Bretton Woods Agreement: History, Impact, and Legacy

The initial talks on reconstructing a postwar international monetary system started between the United States and United Kingdom as early as 1941. The lead negotiators were Harry Dexter White for the USA and John Maynard Keynes for the British. Given the US economic and political dominance at the end of the war, it is not surprising that the eventual system reflected more the US proposals. The system that emerged was ratified at an international monetary conference held at Bretton Woods, New Hampshire, attended by some 44 countries although some commentators dubbed the conference as a meeting of 1.5 nations (the USA and the UK!).

The Bretton Woods Agreement created three institutions. The World Bank dealt with structural and long-term development issues. The International Monetary Fund (IMF) focused on monetary, balance of payments and short-term stabilization issues. And the General Agreement on Tariffs and Trade (GATT) was exclusively concerned with trade.

The Bretton Woods system was about creating the conditions for sustained growth, of output and job creation, post-war reconstruction and post-colonial development–as the official name of the World Bank implied. The stakes were high and the reforms were seen as absolutely necessary to avoid the kinds of social and political developments which led to the outbreak of the Second World War in 1944.

The 1930s were marked by the great depression and major trade imbalances which in turn led to the adoption of widespread protectionism, the adoption of deflationary policies, competitive devaluations and the abandonment of the gold standard. In an influential report for the League of Nations Ragnar Nurkse (1944) argued that experience with floating exchange rates had shown that they discouraged international trade, caused a misallocation of resources and were generally characterized by bouts of destabilizing speculation.

Some historical moments in Neoliberalism’s progress

There are some important moments in Neoliberalism progress apart from the victories of Margaret Thatcher and Ronald Reagan in 1979-80: The Pinochet coup de stat in Chile in 1973, the creation of G7 in 1975, the evolution of the European Union since 1986, and so on. Lets see some of them............

1. THE CRISIS OF NEOLIBERALISM AND THE WAY AHEAD

As we said, Neoliberalism liberalized the labour market and caused income inequality. As a result, the state had to step in to compensate for reduced consumption from workers and an explosion of public debt in the 1980s followed.

From 1995 on governments tried to cut their budget deficits. This time, again to compensate for low demand, we had a rapidly rising private indebtedness in the subsequent decade. This was possible through the liberalization of financial markets (out of control financial markets) and globalization (global imbalances between countries,….). This response of neoliberalism was fully inadequate too, resulting in huge housing bubbles and the collapse of financial markets in 2008