United Nations Monetary and Financial Conference
The
United Nations Monetary and Financial Conference, commonly known as
Bretton Woods conference, was a gathering of 730
delegates from all 45
Allied nations at the
Mount Washington Hotel, situated in the
resort town of
Bretton Woods, New Hampshire. The conference was held from
1 July to
22 July,
1944, when the Agreements were signed to set up the
International Bank for Reconstruction and Development, the
General Agreement on Tariffs and Trade (most commonly referred to as
GATT), and the
International Monetary Fund (the
IMF), to regulate the international monetary and financial order after the conclusion of
World War II.
As a result of the conference, the
Bretton Woods system of
exchange rate management was set up, which remained in place until the early
1970s.
"The economic health of every country is a proper matter of concern to all its neighbors, near and far."-
President Franklin Roosevelt at the opening of Bretton Woods
Stated purposes and goals
The Bretton Woods Conference took place in
July of
1944, but did not become operative until
1959, when
European currency became convertible. Under this system, the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development were established. The IMF was developed as a permanent international body. The summary of agreements from
July 22,
1944 states, "The nations should consult and agree on international monetary changes which effect each other. They should outlaw practices which are agreed to be harmful to world
prosperity, and they should assist each other to overcome short-term exchange difficulties." The International Bank was created to speed up
post-war reconstruction, to aid political stability, and to foster
peace. This was to be fulfilled through the establishment of programs for reconstruction and development.
Encouraging "open markets"
The seminal idea behind the Bretton Woods Conference was the notion of
open markets. In
Henry Morgenthau's farewell remarks at the conference, he stated that the establishment of the International Monetary Fund and the World Bank marked the end of
economic nationalism. This meant countries would maintain their national interest, but trade blocks and economic spheres of influence would no longer be their means. The second idea behind the Bretton Woods Conference was joint management of the Western political-economic order. Meaning that the foremost industrial democratic nations must lower
barriers to trade and the
movement of capital, in addition to their responsibility to govern the system.
Monetary order in a post-war world
The need for postwar Western economic order was resolved with the agreements made on
monetary order and
open system of trade at the 1944 Bretton Woods Conference which allowed for the synthesis of Britain's desire for
full employment and economic stability and the United States' desire for
free trade.
One failed proposal
The Conference also proposed the creation of an
International Trade Organization (ITO) to establish rules and regulations for
international trade. The ITO would have complemented the other two Bretton Woods proposed international bodies: the
IMF and the
World Bank.
The ITO charter was agreed at the
U.N. Conference on Trade and Employment (held in
Havana, Cuba in
March of
1948), but was not ratified by the
U.S. Senate. As a result, the ITO never came into existence.
However, in
1995, the Uruguay Round of GATT negotiations established of the
World Trade Organisation (WTO) as the replacement body for GATT. The GATT principles and agreements were adopted by the WTO, which was charged with administering and extending them. It has been argued that the WTO functions, today, as the ITO would have functioned, had it been created.
*
Bretton Woods system*
Nixon Shock*
World War II*
Marshall Plan*
Franklin Roosevelt*
Gold standard*
International trade*
International finance*
Exchange rates*
The General Agreement on Tariffs and Trade*
Protectionism*
Free trade*
International Trade Organization (Proposed by this Conference; failed to be ratified by the U.S. Senate; later revived in the WTO).
*
World Trade Organization (Revival of ITO).
