The Bretton Woods Conference, formally known as the United Nations Monetary and
Financial Conference, was the gathering of 730 delegates from all 44 Allied
nations at the Mount Washington Hotel, situated in Bretton Woods, New
Hampshire, United States, to regulate the international monetary and financial
order after the conclusion of World War II.
The conference was held in July 1944. Agreements were executed that later
established the International Bank for Reconstruction and Development, and the
International Monetary Fund. The Agreements
The Bretton Woods Conference was held from July 1 to July 22, 1944, but some
of its core accords did not become operative until December 1958, when all
European currencies became convertible. The IMF was developed as a permanent
international body. The summary of agreements states,
The nations should consult and agree on international monetary changes which
affect 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 IBRD 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. The main terms of this agreement were:
Formation of the IMF and the IBRD, which is today part of the World Bank.
Adjustably pegged foreign exchange market rate system: The exchange rates
were fixed, with the provision of changing them if necessary.
Currencies were required to be convertible for trade related and other
current account transactions. The governments, however, had the power to
regulate ostentatious capital flows. As it was possible that exchange rates
thus established might not be favourable to a country's balance of payments
position, the governments had the power to revise them by up to 10%.
All member countries were required to subscribe to the IMF's capital.
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 IMF 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.
The Bank for International Settlements controversy
In the last stages of the Second World War, in 1944 at the Bretton Woods
Conference, the Bank for International Settlements became the crux of a fight
that broke out when the Norwegian delegation put forth evidence that the
BIS was guilty of war crimes and put forth a motion to dissolve the bank; the
Americans, specifically President Franklin Delano Roosevelt and Henry
Morgenthau, supported this motion. This resulted in a fight between, on one
side, several European nations, the American and the Norwegian delegation,
led by Henry Morgenthau and Harry Dexter White; and on the other side, the
British delegation, headed by John Maynard Keynes and Chase Bank
representative Dean Acheson, who tried to veto the dissolution of the bank.
The problem was that the BIS, formed in 1930, had as the main proponents of its
establishment the then Governor of the Bank of England, Montagu Norman, and his
colleague Hjalmar Schacht, later Adolf Hitler's economics minister. The Bank
was, as far as is known, originally primarily intended to facilitate money
transfers arising from settling an obligation from the peace treaty after
WWI. After World War I, the need for the bank was suggested in 1929 by the Young
Committee, as a means of transfer for German reparations payments. The plan
was agreed in August of that year at a conference at the Hague, and a charter
for the bank was drafted at the International Bankers Conference at
Baden Baden in November. The charter was adopted at a second Hague Conference on
January 20, 1930. The Original board of directors of the BIS included two
appointees of Hitler, Walther Funk and Emil Puhl, as well as Herman Schmitz the
director of IG Farben, and Baron von Schroeder the owner of the J.H. Stein
Bank, the bank that held the deposits of the Gestapo.
As a result of allegations that the BIS had helped the Germans loot assets from
occupied countries during World War II, the United Nations Monetary and
Financial Conference recommended the "liquidation of the Bank for
International Settlements at the earliest possible moment." This
dissolution, which was originally proposed by Norway and supported by
other European delegates, as well as the United States and Morgenthau and Harry
Dexter White, was never accomplished. In July 1944, Dean Acheson interrupted
Keynes in a meeting, fearing that the BIS would be dissolved by President
Franklin Delano Roosevelt. Keynes went to Henry Morgenthau to prevent or
postpone the dissolution of the BIS, but the next day the dissolution of the BIS
was approved. The British delegation did not give up, however, and the
dissolution of the bank was still not accomplished when Roosevelt died. In
April 1945, the new president, Harry S. Truman, and the British suspended the
dissolution and the decision to liquidate the BIS was officially
reversed in 1948. 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. These allowed for the synthesis of Britain's desire for full
employment and economic stability and the United States' desire for free
trade. Failed proposals
= International Trade Organization= The Conference also proposed the
creation of an International Trade Organization 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 on at the U.N. Conference on Trade and Employment, but
the charter 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 the World Trade Organization as the replacement body for GATT. The
GATT principles and agreements were adopted by the WTO, which was charged
with administering and extending them. = International Clearing Union=
John Maynard Keynes proposed the ICU as a way to regulate the balance of trade.
His concern was that countries with a trade deficit would be unable to climb
out of it, paying ever more interest to service their ever greater debt, and
therefore stifling global growth. The ICU would effectively be a bank with its
own currency, exchangeable with national currencies at a fixed rate. It would be
the unit for accounting between nations, so their trade deficits or surpluses
could be measured by it. On top of that, each country would have
an overdraft facility in its "bancor" account with the ICU. Keynes proposed
having a maximum overdraft of half the average trade size over five years. If a
country went over that, it would be charged interest, obliging a country to
reduce its currency value and prevent capital exports. But countries with
trade surpluses would also be charged interest at 10% if their surplus was
more than half the size of their permitted overdraft, obliging them to
increase their currency values and export more capital. If, at the year's
end, their credit exceeded the maximum, the surplus would be confiscated.
Lionel Robbins reported that "it would be difficult to exaggerate the
electrifying effect on thought throughout the whole relevant apparatus
of government ... nothing so imaginative and so ambitious had ever been
discussed". However, Harry Dexter White, representing America which was the
world's biggest creditor said "We have been perfectly adamant on that point. We
have taken the position of absolutely no."
Instead he proposed an International Stabilisation Fund, which would place
the burden of maintaining the balance of trade on the deficit nations, and
imposing no limit on the surplus that rich countries could accumulate. White
also proposed creation of the IBRD which would provide capital for economic
reconstruction after the war. Negotiators
Australia was represented by Leslie Melville
Frederick Wheeler, Arthur Tange Belgium was represented by Camille Gutt
Georges Theunis, René Boël Bolivia was represented by René
Ballivián Calderón Brazil was represented by Minister of
Finance Artur de Sousa Costa Francisco Alves dos Santos Filho,
Roberto de Oliveira Campos Canada was represented by Minister of
Finance James Lorimer Ilsley Louis St Laurent, Douglas Abbott and
Lionel Chevrier Chile was represented by Luis Álamos
Barros China was represented by Dr. H.H. Kung
Tsiang Tingfu Colombia was represented by Minister of
Finance Carlos Lleras Restrepo Miguel López Pumarejo
Costa Rica was represented by Francisco de Paula Gutiérrez Ross
Cuba was represented by Minister of Finance Eduardo I. Montoulieu
Czechoslovakia was represented by Minister of Finance Ladislav Feierabend
The Dominican Republic was represented by Anselmo Copello
Ecuador was represented by Esteban F. Carbo
Egypt was represented by Sany Lackany Bey
El Salvador was represented by Agustín Alfaro Morán
Ethiopia was represented by Ephrem Tewelde Medhen
France was represented by Pierre Mendès France
Greece was represented by Kyriakos Varvaressos
Guatemala was represented by Manuel Noriega Morales
Haiti was represented by André Liautaud Honduras was represented by Julián R.
Cáceres Iceland was represented by Magnús
Sigurðsson India was represented by Sir Jeremy
Raisman Sir Chintāman Dwārakānāth Deshmukh, Sir
R. K. Shanmukham Chetty Iran was represented by Abol Hassan
Ebtehaj Iraq was represented by Ibrahim Kamal
Liberia was represented by William E. Dennis, Sr.
Luxembourg was represented by Hugues Le Gallais
Mexico was represented by Eduardo Suárez Víctor Urquidi
The Netherlands was represented by Johan Willem Beyen
New Zealand was represented by Walter Nash
Edward Coldham Fussell Nicaragua was represented by Guillermo
Sevilla Sacasa Norway was represented by Wilhelm
Keilhau Panama was represented by Augusto
Guillermo Arango Paraguay was represented by Celso R.
Velázquez Peru was represented by Pedro Gerardo
Beltrán Espantoso The Commonwealth of the Philippines was
represented by Andrés Soriano Poland was represented by Ludwik
Grosfeld South Africa was represented by S. Frank
N. Gie The USSR was represented by Mikhail
Stepanovich Stepanov The UK was represented by John Maynard
Keynes The USA was represented by Treasury
Secretary Henry Morgenthau, Jr. Fred Vinson, Dean Acheson, Harry Dexter
White Uruguay was represented by Mario La
Gamma Acevedo Venezuela was represented by Rodolfo
Rojas Yugoslavia was represented by Vladimir
Rybar Quotes
At the opening of the Bretton Woods Conference, U.S. President Franklin D.
Roosevelt remarked: "The economic health of every country is a proper matter of
concern to all its neighbors, near and far."
See also Bretton Woods system
Bretton Woods Committee Atlantic Charter
Exchange rates Fixed exchange rate
Gold standard International Clearing Union
International monetary systems including:
The Bretton Woods Era: 1945–1971 The post Bretton Woods system: 1971 –
present The "Revived Bretton Woods system"
identified in 2003 Calls for a "New Bretton Woods"
International Trade Organization. List of World War II conferences
Marshall Plan Nixon Shock
Protectionism Franklin D. Roosevelt
World War II References
Notes Bibliography
Further reading External links
Proceedings and Documents of the United Nations Monetary and Financial
Conference, Bretton Woods, New Hampshire, July 1-22, 1944
Documents relating to the Bretton Woods meetings, legislation, and analysis of
the results. Transcripts and other resources for the
conference hosted at the centre for financial stability