Bretton Woods Conference

: A Vendetta between
developed and developing
nations?
"The economic health of every country
is a proper matter of concern to all its
neighbors, near and far."
U.S. President Franklin D. Roosevelt
at the opening of Bretton Woods

What Was Bretton Woods?

In the aftermath of WWII (in Europe)

The United Nations Monetary and
Financial Conference commonly
known as Bretton Woods conference,
was a gathering of 730 delegates
from all 44 Allied nations.
Main goal was to regulate the
international monetary and financial.

Mount Washington Hotel, situated

in Bretton Woods, New Hampshire

Rational

In 1944 as well as today historians

and economists often argue
economics played a vital role in
causing WWII.
Argument WWI set the conditions to ensure a
second World War.
Extreme governments circa 1932 rose to
power due to Global Great Depression.

Rational Continued

Fear over Great Depression

Many nations wanted protection from a
repeat

Linked economies dont go to war

Support for Govt. intervention in
Economic development.
Tools to reconstruct postwar Europe.

John Maynard Keynes

A British economist whose ideas have had

a major impact on modern economic and
political theory.
He advocated interventionist government
policy
the use fiscal and monetary measures to
mitigate the adverse effects of economic
recessions, depressions and booms.

His ideas are the basis for the school of

thought known as Keynesian economics.

Keynesian economics

Keynes's theory suggested that active

government policy could be effective in
managing the economy.
Keynes advocated policies which acted against
the tide of the business cycle:
deficit spending when a nation's economy suffers
from recession or when recovery is long-delayed
and unemployment is persistently high
and the suppression of inflation in boom times by
either increasing taxes or cutting back on
government outlays.

Governments should solve problems in the

short run rather than waiting for market
forces,
"in the long run, we are all dead."

Milton Friedman

An American economist, statistician and public

intellectual, and a recipient of the Nobel
Memorial Prize in Economic Sciences.
A global public followed his restatement of a
political philosophy that insisted on minimizing
the role of government in favor of the private
sector.
As a leader of the Chicago School of economics,
he had a widespread influence in shaping the
research agenda of the entire profession.
The Economist hailed him as "the most
influential economist of the second half of the
20th centurypossibly of all of it".

Monetarism

Favors Lassez-Faire attitude between

Government and the private sector.
Generally supports low taxation,
privatization of public holdings and
deregulation.
Freidmans logic was the freer the
market the freer the people.

Main Conference Agreements

Formation of the IMF and the IBRD (World

Bank).
Adjustably pegged foreign exchange
market rate system:
The exchange rates were fixed, with the
provision of changing them if necessary.

Currencies were required to be convertible

for trade related and other current account
transactions.
All member countries were required to
subscribe to the IMF's capital.
Using the US dollar as a global gold
standard.

Main Failures

International Trade Organization

The Conference also proposed the
creation of an International Trade
Organization (ITO) to establish rules and
regulations for international trade.
ITO charter was agreed on at the U.N.
Conference on Trade and Employment
but was not ratified by the U.S. Senate.
As a result, the ITO never came into
existence.

Failures Cont.

International Clearing Union

British Economist John Maynard Keynes
argued for creating a system that would
seek global trade balance by ensuring
capital flowed by nations.
His solution was to charge interest on
nations with substantial trade surplus
the US fought against this provision.

International Monetary Fund

(IMF)

A private international organization

that oversees the global financial
system by following the
macroeconomic policies of its
member countries.
focuses on exchange rates and the
balance of payments.
IMF offers financial and technical
assistance to its members, making it an
international lender of last resort.

Voting Power in IMF

Critique of the IMF

IMF policy makers supported military

dictatorships friendly to American and
European corporations.
Critics also claim that the IMF is generally
apathetic or hostile to their views of
democracy, human rights, and labor
rights.
Arguments in favor of the IMF say that
economic stability is a precursor to
democracy; however, critics highlight
various examples in which democratized
countries fell after receiving IMF loans.

Dictators and Debt

Argentina- 42% of its current debt

was accumulated from 1976-1983 by
a military junta.
98% of Indonesias debt is from
Suharto dictatorship.
79% of South Africas debt was from
Apartheid.
98% of Zaire/ Congos debt came
from Mobutu.

Criticisms

Many nations owe the IMF money

from dictatorships who wasted that
money.
Financial aid is always bound to
"Conditionalities"
including Structural Adjustment
Programs.
"The interests of the IMF represent the big international
interests that seem to be established and concentrated in Wall
Street."
Che Guevara, Marxist revolutionary, 1959

World Bank

a family of five international

organizations
responsible for providing finance and
advice to countries for the purposes of
economic development and eliminating
poverty.

Usually offers loans for large scale

products.

Agencies

International Bank for Reconstruction and Development

(IBRD),
provides debt financing on the basis of sovereign guarantees;

International Finance Corporation (IFC),

provides various forms of financing without sovereign

guarantees, primarily to the private sector;

International Development Association (IDA)

which provides concessional financing (interest-free loans or

grants), usually with sovereign guarantees;

Multilateral Investment Guarantee Agency (MIGA)

which provides insurance against certain types of risk, including

political risk

International Centre for Settlement of Investment

Disputes (ICSID),

which works with governments to reduce investment risk.

Criticism

former WB Chief Economist Joseph

Stiglitz, argue that the so-called free
market reform policies in practice are
often harmful to economic
development.
Others criticize the one size fits all
approach.

World Trade Organization (WTO)

international organization designed by its

founders to supervise and liberalize
international trade.
Grew out of existing trade alliances and
agreements.

Deals with regulation of trade between

participating countries; it provides a
framework for negotiating and formalizing
trade agreements, and a dispute
resolution process.

Major Trade Agreements

Trade Related Investment Measures:

Domestic rules on foreign investments
General Agreement on Trade in Services
Intellectual property the Agreement on
Trade-Related Aspects of Intellectual
Property Rights (TRIPS)
Dispute settlement (DSU)
Reviews of governments' trade policies
(TPRM)

Criticisms

The WTO has not had any great

impact in promoting growth in the
3rd World.
Other critics claim that the issues of
labor relations and environment are
steadfastly ignored.
TRIPs agreement has been used to
prevent spread of generic medicine.