International Financial History in the Twentieth Century

In July 1944, when the Bretton Woods conference took place, though the war was not over, there was no doubt who would win it. The efforts of the wartime coalition (the United Nations) concentrated on building up a new postwar order, one able to combine peaceful interaction between states, social change, and economic growth. The conference at Bretton Woods aimed at an international financial system under the umbrella of the Pax Americana that would be able to guarantee the stability of a restored and improved version of the pre-1914 gold standard and, beyond it, to increase the scope for autonomous national economic policies in every country that joined the system. The two main institutional pillars of the new order were fixed exchange rates and - in the long term - free currency markets based on current account convertibility. In order to meet these two contradictory goals, the architects of the Bretton Woods System decided to introduce a gold-dollar standard. This system combined a sufficient built-in flexibility for the specific economic goal of every member state and a standardized procedure for realignment of the exchange rates in the case of “fundamental” asymmetries in the balance of payments.