The Bretton Woods System

1945 –
The Bretton Woods Regime (1945 – the 1990s)
• Officials from 44 nations gathers in Bretton Woods,
NH in July 1944 to draft the new rules
• “An amazing piece of institutional engineering”
(Rodrik,2012, p. 69)
• The IMF, World Bank, GATT
• The voting shares of major powers
The Bretton Woods Regime (continued)
• Was created against the backdrop of Cold-War US
Foreign Policy
• The Truman Doctrine (1947)
• America’s commitment to “economic peace” (tariff
reduction, cross-border investment and trade)
The Bretton Woods Regime (continued)
• Post-WWII order was based on four principles for
Western liberal democracies:
- economic openness
- joint management of Western political-economic
order (lessons from the 1930s)
- institutionalism (“constitutionalism”)
- support domestic stability and social security
The Bretton Woods Regime (continued)
• American-led regime
• Rules-based Multilateralism (legalism vs ad hoc
relationships)
• International Organizations based on the principle of
non-discrimination
• The MFN Principle
Multilateralism
• Rules-based international institutions
• Autonomous institutions that would last the
hegemony of one country
• Developed countries
• Developing countries
The GATT
• The GATT was not a full-fledged organization like the IMF or the
WB
• Developed through Rounds of negotiations
• 8 rounds between 1947 and 1995
• Reduced tariffs
• Introduced the MFN principle
• The volume of world trade increased 7% annually in 1948-1990
• A golden era of globalization
The GATT (continued)
• Large parts of the world remained uncovered
• Too many exceptions for developing countries
• A need for a more inclusive system
The WTO, a Deeper Integration
• The Uruguay Round (1986-1994)
• The WTO created in 1995
• A hyperglobalization that changed the balance between domestic
autonomy and international trade rules
• The Washington Consensus, a global agenda for lower corporate
taxation, tight fiscal policy, deregulation, more open trade
The WTO (continued)
• “Shallow” vs “Deep” integration
• Trade-related aspects of integration
• TRIPS – intellectual property
• TRIMS
• Global rules become the domestic rules
• North-South cleavages
The IMF
• Another Bretton Woods Institution
• Conceived in 1944
• to build a framework for international economic cooperation
• to ensure the stability of the international monetary system
• A global lender of last resort
The IMF
• US dominance
• The US has a unilateral veto power
The US Hegemony
• The bi-polar world of the Cold War
• Post-Cold war order heavily dominated by the US
• The World’s Police

• Spread of democracy
• Economic growth

• Critics argue US “arrogance”

The US Hegemony
• US strength acquired after WWII was unmatched (the Roman
Empire will be the only other example)
• America’s relative power vis-à-vis the rest of the world
• US national security (even after the Cold War) has been
encompassed the security of its allies and friends
• NATO
Multipolarity?

• Multiple calls for multipolarity in international affairs

• Europe wants as mush support against possible Russian threat as

a counterweight to American Power (the French President recently made
attempts to “unify” Europe but was mired in domestic crisis shortly after)
Multipolarity?
• Lack of genuine attempts of multipolarity (China is an exception)
• False (or “honorary”) multipolarity with a pretense of equal
partnership

• US spends on defense considerably more than its (major) NATO

allies
• A free ride?
Multipolarity?
• Are multipolar/multilateral orders efficient?

• Is efficiency worth sacrificing for multipolarity?

The Post-Cold War Era
• Has it been much different from the Cold War period?
• The Bi-polarity of the world ended
• Economies in Western liberal democracies liberalized further

• The World became hyper-globalized (next week’s topic)