...What was the Bretton Woods system? Outline its main pillars and discuss to what extent, if any, its architecture led to both post-war stability and prosperity in the developed world throughout capitalism’s ‘golden age’ “50 Years is Enough” In the final months of the Second world war, an architecture of stability for the international economy emerged. The United States and Britain, having already committed to each other with the signing of Mutual Aid Agreement(1941)1, vied to create a multilateral economic system to replace the international gold standard and its structural rigidity. The Bretton Woods agreement of 1944 established a dollar-gold standard of fixed, but adjustable, exchange rates of $US35 an ounce2. Which, according to Milton Friedman, “carried within it the seeds of its own destruction”3. The Institutions of neo-liberal global economic governance4, were formed; International Monetary Fund, & International Bank for Reconstruction and Development. The Twin Pillars of post-war order5, an “economic super-government”6 essentially adopting both; U.S. Inflation rates.7 and US political policies8. There has been no country in history that has emerged from war into such happy economic circumstances as the United States in 19459. General Maximum Price Regulation(1942) was signed after the attack on Pearl Harbour, controlling most prices beneath a price ceiling until '46, and imposing penalties on violations. In addition to a comprehensive ration system. In order to maximise...
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...Bretton Woods Exchange Rate System Bretton Woods Exchange Rate System is a monetary management which is the establishment of rules and regulations for financial and commercial relations among the industrial nations. Bretton Woods Exchange Rate System was officially the first fully negotiated monetary order to govern monetary relations among the independent nations worldwide. This system was named by the place which was taken for the 730 delegates from 44 different countries to gather which was at Mount Washington Hotel in Bretton Woods, New Hampshire, United States. This gathering is called the United Nations Monetary and Financial Conference which is also known as the Bretton Woods Conference. The intention of this gathering is to rebuild the international economic system whilst World War II was still going on. The planners at the Bretton Woods System established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) which is now known as World Bank which is to set up a system of rules, regulations, procedures and institutions to regulate the international monetary system. The IBRD is also set up to speed up post-war reconstruction, to aid political stability, and to foster peace. The main reason for the establishment of Bretton Woods Exchange Rate System was to make it an obligation for each country to adopt a monetary policy to maintain the exchange rate by tying their currency together with gold which was one of the...
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...The Bretton Woods System : 1946- 1971 The Bretton Woods System (BWS) was implemented in 1946 under the Bretton Woods Agreement, each government obliged to maintain a fixed exchange rate for its currency vis-à-vis the dollar or gold. As one ounce of gold was set equal to $35, fixing a currency’s gold price was equivalent to setting its exchange rate relative to the dollar. The fixed exchange rates were maintained by official intervention in the foreign exchange markets. This intervention was about purchases and sales of dollars by foreign central banks against their own currencies whenever the supply and demand conditions in the market deviate from the agreed on par values. Any dollars acquired by the monetary authorities in the process of an intervention could then be exchanged for gold at the U.S Treasury. In principle, the stability of exchange rates removed uncertainty from international trade and investment transactions. Normally, if a country followed its own policies leading to a higher inflation rate than its trading partners would experience a balance of payments deficit as its good became more expensive, which means its exports will decrease. A deficit has consequences, an increase in the supply of the deficit country’s currency on the foreign exchange markets. The excess supply would demoralize the exchange value of the currency of that country, forcing its authorities to intervene. The nation would be required to buy with its reserves the excess supply of its own...
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...Bretton Woods Agreement Definition: The Bretton Woods Agreement is the result of a 1944 meeting in Bretton Woods, New Hampshire involving delegates from forty-four countries following World War II. The resulting agreement established a fixed rate exchange system, the International Monterey Fund (IMF) and the World Bank. This also included an exchange rate agreement, also known as the gold exchange standard. (Satterlee, 2009, p.157). Summary: A Bretton Woods for innovation This article by author Stephen Ezell highlights one of the issues overlooked upon the conclusion of the 1994 meeting, policies governing innovation. “We need a new international framework that sets clear parameters for what constitutes fair and unfair innovation competition, creating new institutions (and updating old ones) that maximize innovation” (Ezell, 2011, para. 1). Ezell begins by defining the current policies in play concerning innovation and providing examples. Ezell breaks down countries’ policies into four categories, “Good”, “Bad”, “Ugly” and "Self-destructive". “"Good" innovation policies include increasing investments in scientific research; offering research and development tax credits; welcoming highly skilled immigrants; providing strong science, technology, engineering, and math education; and deploying advanced information and communications technologies” (Ezell, 2011, para. 4). “"Bad" policies are strategies like import substitution industrialization that a country believes will...
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...WOMEN’S UNIVERSITY IN AFRICA FACULTY OF SOCIAL SCIENCES AND GENDER DEVELOPMENT STUDIES Assignment Cover Sheet Department: MDS Intake: 10 Part A: Student Details Name of Student: PAIDAMOYO MAGAYA Student I.D No: W150180 Name of Course: ADVANCED QUALITATIVE RESEARCH METHODS Code: MDS 113 Assignment Number: One Question: ‘The establishment of the IMF and the World Bank at the Bretton Woods Conference in July 1944 was mainly aimed at expanding and consolidating the Capitalist Mode of Production throughout the world.’ Discuss Due Date: 25th March 2015 Part B: Marker’s comments: …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… Overall Mark: …………………………………. Date Marked:……………………………… Marker’s Name:………………………………... Signature:………………………………….. Lecturer:………………………………………………………………………………………………... The Bretton Woods conference gave birth to two powerhouses in the economic spheres in the world namely the International Monetary Fund (IMF) and the World Bank (WB). The two institutions have evidently embraced the capitalist ideology by setting the agenda to enrich the few while widening the gap between the haves and the have-nots. IMF and WB are largely capitalist institutions promoting the capitalist mode of production to unsuspecting and vulnerable countries throughout the world. The two institutions do also have some level of development that they have contributed to economies...
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...Bretton Woods System and world trade in post-war period Introduction This reading report is based on two technical papers( The Bretton Woods international monetary system: An historical overview by Michael D. Bordo 148 pages & The post-war rise of world trade: Does the Bretton Woods System deserve credit? By Andrew G. Terborgh 74 pages)on Bretton Wood System as well as the post war international trade system since the U.S has become the most powerful economy after World War II, that US dollar was at that time the dominant currency internationally speaking. The first paper is titled of “The Bretton Woods International Monetary System: An historical overview” by professor Michael D. Bordo who is an economic professor and Director of the center for Monetary and Financial History at Rutger University. His paper has a brief overview of Bretton Woods experience. From its emergence and how it evolved that influence the monetary convertibility and gold dollar standard, until its collapse due to the U.S depression in 1970s. I considered this article to be a very technical one that gives many details on Bretton Wood System in history, but the very interesting part could also be that the author has given the ideas that why Bretton Woods was very stable but lived so short. Meanwhile, the second paper I chose to read is “The Post-War Rise of World Trade: Does the Bretton Wood System Deserve Credit?” . This one is more of an analyzing paper written by Andrew G. Terborgh, economic professor...
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...2013-2014 Degree on Management International Negotiation “The Bretton Woods Agreement [1944]” Luís Leite Teacher in Charge: Carmen Amado Mendes Index: “The Bretton Woods Agreement [1944]”........................................... 0 Luís Leite ............................................................................................ 0 1. Introduction ................................................................................ 2 2. Pre-Negotiation ........................................................................... 4 3. Negotiation before the final conference ................................... 11 4. Negotiation: The Bretton Woods Conference ........................... 15 5. Conclusion: Later changes and full analysis ............................. 19 6. Primary Sources and Bibliography ............................................ 22 7. Annexes: .................................................................................... 26 FEUC – Negociação Internacional – 2013-14 1 1. Introduction The United Nations Monetary and Financial Conference that occurred from the 1st of July to the 22nd in 1944 better known as the Bretton Woods conference gave origin to a ground-breaking system. It was the first time a fully negotiated monetary order came to existence which a new paradigm perspective on how to face economical international relations. This essay will help you understand why the Bretton Woods system happened, its historical context, why it worked throughout...
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...most of the world's leading nations met at Bretton Woods, New Hampshire, in 1944 to create a new international monetary system. The representatives had decided to link the world currencies to the dollar since the United States accounted for over half of the world's manufacturing capacity and held most of the world's gold during that time. At the final, they agreed should be convertible into gold at $35 per ounce. What is Bretton Woods System? The Bretton Woods system is often refer to the international monetary regime that prevailed from the end of World War II until 1971. The origin of the name is from the site of the 1944 conference that had created the International Monetary Fund (IMF) and World Bank. According to the history, the Bretton Woods system was the first example of a fully negotiated monetary order intended to govern currency relations among sovereign states. In principle, the regime was designed to combine binding legal obligations with multilateral decision-making conducted through an international organization -- the IMF, endowed with limited supranational authority. In practice the initial scheme, as well as its subsequent development and ultimate demise, were directly dependent on the preferences and policies of its most powerful member -- the United States. The International Monetary Fund was officially established on 27th December 1945, when the 29 nations who had participated in the conference of Bretton Woods signed the Articles of Agreement. It commenced...
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...TRABAJO TEMA 2: LA CONFERENCIA DE BRETTON WOODS El actual sistema monetario internacional es heredero del que se creo en julio de 1944, en Bretton Woods (New Hampshire) donde tuvo lugar una Conferencia Monetaria y Financiera de la que participaron 44 países. Las negociaciones para implementar el sistema partieron de una teoría desarrollada por John Maynard Keynes, que entendía que el crecimiento económico debía lograrse en un plano global, lo cual requería de cuatro instituciones fundamentales: 1.-‐Un banco central mundial, que estabilizara la economía mundial, incluso propuso la creación de una moneda mundial. 2.-‐Un fondo para la reconstrucción y el desarrollo, que otorgara créditos a países de bajos ingresos. 3.-‐Una organización internacional de comercio, que se ocupara especialmente de la estabilidad de los bienes de exportación primarios. 4.-‐Un programa “soft aid programme”...
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...consequences of The Bretton Woods system. 1. What is The Bretton Woods System? The Bretton Woods agreement was created in a 1944 conference of all of the World War II allied nations. It took place in Bretton Woods, New Hampshire. Actually, according to Helleiner (2011), the creation of the Bretton Woods system happened when allied nations of WW2 decided to come up with an integrated monetary financial system to help nations rebuild after the war. The opportunity to create such a new system arose “in the early 1940s when the US & UK policy makers began to plan the organisation of the post-war international monetary and financial system”. In other words, the...
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...This paper will go over the theories of absolute and comparative advantage and will also go over the principal aspects of the Bretton Woods agreement and following its demise the decision of the EU (European Union) countries to create a single currency. Let me remind you of the handouts from The Economist (trade Winds and Comparatively Speaking) and the material from Daniels and Radebaugh. I want us today to look carefully at the assumptions underpinning the theory of specialisation [Daniels and Radebaugh pp 176 - 177]. A handout has already been provided. Full employment is one of the central assumptions for these theories of trade to apply. In the world being described by either Smith or Ricardo unemployment as such was probably an unknown phenomenon. Society was largely agricultural and highly stable. People had to work! They had to be employed. And doubtless wage rates adjusted to the point where there was no unemployment as we know it today. But in the world of today the backdrop is very different. How do we deal with that where wage rates are not downwardly adjustable? We have looked at the specialisation argument. This can be seen very differently depending where you are in the argument. Some analysts have throughout history argued that the notion of specialisation into one particular pattern of output ‘fixes’ that pattern. This may very well disadvantage one nation when compared with another. What about the ‘infant industries’ argument. How would you view...
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...story of a small resort village, Bretton Woods, and the global impact it had on Europe and the rest of the world. Bretton Woods institutions were created in 1944 during the United Nations Monetary and Financial Conference at the Mount Washington Hotel (The Bretton Woods Committee, n.d.). The Bretton Woods institutions created an international basis for exchanging one currency for another. It also led to the creation of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development, now known as the World Bank (Stephey, 2008) and the General Agreement on Tariffs and Trade (GATT)—the precursor to the World Trade Organization (WTO). In addition to establishing the World Bank, the Committee chose the U.S. dollar as the pillar of international monetary exchange. The meeting provided the world post World War II currency stability which was desperately needed. The Bretton Woods system itself may have collapsed in 1971, when President Richard Nixon severed the link between the dollar and gold — a decision made to prevent a run on Fort Knox, which contained only a third of the gold bullion necessary to cover the amount of dollars in foreign hands. By 1973, most major world economies had allowed their currencies to float freely against the dollar. It was a rocky transition, characterized by plummeting stock prices, skyrocketing oil prices, bank failures and inflation (Stephey, 2008). However you spin it, Bretton Woods established the United States...
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...How should the banking system be regulated? • The post Bretton woods era was marked with political disputes by developed countries and new policy regimes in response to the failures of previous crises. During the Bretton Woods system, capital controls were an instrument to prevent the instability but with the rise of the Euromarkets in the 1960’s capital controls had been reduced and became difficult to enforce effectively. Towards the end of the 1970’s both the UK and US had adopted financial deregulation which encouraged competition between banks and this led to developing countries adopting similar methods. • Since the Bretton Woods era, there has been more integration between economies and this has led to a more globalised world. Global capital mobility along with global lending has increased, and advances in technology have allowed financial innovation that tested state boundaries encouraged more globalization, not less. Trade continued to expand as it had during the Bretton Woods era, but after Bretton Woods there was a shift towards more neoliberal policies which favoured liberalisation and the openness of markets. • Many of the debates that took place after the financial crisis were concerned with an increasing role of regulation around the world with the help of governments. Firstly, after the financial crisis it was clear to see that the goal of financial stability had to be included in monetary policy but what tool could be used to do this effectively? Interest...
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...The Bretton Woods system is commonly understood to refer to the international monetary regime that prevailed from the end of World War II until the early 1970s. Taking its name from the site of the 1944 conference that created the International Monetary Fund (IMF) and World Bank (International Bank for Reconstruction and Development), the Bretton Woods system was history's first example of a fully negotiated monetary order intended to govern currency relations among sovereign states. In principle, the regime was designed to combine binding legal obligations with multilateral decision-making conducted through an international organization, the IMF, endowed with limited supranational authority. In practice the initial scheme, as well as its subsequent development and ultimate demise, were directly dependent on the preferences and policies of its most powerful member, the United States. The World Bank and its sister organization, the International Monetary Fund, were created at Bretton Woods New Hampshire in 1944. Together they are referred to as the Bretton Woods Institutions or BWIs. The IMF's original mandate sets forth three main objectives: 1. To promote international monetary cooperation; 2. To facilitate the expansion of international trade; 3. To promote exchange rate stability. The IMF achieves these objectives by advising member countries on their economic policies and by providing conditional assistance to member countries experiencing balance of payments...
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...levels of capability. The danger is that weak nations with extensive resource wealth may be exploited in the short term rather than developing national economies with well trained work forces over the long term • The breakdown of the Bretton Woods system in 1971 led to the collapse of the global system of fixed exchange rates, which had given developing nations flexibility in developing their national economies. - Thus from an ethical standpoint we have not maintained the principles of impartiality in global economic development since the end of WWII Sustainability is a principle directly relate to “sustainable development,” i.e., using natural resources so as to preserve the overall capacities of natural systems to replenish themselves. In essence we leave nature in the same condition we found it. Sustainability thus implies obligations to future generations. Renewable resources are kept intact. Pollution and other externalities are limited • problems of sustainability and impartiality are related. If current theories of global warming are correct, greenhouse gas emissions contribute to climate change that triggers floods in Mozambique or Bangladesh, causing significant damage to farmland. At the same time the collapse of Bretton Woods opened the door for massive movements of short term capital around the world, usually away from third world economies that most need them. We want to accumulate goods but are we doing this in a sustainable manner? Are we infringing...
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