Bretton Woods’s system

The Bretton Woods system of monetary management established the rules for commercial and

financial relations among the United States, Canada, Western European countries, Australia,
and Japan after the 1944 Bretton Woods Agreement. The Bretton Woods system was the first
example of a fully negotiated monetary order intended to govern monetary relations among
independent states. The chief features of the Bretton Woods system were an obligation for each
country to adopt a monetary policy that maintained its external exchange rates within 1 percent
by tying its currency to gold and the ability of the International Monetary Fund (IMF) to bridge
temporary imbalances of payments. Also, there was a need to address the lack of cooperation
among other countries and to prevent competitive devaluation of the currencies as well.
Preparing to rebuild the international economic system while World War II was still being
fought, 730 delegates from all 44 Allied nations gathered at the Mount Washington
Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and
Financial Conference, also known as the Bretton Woods Conference. The delegates deliberated
from 1 to 22 July 1944, and signed the Bretton Woods agreement on its final day. Setting up a
system of rules, institutions, and procedures to regulate the international monetary system, these
accords established the IMF and the International Bank for Reconstruction and
Development (IBRD), which today is part of the World Bank Group. The United States, which
controlled two-thirds of the world's gold, insisted that the Bretton Woods system rest on both
gold and the US dollar. Soviet representatives attended the conference but later declined to ratify
the final agreements, charging that the institutions they had created were "branches of Wall
Street".[1] These organizations became operational in 1945 after a sufficient number of countries
had ratified the agreement. According to Barry Eichengreen, the Bretton Woods system operated
successfully due to three factors: "low international capital mobility, tight financial regulation,
and the dominant economic and financial position of the United States and the dollar."
On 15 August 1971, the United States unilaterally terminated convertibility of the US dollar
to gold, effectively bringing the Bretton Woods system to an end and rendering the dollar a fiat
currency. Shortly thereafter, many fixed currencies (such as the pound sterling) also became
free-floating. The Bretton Woods system was over by 1973. The subsequent era has been
characterized by floating exchange rates.
Marshall Plan
The Marshall Plan (officially the European Recovery Program, ERP) was an American
initiative enacted in 1948 to provide foreign aid to Western Europe. The United
States transferred over $13 billion (equivalent of about $114 billion in 2020) in economic
recovery programs to Western European economies after the end of World War II. Replacing an
earlier proposal for a Morgenthau Plan, it operated for four years beginning on April 3, 1948.
The goals of the United States were to rebuild war-torn regions, remove trade barriers,
modernize industry, improve European prosperity, and prevent the spread of communism. The
Marshall Plan required a reduction of interstate barriers and the dissolution of many regulations
while also encouraging an increase in productivity as well as the adoption of modern business
procedures.
The Marshall Plan aid was divided among the participant states roughly on a per capita basis. A
larger amount was given to the major industrial powers, as the prevailing opinion was that their
resuscitation was essential for the general European revival. Somewhat more aid per capita was
also directed toward the Allied nations, with less for those that had been part of
the Axis or remained neutral. The largest recipient of Marshall Plan money was the United
Kingdom (receiving about 50% of the total), but the enormous cost that Britain incurred through
the "Lend-Lease" scheme was not fully re-paid to the US until 2006. The next highest
contributions went to France (8%) and West Germany (12%). Some eighteen European countries
received Plan benefits. Although offered participation, the Soviet Union refused Plan benefits,
and also blocked benefits to Eastern Bloc countries, such as Romania and Poland. The United
States provided similar aid programs in Asia, but they were not part of the Marshall Plan.
Its role in the rapid recovery has been debated. The Marshall Plan's accounting reflects that aid
accounted for about 3% of the combined national income of the recipient countries between 1948
and 1951, which means an increase in GDP growth of less than half a percent.
After World War II, in 1947, industrialist Lewis H. Brown wrote (at the request of
General Lucius D. Clay) A Report on Germany, which served as a detailed recommendation for
the reconstruction of post-war Germany, and served as a basis for the Marshall Plan. The
initiative was named after United States Secretary of State George C. Marshall. The plan had
bipartisan support in Washington, where the Republicans controlled Congress and
the Democrats controlled the White House with Harry S. Truman as president. The Plan was
largely the creation of State Department officials, especially William L. Clayton and George F.
Kennan, with help from the Brookings Institution, as requested by Senator Arthur Vandenberg,
chairman of the United States Senate Committee on Foreign Relations. Marshall spoke of an
urgent need to help the European recovery in his address at Harvard University in June
1947. The purpose of the Marshall Plan was to aid in the economic recovery of nations after
World War II and secure US geopolitical influence over Western Europe. To combat the effects
of the Marshall Plan, the USSR developed its own economic plan, known as the Molotov Plan,
in spite of the fact that large amounts of resources from the Eastern Bloc countries were paid to
the USSR as reparations for participating with the Axis Powers during the war.
The phrase "equivalent of the Marshall Plan" is often used to describe a proposed large-scale
economic rescue program. In 1951 the Marshall Plan was largely replaced by the Mutual
Security Act.
Berlin Blockade:
The Berlin Blockade (24 June 1948 – 12 May 1949) was one of the first major international
crises of the Cold War. During the multinational occupation of post–World War II Germany,
the Soviet Union blocked the Western Allies' railway, road, and canal access to the sectors
of Berlin under Western control. The Soviets offered to drop the blockade if the Western Allies
withdrew the newly introduced Deutsche Mark from West Berlin.
The Western Allies organized the Berlin Airlift from 26 June 1948 to 30 September 1949 to
carry supplies to the people of West Berlin, a difficult feat given the size of the city's
population. American and British air forces flew over Berlin more than 250,000 times, dropping
necessities such as fuel and food, with the original plan being to lift 3,475 tons of supplies daily.
By the spring of 1949, that number was often met twofold, with the peak daily delivery totaling
12,941 tons.
Having initially concluded there was no way the airlift could work, its continued success became
an increasing embarrassment for the Soviets. On 12 May 1949, the USSR lifted the blockade of
West Berlin, due to economic issues in East Berlin, although for a time the Americans and
British continued to supply the city by air as they were worried that the Soviets would resume
the blockade and were only trying to disrupt western supply lines. The Berlin Airlift officially
ended on 30 September 1949 after fifteen months. The US Air Force had delivered 1,783,573
tons (76.40% of total) and the RAF 541,937 tons (23.30% of total), totaling 2,334,374 tons,
nearly two-thirds of which was coal, on 278,228 flights to Berlin. In
addition Canadian, Australian, New Zealand and South African air crews assisted the RAF
during the blockade. The French also supported but only to provide for their military garrison.
American C-47 and C-54 transport airplanes, together, flew over 92,000,000 miles
(148,000,000 km) in the process, almost the distance from Earth to the Sun. British transports,
including Handley Page Haltons and Short Sunderlands, flew as well. At the height of the Airlift,
one plane reached West Berlin every thirty seconds.
Seventeen American and eight British aircraft crashed during the operation. A total of 101
fatalities were recorded as a result of the operation, including 40 Britons and 31
Americans, mostly due to non-flying accidents.
The Berlin Blockade served to highlight the competing ideological and economic visions for
postwar Europe. It played a major role in aligning West Berlin with the United States as the
major protecting power, and in drawing West Germany into the NATO orbit several years later
in 1955.