United Nations Monetary and Financial Conference

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Mount Washington Hotel
Mount Washington Hotel

The United Nations Monetary and Financial Conference, commonly known as Bretton Woods conference, was a gathering of 730 delegates from all 45 Allied nations at the Mount Washington Hotel, situated in Bretton Woods, New Hampshire to regulate the international monetary and financial order after the conclusion of World War II.

The conference was held from 1 July to 22 July 1944, when the agreements were signed to set up the International Bank for Reconstruction and Development (IBRD), the General Agreement on Tariffs and Trade (GATT), and the International Monetary Fund (IMF).

As a result of the conference, the Bretton Woods system of exchange rate management was set up, which remained in place until the early 1970s.

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[edit] Purposes and goals

The Bretton Woods Conference took place in July 1944, but did not become operative until 1959, when all the European currencies became convertible. Under this system, the IMF and the IBRD were established. The IMF was developed as a permanent international body. The summary of agreements from July 22, 1944 states, "The nations should consult and agree on international monetary changes which affect each other. They should outlaw practices which are agreed to be harmful to world prosperity, and they should assist each other to overcome short-term exchange difficulties." The IBRD was created to speed up post-war reconstruction, to aid political stability, and to foster peace. This was to be fulfilled through the establishment of programs for reconstruction and development.

The main terms of this agreement were:

  1. Formation of the IMF and the IBRD (presently part of the World Bank).
  2. Adjustable peg Foreign exchange market rates system: The exchange rates were fixed, with the provision of changing them if necessary.
  3. Currencies were required to be convertible for trade related and other current account transactions. The governments, however, had the power to regulate ostentatious capital flows.
  4. As it was possible that exchange rates thus established may not be favourable to a country's Balance of payments position, the governments had the power to revise them by up to 10%.
  5. All member countries were required to subscribe to the International Monetary Fund's capital.

[edit] Encouraging open markets

The seminal idea behind the Bretton Woods Conference was the notion of open markets. In Henry Morgenthau's farewell remarks at the conference, he stated that the establishment of the IMF and the World Bank marked the end of economic nationalism. This meant countries would maintain their national interest, but trade blocks and economic spheres of influence would no longer be their means. The second idea behind the Bretton Woods Conference was joint management of the Western political-economic order. Meaning that the foremost industrial democratic nations must lower barriers to trade and the movement of capital, in addition to their responsibility to govern the system.

[edit] Monetary order in a post-war world

The need for postwar Western economic order was resolved with the agreements made on monetary order and open system of trade at the 1944 Bretton Woods Conference which allowed for the synthesis of Britain's desire for full employment and economic stability and the United States' desire for free trade.

[edit] One failed proposal

The Conference also proposed the creation of an International Trade Organization (ITO) to establish rules and regulations for international trade. The ITO would have complemented the other two Bretton Woods proposed international bodies: the IMF and the World Bank.

The ITO charter was agreed on at the U.N. Conference on Trade and Employment (held in Havana, Cuba, in March 1948), but was not ratified by the U.S. Senate. As a result, the ITO never came into existence.

However, in 1995, the Uruguay Round of GATT negotiations established the World Trade Organization (WTO) as the replacement body for GATT. The GATT principles and agreements were adopted by the WTO, which was charged with administering and extending them. It has been argued[who?] that the WTO functions, today, as the ITO would have functioned, had it been created.[citation needed]

[edit] Quotes

  • "The economic health of every country is a proper matter of concern to all its neighbors, near and far."

— U.S. President Franklin D. Roosevelt at the opening of Bretton Woods

[edit] See also

Retrieved from "http://en.wikipedia.org/wiki/United_Nations_Monetary_and_Financial_Conference"
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