Bretton Woods system

In July 1944, seven hundred and thirty delegates from forty-four allied nations came together in Bretton Woods, NH, USA. The reason for the gathering was the United Nations Monetary and Financial Conference. For the first time in history, monetary relations amongst the world's major industrial states were governed; it was the first time a system was implemented, in which the rules for commercial and financial relations were negotiated and agreed upon.

It is said that many political reasons ended up resulting in the Bretton Woods system of international monetary management. Just to name a few: the two world wars and the interwar years, which was followed by a need to rebuild international economy during WWII; the Great Depression; the strong and shared belief in Capitalism; USA’s status of a dominant power; a need for an economic system that would act as security.

The Bretton Woods system of international monetary management set up rules, regulations, and institutions that would regulate the international monetary system. For example, at the Bretton Woods system the International Bank for Reconstruction and Development (IBRD) was established, and so was the International Monetary Fund (IMF). The IBRD is now the World Bank. Having seen the outcome of floating rates in the 1930’s, which had negative worldwide consequences, the conference was eager to adopt one major method with which to regulate international monetary systems as to create a policy in which the exchange rate of each currency will have a fixed value (more or less). And indeed, such a method was implemented. Newly established international institutions supervised and managed it, and they used the US dollar to do so.

The Bretton Woods system was an effective system that controlled conflict for many years. It was able to achieve the common goals that were set, however its lifespan did not last long as by 1971 it collapsed.