The Bretton-Woods-System and it's Historical Backdrop

Arne Frohwitter

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Studienarbeit aus dem Jahr 2012 im Fachbereich Geschichte - Sonstiges, Note: 14, Philipps-Universität Marburg, Sprache: Deutsch, A...

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Studienarbeit aus dem Jahr 2012 im Fachbereich Geschichte - Sonstiges, Note: 14, Philipps-Universität Marburg, Sprache: Deutsch, Abstract: Observing this todays financial crisis one might find it hard to believe that only about sixty years ago we had a financial world order that was founded on the idea that finance has to be the "servant" (Gardner 76) of the economy and of society as a whole. The Bretton-Woods-Conference in 1944 set out to regulate finance in a way that promotes trade while protecting national states from damage caused by monetary problems. The focus lay on the domestic economies, which the new system would strive to safeguard. The national states were, in the thinking of the makers, to be the "masters" (76) of international economy and the international financial system was to work in their best interest. The way of thinking of economists and policy makers at the time did not originate out of thin air. After the turn of the 19th to the 20th century the world experienced two devastating World Wars and the Great Depression, which brought unemployment and poverty to millions of people and basically destroyed parts of the economy in the western hemisphere. These events resulted in the wish to create a system of international rules and regulations that could guarantee stability. Problems that called for a remedy included fluctuating exchange rates, extensive balance of payment deficits and destructive mercantilist trade policies, like competitive devaluations and foreign exchange regulations. Still, to understand the foundations on which John Maynard Keynes and Harry Dexter White, the chief economists behind the Bretton-Woods-System, drafted their initial plans for an economic world order, it is necessary to go even further back in time. The starting point for the analysis in this paper will be a period of relative stability, namely the end of the 19th century when most economic activity gravitated around Great Britain, at the time the hub of the financial world. The system in place was the so-called gold standard, which guaranteed the convertibility of different currencies and ensured that balance of payments deficits were evened out.