International Monetary Relations since Bretton Woods
Publication Year: 2008
The Bretton Woods Conference of 1944 resulted in the formation of the International Monetary Fund and World Bank and helped lay the foundation for an unprecedented expansion of international commerce. Yet six decades later, at the beginning of the twenty-first century, the central characteristics of the Bretton Woods system remain disputed-and the subject of continuing public policy debate.
Relying on extensive access to IMF, World Bank, and other archives, the contributors to Orderly Change show that the history of international monetary relations since Bretton Woods is one of "orderly change"-that is, change within a sturdy but supple framework. Even during the years of fixed exchange rates, very different practices characterized international monetary relations immediately after World War II, during the 1950s, and during the 1960s. Later, when the fixed exchange-rate system collapsed, underlying commitments to trade liberalization in the context of continuing national economic policy autonomy survived and even flourished. However, the resulting international economic order is now in grave danger: the tension between states' autonomy and their mutual openness has become acute, as international monetary structures no longer appear capable of mediating between these objectives. David M. Andrews and the contributors to Orderly Change examine past transitions as a means of suggesting possible avenues for current and future policymaking.
Published by: Cornell University Press
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Title Page, Copyright
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Ac know ledgments
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This project began as musings on periodicity in the Bretton Woods system; butchallenged by friends and colleagues to consider the wider implications of thisanalysis, the project’s trajectory soon changed. Following this new course was richlyAs is often the case with circuitous journeys, along the way we acquired severaldebts. For my own part, the chief of these is to my collaborators. I entered the acad-...
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Few readers of this volume will require convincing of the significance of theBretton Woods conference of July 1944. Yet bold statements about Bretton Woods,and especially about what eventually became known as the Bretton Woods system,are difficult to sustain. All history is complex, and broad generalizations aboutalmost any topic are subject to exceptions; yet generalizing about the Bretton Woods...
Chapter 1Bretton Woods
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July 1944 was an epochal moment in modern economic history. Following thecalamities of a global depression and two world wars, the Bretton Woods confer-ence of that month represented the best effort of its generation to provide forshared and lasting prosperity. The immediate aim of the gathering was to realize adurable institutional architecture for global monetary affairs, an architecture capa-...
Chapter 2Trade and Money in theRoose velt Administration
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Between the drafting of the Atlantic Charter in 1941 and the founding of the In-ternational Monetary Fund (IMF, or Fund) in 1946, the U.S. government spear-headed international efforts to create a trading system that was reasonably free andnondiscriminatory and a corresponding framework for monetary and financial col-laboration intended to bolster those trade arrangements. It was trade, not money,...
Chapter 3War time Financial Diplomacy and the Transitionto the Trea sury System, 1939–1947
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In 1944, the United States held half of world gold reserves and was the only po-tential creditor for a plethora of war- ravaged potential borrowers desperate forcash. In the early years after the war, U.S. credit was not made available easily. Afteran initial period of very hard- line bargaining, however, U.S. financial policy thensoftened somewhat. The catalyst for this important change was the Cold War....
Chapter 4International Liquidity Provision
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Revisiting the early history of liquidity provision serves as a useful lens throughwhich we can explore the early division of responsibilities between the InternationalMonetary Fund (IMF, or Fund) and the International Bank for Reconstruction andDevelopment (IBRD, or Bank). As I document here, both John Maynard Keynesand Harry Dexter White intended for the IBRD to be given explicit powers to help...
Chapter 5Ambiguous Aspects of Bretton Woods
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Between 1950 and 1962, Canada was the only developed country to float itscurrency against the U.S. dollar, directly contravening commitments articulated inthe International Monetary Fund (IMF, or Fund) Articles of Agreement. This ex-perience has usually been relegated to a footnote in histories of the Bretton Woodssystem; Canada is generally portrayed as a relatively minor player, and the circum-...
Chapter 6Kennedy’s Gold Pledge and the Returnof Central Bank Collaboration
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At the end of the 1950s and in the early 1960s, the mix of policies and proce-dures of the Marshall system was replaced by a new and very different modusoperandi. In fact, the emerging system was in many ways the mirror- image of whatpreceded it: capital became more mobile, fixed exchange- rate schemes becamemore fragile, and national central banks asserted themselves as important policy ac-...
Chapter 7U.S. Payments Problems and the KennedyRound of GATT Negotiations, 1961–1967
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The U.S. dollar was under considerable pressure when John F. Kennedy enteredthe White House in January 1961 (see David Andrews, chap. 6 in this volume).Three successive years of large balance- of- payments deficits had resulted in heavygold losses that threatened the strength of the dollar and, as a consequence, the sta-bility of the entire international monetary system. Kennedy placed the blame for...
Chapter 8Incomes Policies and the U.S. Commitmentto Fixed Exchange Rates, 1953–1974
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It is sometimes forgotten that the era of full currency convertibility (1959–1971)began and ended with crises over wages and prices in the U.S. steel industry. In1959, a 116- day U.S. steel strike led to the emergence of a trade deficit in steel,heightening concerns for the balance of payments. The Eisenhower administrationviewed the strike as directly threatening the stability of not only the dollar but also...
Chapter 9West German Monetary Policy and theTransition to Flexible Exchange Rates,1969–1973
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The Federal Republic of Germany (FRG) was one of the main pillars of thefixed- but- adjustable exchange rate system that, in its various forms, characterizedmonetary relations in the Western world after 1945.1 During the 1960s, as the Ger-man currency (the deutschemark, or DM) was gaining strength amid increasingcapital market deregulation, German monetary authorities went to great lengths to...
Chapter 10Legal Foundations of the U.S. Dollar,1933–1934 and 1971–1978
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The history of international monetary relations is partly a story about govern-ments responding to economic and po liti cal pressures and is typically told fromthis point of view. But it is also a story about the beliefs and practices of people ac-tually using money. While trying to build an international monetary system, gov-ernments had to contend with the reality of how their citizens and corporations...
Chapter 11The Institutional Legacy of Bretton Woods
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The par value exchange- rate system designed in 1944 ended long ago, but theinstitutional legacy of Bretton Woods persists. That legacy can perhaps best betraced by examining the core mandate of the International Monetary Fund (IMF,or Fund) as embodied in its surveillance operations. The almost continual adapta-tion and renewal of this central function of the Fund reflects the conjunction of the...
Chapter 12Future Prospects of the Bretton Woods Order
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In 1956, Richard Gardner published Sterling- Dollar Diplomacy, his magisterialstudy of the Anglo- American negotiations for the economic framework of the post-war world.1 In it, Gardner examined in some detail the rationales and strategies ofU.S. war time planners, especially with respect to the establishment of internationalorganizations for the promotion and maintenance of multilateral commercial and...
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Page Count: 264
Publication Year: 2008