The Bretton Woods Conference

The agreements between different nations to the idea on how will they have a solution to
the economic situation they suffered after the World War ii, is an important part of the
modern world economics history. It is great how they learned from their failed system of
policies that made an unstable international environment without improving the economic
situation, where a lot of people are expecting from the government to improve growth and
employment through welfare programs. Their realization was one of the smart ideas they
made, knowing that the real solution to the economic situation they suffering was to do
economic cooperation between different nations to achieve both prosperity and peace
Internationally. Where they held all of the ideas in the Bretton Woods Conference.
The Wilsonian belief by President Franklin D. Roosevelt and Secretary of State Cordell
Hull is agreeable that free trade supposed not only promoted international prosperity but
also international peace. Since, some of the countries natural resources needs to do
trades with other countries peacefully to have a better relation with each other. It is for the
reason during the post-World War ii, when there is a great depression and trade
restriction. That is why they come up to do economic cooperation to promote prosperity
and peace internationally that will benefit a lot of countries.
Several articulations that made before the conference shows economic cooperation
between different nations. These established several great ideas since importing and
exporting of goods is costly to transport from different areas. Furthermore, the idea of
equal terms in the agreement must be implemented to avoid biases and take advantages
of each country. In addition, lots of the decisions that had been made in the preparation
to the conference is consistent to their goal. Since, it focuses on the solution to the
international prosperity and international peace. The collaborative agreements in the
articulations are to secure all countries within the agreement to improve their economic
system to rise up from the depression.
Moreover, the agreement of Britain to join in promoting International Cooperation is a
smart decision since it expands the production employment, and the exchange and
consumption of goods, and would reduce tariffs, and other trade barriers. Which helps
the economy of the several countries to be more productive and rise from the economic
situation.
The plans of John Maynard Keynes really made a big impact up until today. As he drafted
the plans that made the International Monetary Fund (IMF) and International Bank for
Reconstruction and development (IBRD) or what do we know for today as World Bank.
These organizations provide a solution to help countries to have short term financial
assistance while experiencing temporary deficits in their balance of payments and
responsible for providing financial assistance for the economic development of
developing countries. Moreover, in the conference they attempt to make international
trade organization but they failed. Luckily, they replace it by General Agreement on Tariffs
and Trade (GATT) which remove the trade restrictions that helps a lot of countries. A
righteous decision since it is one of the problems during the great depression.
One of the agreements in the Bretton conference that made me impressed is when they
agreed to require countries to monitor and maintain their currency control where they
achieved it by doing buy or sell of U.S. dollars as the countries needed. That is why our
exchange rate are based on the value of U.S. Dollar since when the conference
happened. Lots of countries accepted the system to which rely on both gold and dollars
as a base for exchange rate. Since, the U.S. has the 2/3 of the Gold around the world at
the time of the conference. That is why they are dominant when it comes to foreign
exchange rate up until this day.
One of the economic developments in the conference that made a great impact for me is
one of the agreements in the Bretton woods system. this minimized the international
currency exchange rate volatility which helped international trade relations more stability
in foreign exchange that support loans and grants internationally from the World bank that
even works this day.
However, after its implementation in 1944. In year 1970s, the dollar Exchange crisis
happened and President Richard Nixon suspended the dollar's convertibility into gold to
address the international dilemma of a threatening gold run and the domestic problem of
inflation. Which is a good decision to be made during that time since depending too much
on gold, will get result to run out of gold value and will produce more money that will made
people to cause inflation.
That is why in year 1973, Floating exchange rate become the usual for the currencies of
the major industrialized nations. This ended the Bretton Woods system and the foreign
exchange eventually change later on into pure fiat. Positively, The International monetary
fund and World bank had remained and still doing its responsibilities until this day where
they focus more on third world countries.
In conclusion, the conference is the most important event in the development of modern
world economics. It is good to know that several countries agreed to economic
cooperation to help each other to prosper and have peace inside or outside of their
country. But in my opinion, I think it is better if they have predicted the recession in 1970s
that made golds to run out and cause inflation. However, we cannot blame them as the
conference produce a positive return such as the International Monetary Fund and World
Bank as wells as the General Agreement on Tariffs and trade that morph into this day as
World Trade Organization.
The exchange rate of our money based on dollars today is fine since during when they
held the conference before in United States of America, they are the one who has the 2/3
of golds. Unless we hold another conference in the present that will update countries
natural resources around the world to update the base foreign exchange currencies.
Maybe this part of history is the reason why a lot of people said that dollars are so
powerful.
Reference:
https://2001-2009.state.gov/r/pa/ho/time/wwii/98681.htm
https://www.investopedia.com/terms/b/brettonwoodsagreement.asp