What was bretton woods conference

Britain, represented by John Maynard Keynes and wanting the freedom to pursue autonomous policy goals, pushed for greater exchange rate flexibility in order to ameliorate balance of payments issues. A compromise of fixed-but-adjustable rates was finally settled upon. Member nations would peg their currencies to the U. Further provisions of the Articles stipulated that current account restrictions would be lifted while capital controls were allowed, in order to avoid destabilizing capital flows.

Further, there was no definitive timeline for implementing the new rules, so it would be close to 15 years before the Bretton Woods system was actually in full operation. By this time, the system was already showing signs of instability. While the U. With no international currency created to provide supplemental liquidity, and given the limited loan capacities of the IMF and IBRD, it soon became evident that the U.

From to , the U. In contrast, by , European nations were suffering from chronic balance-of-payments deficits , resulting in the rapid depletion of their dollar and gold reserves. Rather than considering this situation advantageous, the U. Within this context, the U. These moves helped alleviate the shortage of dollars and restored competitive balance by reducing the U.

Exchange controls were gradually lifted, with full current account convertibility finally achieved at the end of However, during this time the U. The U. The depletion of U.

With the U. But while member nations had individual incentives to take advantage of such an arbitrage opportunity, they also had a collective interest in preserving the system. What they feared, however, was the U. To allay these concerns, presidential candidate John F. Kennedy was compelled to issue a statement late in that if elected he would not attempt to devalue the dollar. In the absence of devaluation, the U. Despite appeals for a coordinated revaluation to restore balance to the system, member nations were reluctant to revalue, not wanting to lose their own competitive edge.

The Gold Pool brought together the gold reserves of several European nations in order to keep the market price of gold from significantly rising above the official ratio. Between and , new supplies from South Africa and the Soviet Union were enough to offset the rising demand for gold, any optimism soon deteriorated once demand began outpacing supply from through Another attempt to rescue the system came with the introduction of an international currency—the likes of what Keynes had proposed in the s.

But as serious discussions of this new currency—given the name of Special Drawing Rights SDR —only began in , and with the first issuance not occurring until , the remedy proved to be too little, too late. By the time of the first issuance of the SDRs, total U. In a final attempt to keep the system alive, negotiations took place in the latter half of that led to the Smithsonian Agreement , by which the United States agreed to devalue the dollar against gold by approximately 8.

But despite these revaluations, another run on the dollar occurred in , creating inflationary flows of capital from the U. Pegs were suspended, allowing currencies to float and bringing the Bretton Woods system of fixed-but-adjustable rates to a definitive end. We also invite you to explore other knowledge products produced by the Archives that relate to the Bretton Woods Conference. In , the World Bank Group celebrated the 75th anniversary of the conference; the Archives organized a variety of events that are documented here.

Finally, the oral history interviews of former government officials involved in the preparatory work of Bretton Woods or who were delegates at the conference and later became Bank staff, including Irving S. Friedman , Aron Broches , Ansel F.

Luxford , and Daniel Crena de Iongh, offer reflections on the events. This site uses cookies to optimize functionality and give you the best possible experience. If you continue to navigate this website beyond this page, cookies will be placed on your browser. To learn more about cookies, click here. English History exhibits. Explore History. Bretton Woods and the Birth of the World Bank. It was an unprecedented cooperative effort for nations that had been setting up barriers between their economies for more than a decade.

They sought to create a system that would not only avoid the rigidity of previous international monetary systems, but would also address the lack of cooperation among the countries on those systems. The classic gold standard had been abandoned after World War I. In the interwar period, governments not only undertook competitive devaluations but also set up restrictive trade policies that worsened the Great Depression.

Those at Bretton Woods envisioned an international monetary system that would ensure exchange rate stability, prevent competitive devaluations, and promote economic growth. Although all participants agreed on the goals of the new system, plans to implement them differed. To reach a collective agreement was an enormous international undertaking. Preparation began more than two years before the conference, and financial experts held countless bilateral and multilateral meetings to arrive at a common approach.

While the principal responsibility for international economic policy lies with the Treasury Department in the United States, the Federal Reserve participated by offering advice and counsel on the new system. Keynes, one of the most influential economists of the time and arguably still today , called for the creation of a large institution with the resources and authority to step in when imbalances occur. This approach was consistent with his belief that public institutions should be able to intervene in times of crises.

The Keynes plan envisioned a global central bank called the Clearing Union. Each country would receive a limited line of credit that would prevent it from running a balance of payments deficit, but each country would also be discouraged from running surpluses by having to remit excess bancor to the Clearing Union. He assumed the United States would experience another depression, causing other countries to run a balance-of-payments deficit and forcing them to choose between domestic stability and exchange rate stability.

It reflected the concerns that much of the financial resources of the Clearing Union envisioned by Keynes would be used to buy American goods, resulting in the United States holding the majority of bancor. White proposed a new monetary institution called the Stabilization Fund. A clause was added in case a country ran a balance of payments surplus and its currency became scarce in world trade.

The fund could ration that currency and authorize limited imports from the surplus country.