What Do You Mean By Bretton Woods Agreement What Was Its Aim

In the 1930s, Britain had a trading bloc excluding the nations of the British Empire, known as the “sterling zone.” While Britain imported more than it exported to countries such as South Africa, South African sterling beneficiaries tended to put them in London banks. This meant that Britain had a trade deficit, but it had a financial surplus and payments were balanced. Increasingly, Britain`s positive balance of payments demanded that the wealth of empire nations be kept in British banks. An incentive, say, for South African rand owners to park their assets in London and keep money in sterling was a highly rated pound sterling. In the 1920s, imports from the United States threatened parts of the British domestic industrial goods market and the way out of the trade deficit was to devalue the currency. But Britain could not devalue, or the empire-surplus would leave its banking system. [7] Although the agreement was concluded in 1944, it did not enter into full force until 1958. The agreement helped stabilize the values of the currencies concerned and the IMF received contributions from the Member State, which allowed it to borrow additional resources. If they did not have some kind of world central bank from which they could borrow, they would have resorted to higher interest rates or even trade barriers, and if that were the case, it could lead to a trade war, which the Bretton Woods agreement did not want.

730 delegates from the 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, USA, for the United Nations Monetary and Financial Conference, also known as the Bretton Woods Conference. Delegates deliberated from July 1 to 22, 1944 and signed the Bretton Woods Agreement on the last day. Through the establishment of a system of rules, institutions and procedures for regulating the international monetary system, these agreements created the IMF and the International Bank for Reconstruction and Development (IBRD), now part of the World Bank Group. The United States, which controlled two-thirds of the world`s gold, insisted that the Bretton Woods system was based on both gold and the U.S. dollar. Soviet representatives attended the conference, but then refused to ratify the final agreements and claimed that the institutions they had created were “branches of Wall Street.” [1] These organizations were commissioned in 1945 after the agreement was ratified by a sufficient number of countries. As chief international economist at the U.S. Treasury, Harry Dexter White designed the U.S. Cash Access Project in 1942/44, which rivaled Keynes`s plan for the British Treasury. Overall, White`s system tended to favour incentives to create price stability in the world`s economies, while Keynes wanted a system that promoted economic growth.

Comments are closed.