The International Monetary Fund maintains a system of fixed exchange rates centered on gold and the U.S. dollar, and the International Bank for Reconstruction and Development provides economic assistance to developing countries. By creating them both, the Bretton Woods Agreement began a new era of international finance and monetary policy.
The Bretton Woods Agreement is the common name for the agreement arising out of the United Nations Monetary and Financial Conference, which was held in Bretton Woods, New Hampshire, from July 1 to July 22, 1944. Many nations had responded to the Great Depression during the 1930’s by adopting nationalist measures focused within each nation’s borders: They devalued their currencies, adopted high tariff barriers, and established unfair trading blocs. Rather than solving the global economic problems, these tactics led to further instability and brought many global leaders to conclude that economic cooperation was the only way the world could achieve peace and prosperity.
On August 9, 1941, U.S. president Franklin D. Roosevelt and British prime minister Winston Churchill crafted the Atlantic Charter, which called for global economic cooperation and lower trade barriers. The charter was announced on August 14 and was quickly adopted by the Allied nations.
By 1942, John Maynard Keynes, an adviser to the British treasury, and Harry Dexter White, an assistant to the U.S. secretary of the Treasury, had drafted plans for an organization to provide financial assistance to nations undergoing economic difficulties. Their plans called for fixed exchange rates, which, in theory, were expected to lead to expanded world trade. Between 1942 and 1944, representatives of the United States and Great Britain met several times to work out the details of this mechanism, and on April 21, 1944, the nations issued the Joint Statement by Experts on the Establishment of an International Monetary Fund, which formed the basis of the Bretton Woods negotiations.
As World War II neared its end, the United States invited more than seven hundred delegates from forty-four Allied nations to agree on a new series of rules to govern and manage the international monetary system. The resulting agreements brought order to the international financial and monetary system and established the
The IMF serves as a forum in which nations consult on macroeconomic issues. It is entrusted with maintaining a system of fixed exchange rates centered on gold and the U.S. dollar. Its task is to expand world trade by providing financial assistance to countries facing short-term deficits in their balance of payments.
The IBRD provided financial assistance at first for reconstruction in countries that had been damaged during World War II. It later provided economic assistance to developing nations.
The United States became a member of the IMF and IBRD in July, 1945, when Congress passed the Bretton Woods Agreements Act. The two organizations were officially established on December 27, 1945.
McClure, Paul S., ed. A Guide to the World Bank. Washington, D.C.: World Bank, 2003. Peet, Richard. Unholy Trinity: The IMF, World Bank, and WTO. London: Zed Books, 2003. Woods, Ngaire. The Globalizers: The IMF, the World Bank, and Their Borrowers. Ithaca, N.Y.: Cornell University Press, 2007.
International economics and trade
World Trade Organization
World War II