Performance of the Bretton Wood System

Performance of the Bretton timber SystemTHE proceeding OF THE BRETTON WOOD SYSTEMThis essay will assess the performance of the Bretton Wood dodging which was scratch line established in 1944 by 730 delegates from all 44 Allied nations who gathered at the Mount Washington Hotel in Bretton timberland, spic-and-span Hampshire, United States, and began an internationalistic control of human beings(prenominal) pecuniary relations amid nations. The essay will show that the placement has been relatively successful and contributed to struggleds the evolution of orbiculate free trade amongst nations and helped prevent the kind of economic disasters much(prenominal) as the Great Depression of the 1930s, which was felt to have been one of the captures of cosmos warfargon 11. However, the essay will also argue that criticism of the Bretton woodwind instrument as merely the vehicle for US hegemony over the international thrift is also justified.The Bretton timberland System began in 1944 with the United Nations Monetary and pecuniary Conference, and established the International Monetary investment firm (IMF) andthe International depository financial psychiatric hospital for reconstructive memory and Development (IBRD). In the new agreement on the pecuniary schema, for each one country member must ensure the qualify rate of its money is remained within a amend value,in terms of gold and for the IMF to help comport countries suffering temporary imbalances of payments (Markwell, 2006).The Bretton Woods agreement came near the end of a instauration state of war that had devastated the globe and many thought that the war itself was part a result of the economic policies of the pre-war years. In the 1930s the United States favorite(a) policies of isolationism that led them to demand repayment of Allied war debts from humankind War 1 and ca employ countries to independently set economic conditions for global trade that cause deflationary pro blems that aggravated the parentage of world trade, led to mass unemployment and negatively affected the majority of the economies of the developed world. The nearly serious outcome was the crepuscule in the international flow of capital and the retarding of development of international investment. The War left the main economies aware that peace could only be kept up(p) if countries cooperated and efficiently managed the value and exchange rates of currencies. As Cordell Hull (US monument of State) argue if there was a freer system of vocation where countries treated sanely and eased on trading regulations, they could all raise their living standards, therefore, economic development would be a peaceful competition, thus eliminating the economic dissatisfaction that breeds war (Hull, 1948, p.81)Keynesian economic theory was now the dominant foundation of most countries economic policy-making and this promoted a greater role for governance in trade with national politics bas ed on governments assuming a responsibility towards all their citizens. The War also left countries feeling a clear need for economic cooperation and peace to be maintained finished trade and that trade to be incorporated by an international pecuniary system based on free markets (Markwell, 2006). However, it was the intend of Harry dexter White from the US Treasury, rather than Keyness own plan that was the main model for the Bretton system, and this showed from the outset that the dominant nation in the system would be the USA, wind to accusations that the Bretton system is little more than an economic vehicle for American hegemony (Strange, 1996)The first goal of the new approach to global trade was post-war reconstruction of the devastated economies of europium and Asia. The Bretton Woods system, as the first example of a fully negotiated monetary order int stop to govern currency relations among sovereign states (Cohen, 2009, p.1). However, the reality was that Europe and large parts of Asia were in virtual economic pass on due to the gentlemans gentleman War and the creation of the International Monetary Fund (IMF) needed to also be supported by an International Bank for Reconstruction and Development, now known as the humans Bank (WB). The system was designed to regulate the par value exchange rates and alter sustain currencies to nations with trade deficits thus enabling them with international supporter to re-build their economies and posterior to help finance the poor or developing countries with their reconstruction projects (Stephey, 2008, p.1)If we fancy how nations did recover from the War and the impressive development in the 1950s and mid-sixties of countries desire Germany and Japan, then our assessment of this period of the Bretton Woods, aligned with the Marshal program for reconstruction, must agree that Bretton was a positive influence and relatively of or so success. The Great Depression in the 1930s was due to the lack o f a leading, dominant state to play a hegemonic role in the international saving. In Bretton Woods institutions the US clam was the dominant currency and became the wing of American hegemony to the international economy (Stephey, 2008, p.2). However, as Susan Strange noted, any four-lobed institution might become merely the instruments of the structural strategy and remote policy of the dominant state, and for many critics of the IMF and the manhood Bank, the problem is the lateralisation through these institutions of the majority of the globes nations by a very few puissant nations led by the US (Strange, 1996).The IMF is seen as a multilateral institution that lends money to governments to stabilize currencies and maintain order in international financial markets. However, its lending carries stringent loan conditions that many see as add to worsening conditions for the majority of citizens in the countries that are least able to deal with the economic might of developed countries (Strange, 1996).The IMF is supposed to focus on creating a stable climate for international trade by harmonising its members monetary policies, and maintaining exchange stability (Bretton Woods Project, 2005). It can provide temporary financial assistance to countries encountering difficulties with their balance of payments and it is based on consensual decision-making with the aim of helping countries whose economies are under-developed or in crisis (Bretton Woods Project, 2005). However, to assess the success of this one has to quantify the degree of fairness in IMF/World Bank strategies and many critics, like Strange (1996) and Mazzei (2007) are highly critical of the true purpose of the Bretton Woods System. For example, Mazzei (2007) finds that it is the poor countries that actually finance the World Bank and not the some other way around (p.2). Mazzei notes how that for 20 years poor countries have financed the World Bank, while it is rich countries that contribut e only 1/4 of organic fund and yet it is them who hold 3/4 of the votes (p.2).The first major point of concern for the global economy was in 1971 when the US used its power over the global economy through the Bretton Woods system to protect its own interests against those of the rest of the world. The United States unilaterally terminated convertibility of the dollar to gold. The US could now unilaterally control the global economy by insisting that the United States dollar became the sole backing of currencies and a reserve currency for all the member states (Strange, 1996, p.20). This actually led to the virtual ease up of the Bretton Woods System in the mid-seventies and plunged the world into economic decline while it fought to adjust to the changes brought about by US policies (Strange, 1996 Cohen, 2009, Calleo and Rowland, 1973). The US ended the tying of the Dollar to the Gold Standard and left it and other global currencies to float free. Keynes had originally planned tha t the world adopt a global currency but it was adoption in 1944 of Dexter Whites own plan to make the dominant trading currency of the world the Dollar that had structured the next policies of the IMF/World Bank and allowed the US to have the power to hold the globes trade.By the 1970s the US was coming under strong criticism for its unilateral control of global trading. French President Charles De Gaulle claimed that the international monetary system allowed the United States to live beyond its means and forced the European surplus countries to finance Americas military empire overseas (Gavin, 2002, p.4). The Bretton Woods system was designed to crystalize monetary economic policies from power politics, and yet, by the 1970s it had become highly politicized and required constant political intervention to adjudge the system functioning smoothly (Gavin, 2002, p.5). The faults of the Bretton Woods System were listed by Bordo (1991, p.20) as the gold exchange standard, which placed the United States under threat of a convertibility crisis secondly the problems with the adjustable peg, because, in the face of growing capital mobility, the cost of discrete changes in parities were deemed so high, the system evolved into a reluctant fixed exchange rate system without any effective adjustment implement and finally that U.S. monetary policy was inappropriate for a key currency. Thus, the Bretton Woods System collapsed in the 1970s but its basic institution of the IMF and afterwards the World Bank remain as the guiding bodies of the international economy.The World Banks task is lending to promote the growth of world trade and to finance the post-war reconstruction of European economies. It is a multilateral institution that lends money to governments and government agencies for development projects. However, the Bank also imposes harsh conditions through Structural modification Programs, forcing countries to adopt reforms, deregulate capital markets, promote pri vatisation of state enterprises, and downsize public programs for amicable welfare. This results in policies such as privatisation of utility suppliers, bringing in fees and privatisation of gentility and health services. For its critics the World Bank and IMF have become the contributors to the persistence of world poverty rather than vanguard for preventing it and represent not the interests of the global ships company but rather the interests of Wall Street and the United States Treasury plane section (Strange 1996, Cohen, 2009, Markwell, 2006)In contrast, the supporters of the World Bank insist that the Bank is an institution in which the rich developed countries can serve to improve the global economy and the capacity of countries to trade by lending money to war-ravaged and impoverished countries for reconstruction and development projects (www.imf.org).Thus, in assessing the success of the Bretton Woods System and its subsequent trading organisations such as the IMF and t he World Bank, one can see a very different analysis depending on your political affiliation. Rather than separate power politics from global trading, the System has become directly connect to the fortunes and hegemony of the US. Its record in helping a devastated globe recover from the affects of World War 11 is very good and the global economy has big(a) over each decade. However, its critics still see it as chiefly prevail by the US and its allies and whilst it continues to support the growth of trade its go through as a vehicle mainly for the US retards how well its future role in the global economy will be judged by the growing economic powers of countries like China and India.ReferenceBloch, F.L. (1977) The Origins of International frugal Disorder, Berkeley and Los Angeles University of California chargeBordo Michael (1991)The Bretton Woods International Monetary System An historic Overview, Chicago press, USBretton Woods Project,( 2005) What are the Bretton Woods Instit utions, www.brettonwoodsproject.comCalleo, D.P. and Rowland, B.M. (1973) America and the World Political Economy, Bloomington, IN Indiana University PressCohen, Bernard (2009) Bretton Woods System, USA, RoutledgeEichengreen, B. (1996) Globalizing Capital A news report of the International Monetary System, Princeton, NJ Princeton UniversityGavin Francis (2002) The Gold Battles Within the shabby War Diplomatic History, US.Hull, Cordell (1948). The Memoirs of Cordell Hull vol. 1. New York Macmillan.Keynes, John Maynard (2007) 1936. The General possibleness of Employment, Interest and Money. Basingstoke, Hampshire Palgrave MacmillanMarkwell Donald, (2006) John Maynard Keynes and International Relations Economic Paths to War and Peace, Oxford University Press,Mazzei, Umberto (2007) The tabernacle of Capital is Cracking, Ventana Global , SpainStephey M J (2008) A Brief History of the Bretton Woods System, Time Magazine, USAStrange, S. 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