A Critique of the Bretton

Woods System
(Did the Bretton Woods Agreements
Succeed?)
 Purpose:
• Secure world peace and prosperity through
international economic cooperation… in which
capital and goods might move freely, regulated by
global institutions operating in the general interests
of greater stability and predictability
• It aimed to aid countries in recovering from the post-
World War II debt as well as to improve the capital
flow between nations
• The Gold standard
 Goals:
• Set standard for exchange rate. (1 ounce gold =
$35)
• Establish international monetary cooperation
• Money pool from which members of the nations
can borrow funds.
 Expectation:
• Through the capital controls, the countries would
pursue the full employment and price stability
(low inflation) and the external balance (keeping
exchange rates stable) simultaneously.
 Outcome:
• Quota embedded in the IMF
• Members were forbidden to engage in
discriminatory currency practices
• The creation of the IMF and World Bank
• The dollar standard
 Problem:
• Post-war monetary relations were unstable
• The member nations underestimated the
strength of their funds… after two year of
lending, the imf was drained its money
 End of Bretton Woods system
• The system dissolved between 1968 and 1973. In
August 1971, U.S. President Richard Nixon
announced the "temporary" suspension of the
dollar's convertibility into gold.
• While the dollar had struggled throughout most
of the 1960s within the parity established at
Bretton Woods, this crisis marked the breakdown
of the system. An attempt to revive the fixed
exchange rates failed.
 End of Bretton Woods system
• And by March 1973 the major currencies began
to float against each other.
• IMF members have been free to choose any form
of exchange arrangement they wish (except
pegging their currency to gold)
Other important Economic
Organization
 The World Bank Group (WBG)
• is a family of five international organizations that
make leveraged loans to developing countries. It
is the largest and most famous development bank
in the world and is an observer at the United
Nations Development Group.
The World Bank Group (WBG)
 The United Nations (UN)
• is the meeting place for almost all of the world’s
nation states – it’s basically a forum for countries
to talk, make decisions and take action on how to
deal with global issues like war, climate change
and world poverty.