The Mount Washington Hotel in New Hampshire, where 730 delegates from 44 nations met in July 1944 (1944)
Formally the United Nations Monetary and Financial Conference, 1–22 July 1944
General knowledge · Economics & society
Bretton Woods
Conference 1–22 July 1944; system collapsed 1971–73
Economics — the postwar international monetary order
The conference held in July 1944 at a New Hampshire resort hotel, and the system of fixed but adjustable exchange rates it created. Delegates from forty-four Allied nations agreed to peg their currencies to the US dollar, which was in turn convertible into gold at thirty-five dollars an ounce, and set up two institutions to police and finance the arrangement: the International Monetary Fund and what became the World Bank. The British delegation was led by John Maynard Keynes, whose more ambitious plan for a world clearing union was beaten by the American scheme of Harry Dexter White. The system held for a quarter of a century of rapid growth, then broke apart between 1971 and 1973.
How to spot them
- ▸A New Hampshire resort hotel at the foot of Mount Washington, July 1944
- ▸Forty-four nations, and a British delegation led by a dying Cambridge economist
- ▸Thirty-five dollars an ounce, and currencies pegged within one per cent either side
- ▸Its American architect was later accused of spying for the Soviet Union
Key facts
Keynes's defeated plan for an international clearing union with its own unit of account (1944)
The bancor; the American plan drawn up by Harry Dexter White prevailed
The two institutions created there, both now headquartered in Washington DC (1944)
The International Monetary Fund and the International Bank for Reconstruction and Development
Robert Triffin's 1960 warning that the reserve currency country must run deficits, and will eventually be distrusted for it (1960)
The Triffin dilemma, which diagnosed the flaw a decade before the collapse
Nixon's announcement of 15 August 1971, which pulled out the system's keystone (1971)
Suspension of the dollar's convertibility into gold
The December 1971 agreement at a Washington museum that tried, and failed, to patch the pegs back together (1971)
The Smithsonian Agreement; currencies were floating freely by March 1973
The 1976 amendment at a Caribbean meeting that formally legalised floating exchange rates (1976)
The Jamaica Accords, ratifying what had already happened
Key ideas
- The design was a compromise between the interwar extremes: neither the rigid metallic discipline of the 1920s nor the competitive devaluations of the 1930s. Pegs were fixed but could be adjusted with agreement, and capital controls were expected, so that countries could run their own monetary policy.
- The Triffin dilemma is the structural flaw: the world needed dollars for reserves, which required America to run deficits, which in time made the promise to convert dollars into gold incredible.
- The collapse did not end the institutions. The IMF and the World Bank outlived the system that created them and redefined their roles — the Fund as a crisis lender, the Bank as a development lender.
Quick-fire facts
- •The conference ran from 1 to 22 July 1944 at the Mount Washington Hotel in Bretton Woods, New Hampshire, with 730 delegates from 44 Allied nations
- •John Maynard Keynes led the British delegation; Harry Dexter White led the American, and the American plan won
- •Keynes proposed an International Clearing Union with a supranational unit of account called the bancor
- •Currencies were pegged to the US dollar within one per cent either side; the dollar was convertible into gold at $35 an ounce
- •The conference created the IMF and the IBRD; a third body, the International Trade Organization, was agreed at Havana in 1948 but never ratified by the US Senate, leaving GATT in its place
- •Harry Dexter White was accused in 1948 of passing information to Soviet intelligence; he denied it before the House Un-American Activities Committee and died of a heart attack days later
- •The Belgian-American economist Robert Triffin set out the system's central contradiction in 1960
- •Richard Nixon suspended convertibility on 15 August 1971; the Smithsonian Agreement of December 1971 failed to save the pegs
- •Generalised floating began in March 1973 and was legalised by the Jamaica Accords of 1976
- •Keynes was already gravely ill at the conference and died in April 1946
Drill it — 8 cards
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Sources
- Benn Steil — The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order 2013
- Barry Eichengreen — Globalizing Capital: A History of the International Monetary System