Bretton Woods at 75
The framework of multilateral economic cooperation established in 1944 is under serious strain, if not broken. Nevertheless, the Bretton Woods institutions, together with more recently established international and regional forums, still have a meaningful long-term role to play in global economic governance.
RIO DE JANEIRO – The 1944 Bretton Woods conference established a multilateral framework for global cooperation on macroeconomic stability, trade, and development that has endured – despite inevitable disruptions and adjustments – for 75 years. We should celebrate and praise these achievements. And, although this system of global economic governance is now under serious strain, the Bretton Woods institutions, together with more recently established international and regional forums, will still have a meaningful long-term role to play.
At the macro level, Bretton Woods was based on fixed but adjustable exchange rates, and relied on the newly created International Monetary Fund to monitor the consistency of national policies and provide financial support to countries facing external shocks. The new World Bank (which began as the International Bank for Reconstruction and Development) provided support and advice on long-term investment projects for development and reconstruction. And another postwar institution, the General Agreement on Tariffs and Trade – expanded and reestablished as the World Trade Organization (WTO) in 1995 – provided a framework for advancing free trade, based on multilateral rules and dispute mechanisms.
This global arrangement allowed plenty of room for different national and regional approaches, as long as policies did not lead to recurring balance-of-payments and inflation crises. Successful countries were able to accumulate more capital, especially human, and build institutions that made their gains more permanent. In many ways, the national strategies that paid off were convergence bets – ones that aimed to narrow productivity gaps with more advanced economies.
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