The Bretton Woods conference

Depression, devaluation, and trade barriers divided the international economy in the 1930s. War further disrupted production and payments. Allied economists sought cooperative arrangements that would reduce attempts to shift crises through exchange rates and restrictions. Representatives of forty-four countries met at Bretton Woods in July 1944. Keynes and White advanced different plans, and negotiations linked reconstruction funds, payments, exchange stability, and domestic policies with unequal international political power.

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The conference planned the IMF and the International Bank for Reconstruction and Development. The former would support countries with payments difficulties and supervise exchange arrangements; the latter financed reconstruction and development. Currencies were linked to the dollar, convertible to gold at a specified price. Exchange adjustment remained possible under conditions, and capital controls preserved policy space. Cooperation aimed to restore trade while avoiding some of the contractionary pressures of the interwar years.

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The institutions developed operations in reconstruction, development financing, and payments. Dollar supply and changing national policies strained fixed exchange rates. The United States ended the previous gold-conversion arrangement in 1971, and the system moved toward different exchange practices. The IMF and World Bank continued with evolving functions. The conference left shared institutions while opening lasting negotiations about lending conditions, development strategies, and the autonomy of governments using international finance.

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