Bretton Woods Agreement Meaning
Despite its name, the World Bank was not (and is) not the central bank of the world. At the time of the Bretton Woods Agreement, the World Bank was created to lend to European countries devastated by the Second World War. The World Bank`s focus has changed in providing lending to economic development projects in emerging countries. The Bretton Woods Agreement was reached in 1944 at a summit in New Hampshire, USA, at a site of the same name. The agreement was reached by 730 delegates representing the 44 allied nations that attended the summit. As part of the agreement, delegates used the gold standard In the simplest terms, the gold standard is a system used to understand the value of the currency, and this means that a currency is compared to the value it is worth in gold and at what price it can be exchanged for gold. to establish a fixed exchange rate. The designers of Bretton Woods set up a system of rules, institutions and procedures to regulate the international monetary system. They created the International Bank for Reconstruction and Development (IBRD) (now one of the five institutions of the World Bank Group) and the International Monetary Fund (IMF). These organizations intervened in 1946, after the ratification of the agreement by a sufficient number of countries. A high degree of agreement among the powerful on the objectives and means of international economic management facilitated the decisions of the Bretton Woods conference. The basis of this agreement was a common belief in capitalism. Although the governments of developed countries somewhat distinguished themselves by the type of capitalism they preferred for their economies (France, for example, preferred more advanced state planning and intervention, while the United States preferred relatively limited state interventions), everyone relied primarily on market mechanisms and private property.
The Bretton Woods Agreement was created in 1944 at a conference of all allied nations of World War II. It took place in Bretton Woods, New Hampshire. Post-war global capitalism suffered from a huge shortage of dollars. The U.S. had huge trade surpluses, and U.S. reserves were huge and growing. It was necessary to reverse this river. Although all nations wanted to buy American exports, the dollars had to leave the United States and be available for international use so that they could do so. In other words, the United States should reverse imbalances in global prosperity by presenting a trade deficit financed by U.S. exits. .