR which had signed the Final Act but refused to ratify it later. Soviet leaders rejected inclusion of the dollar alongside gold calling the institutions branches of Wall Street. Australia and New Zealand were likewise absent from formal participation though they joined the IMF and IBRD later. The Russian Federation eventually joined these organizations in 1992 as a successor state to the former Soviet Union.

• 7. System Collapse And Reform Calls

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  The Bretton Woods system of pegged exchange rates lasted into the early 1970s before collapsing completely. Gross domestic product became adopted as the primary measure of country economies during the conference proceedings. Since that collapse there have been numerous calls for a new Bretton Woods arrangement globally. Critics point to the failure of fixed exchange rates as evidence needing systemic reform today. The International Trade Organization never came into existence because its charter failed ratification by the U.S. Senate. Instead the less ambitious General Agreement on Tariffs and Trade was adopted in its place initially. In 1995 Uruguay Round negotiations established the World Trade Organization as the replacement body for GATT principles.