What was the Bretton Woods Conference

The Bretton Woods Conference was a major international conference held in New Hampshire in 1944. It led to the creation of the International Monetary Fund, the International Bank for Reconstruction and Development (now the World Bank), and, indirectly, to the General Agreement on Tariffs and Trade (now the World Trade Organization). These organizations are collectively known as the Bretton Woods institutions, and formed the basis for the post-1945 global economic order.

– Bretton Woods Conference –

The Bretton Woods Conference occurred in Bretton Woods, New Hampshire, in July 1944, and was attended by representatives of dozens of Allied countries, including all of the major capitalist powers. These countries were determined to craft the postwar world order in such a way that the painful (and then still-recent) Great Depression would never be repeated.

At that time, countries had desperately adopted protectionist measures in an attempt to spur exports and protect domestic industries, but the actual consequence had been deflation, unemployment, and a collapse in global trade. The new global economy would therefore have to be regulated and stable, built on what was hoped to be the bedrock of gold-backed American dollars.

– International Monetary Fund –

The first institution established by the Conference was the International Monetary Fund (IMF), which remains in existence today. The IMF was intended to manage international monetary trading. In the original vision of British economist John Maynard Keynes, the IMF would create and supervise a world currency, essentially acting as central bank to the world. Keynes’s vision was stymied by the Americans present, but the organization still did emerge as the central global organization responsible for stabilizing exchange rates. Since the 1970s, it has also taken on an increasingly controversial role by setting out lists of policy reforms (so-called Structural Adjustment plans) which developing countries must meet before qualifying for loans from the IMF and its partner organization, the World Bank.

The IMF is headquartered in Washington, D.C. Historically, however, its director has always been European. Voting rights are determined by a country’s proportion of the global economy, meaning that the major Western powers (and particularly the United States) essentially control the course of the organization. The current director is Dominique Strauss-Kahn of France.

– International Bank for Reconstruction and Development –

The second Bretton Woods institution, the International Bank for Reconstruction and Development, is now known simply as the World Bank. The initial purpose of the bank was to assist in financing European reconstruction. It subsequently transitioned to its current role as one of the leading financiers of economic development projects in developing countries.  (Technically, the IBRD is one of five agencies which collectively comprise the World Bank; the others are the International Development Corporation, the International Finance Corporation, the Multilateral Investment Guarantee Agency, and the International Centre for Investment Dispute Settlements.) Like the IMF, it has been criticized by opponents in recent years for a counterproductive ideological adjustment to excessively rapid market liberalization and privatization of public-sector institutions.

The World Bank is headquartered in Washington, D.C., and its President is traditionally appointed by the American President for a five-year term. The current president is Robert Zoellick, appointed in 2007. All member countries possess voting rights in the Bank, but votes are allocated according to the level of contribution. Currently the United States holds about one-sixth of World Bank voting rights, followed at a distance by Japan, Germany, Britain, and France. Major reforms require an 85% supporting vote, meaning that the U.S. essentially holds veto power.

– General Agreement on Tariffs and Trade –

The General Agreement on Tariffs and Trade (GATT) is traditionally referred to as a Bretton Woods institution, although it was not actually created at the Bretton Woods conference. Instead, the Agreement was signed in Geneva in 1947. The GATT, throughout its history, has been a series of increasingly strict restrictions on national tariffs and subsidies. Since the eighth round of GATT negotiations, between 1986 and 1994 (the so-called “Uruguay Round”), the GATT has been known as the World Trade Organization. The WTO is headquartered in Geneva, Switzerland, and has grown to include restrictions on national tariffs and subsidies as well as formal dispute-resolution processes. In theory, each member country has one vote, but in practice votes do not take place: decisions are made by formal consensus, with several major powers (including the U.S. and Europe) typically agreeing to general decisions and then presenting them to other members for approval.

Further tariff reductions and restrictions on national governments are part of the Doha Round of negotiations, initiated in 2001. However, since the failure of talks at Cancun in 2003, the WTO has been unable to close this round of negotiations in the face of strong protests by developing countries, who have demanded that the industrialized countries (particularly the U.S. and the European Union) commit to serious liberalization of their own markets before further concessions will be made by the developing world).