Bretton Woods Conference
The Bretton Woods Agreements of 1944 and 1945 established the International Bank for Reconstruction and Development (or World Bank) and the International Monetary Fund. The United Nations Monetary and Financial Conference was held in July 1944 at Bretton Woods, New Hampshire. The organizations became operational in 1946 after a sufficient number of countries had ratified the agreement. The architecture of a post-World War II international financial system has largely stayed in place, despite major shifts in monetary policy (including eliminating the gold standard).
They are named for the New Hampshire resort area, the site of the Mount Washington Hotel where they were deliberated upon and signed by 730 delegates from 44 countries. The agreements formed the International Monetary Fund and International Bank for Reconstruction and Development (later divided into the World Bank and Bank for International Settlements), which are today known as the Bretton Woods institutions or Bretton Woods system for their origins. These organizations began operation in 1946 upon the ratification of the agreements by a sufficient number of countries.
"John Maynard Keynes was a prime mover of the Bretton woods design", according to economist John Kenneth Galbraith, who wrote on the subject in his 1975 book, , and also credits Harry D. White, Assistant Secretary of the United States Department of the Treasury, with this and influencing the Employment Act of 1946 which also reflected Keynes' design and set US postwar monetary policy.
According to Galbraith, the gold standard (in effect only in the late 19th century) had been collapsed by World War I, had been further skewed by the interim and World War II chaos, so that "in 1944 the world's supplies of gold were even more egregiously ill-distributed than before. And the gold standard was itself in ill repute. The Bretton Woods arrangements sought to recapture the advantages of the gold standard - currencies that were exchangeable at stable and predictable rates into gold and thus at stable and predictable rates into each other. And this it sought to accomplish by minimizing the pain imposed by the gold standard on countries that were buying too much, selling too little, and thus losing gold. This was done by moderating, making less abrupt the measures - tighter fiscal policy, tighter monetary policy with higher interest rates, perhaps a tighter hold on incomes - by which a country reduced consumer and investment demand and thus prices and so made itself a harder place in which to sell, an easier one from which to buy, a better one to keep money at interest, by all these means reversing the tendency for gold to flow away... The pain that gold inflicted immediately, the IMF mission inflicted a little later. If the balance of payments situation of a country were persistent, it was permitted a onetime devaluation in relation to gold and other currencies of up to 10 percent. If, like Brazil, it's currency was endemically subject to depreciation, there was tolerance. Nothing, in fact, happened."
The fund began operations in Washington DC on March 1, 1947. The Communist countries, after first contemplating membership, did not join. Later they were to denounce the system as imperialism and form a rival - COMECON.
The original design of Keynes was no longer effective as of the US departing formally from the system of redemption into gold in 1971.
The remnant Keynesian scheme has been heavily criticized, especially by Marilyn Waring, as depressing the value of life and by many as leading directly to uneconomic growth. Defeating these institutions, and the World Trade Organization and trade bloc pacts, are a key focus of the anti-globalization movement. An often-cited objective is achieving respect for what they call the triple bottom line which takes more than balance of trade into account in setting money supply standards.
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