Bretton Woods Conference

The Bretton Woods Conference, formally known as the United Nations Monetary and Financial Conference, was a landmark international gathering held at the Mount Washington Hotel in Bretton Woods, New Hampshire, from 1 to 22 July 1944. Bringing together 730 delegates from 44 Allied nations, the conference aimed to construct a stable and cooperative international monetary system for the post-Second World War world. It resulted in the establishment of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), institutions that became central pillars of global economic governance.
The conference emerged from the shared understanding among participating nations that only structured multilateral cooperation could prevent the recurrence of the economic instability that had marked the interwar years, including competitive devaluations, protectionist trade blocs, and destabilising capital flows. Its agreements laid the foundation of what became known as the Bretton Woods system, a framework governing international commercial and financial relations for several decades.

Background and Rationale for Post-war Economic Cooperation

The interwar period had vividly demonstrated the consequences of monetary disarray. The abandonment of the gold standard, the onset of the Great Depression, and the spread of trade wars created economic turmoil worldwide. One of the most acute crises occurred in Germany, where punitive reparations imposed by the Treaty of Versailles and hyperinflation in the early 1920s destabilised the economy. By autumn 1923, exchange rates had spiralled to the point where one United States dollar was worth roughly four trillion German marks, contributing to social and political upheaval that later facilitated the rise of Nazism. For many policymakers, including British economist John Maynard Keynes, this experience underscored the dangers of unmanaged international economic relations.
To avoid repeating such crises, Allied powers recognised the need for a cooperative monetary order. Discussions began early in the Second World War, with Keynes of the British Treasury and Harry Dexter White of the United States Department of the Treasury independently formulating proposals for the post-war system. Their ideas converged through bilateral negotiation between the United States and the United Kingdom and consultations with other Allied governments.
A Joint Statement by Experts on the Establishment of an International Monetary Fund was published simultaneously across Allied countries in April 1944, setting out the outline of a proposed fund. Shortly thereafter, the United States invited Allied nations to a conference to formalise plans for an International Monetary Fund and potentially a Bank for Reconstruction and Development. A preliminary expert meeting was held in Atlantic City, New Jersey, in June 1944, during which draft proposals for the upcoming Bretton Woods discussions were refined.

Key Agreements and Institutional Outcomes

The Final Act of the Bretton Woods Conference contained three major outcomes:

• Articles of Agreement establishing the International Monetary Fund, tasked with promoting exchange-rate stability, facilitating balanced international trade, and assisting countries facing short-term balance-of-payments difficulties.
• Articles of Agreement establishing the International Bank for Reconstruction and Development, intended to support post-war reconstruction and long-term economic development, particularly through lending for infrastructure.
• Additional recommendations on broader international economic cooperation, reflecting the participants’ intention to create a more interlinked global trading and financial system.

Features of the IMF Agreement

The IMF agreement was considered the conference’s most consequential achievement. Its principal features included:

• An adjustably pegged exchange-rate system, in which member states pegged their currencies to gold or to the United States dollar. Governments were permitted to adjust exchange rates only to correct a fundamental disequilibrium and could make adjustments of up to 10 per cent without objection from the IMF.
• Commitments to currency convertibility for current-account transactions, although transitional provisions allowed countries to delay implementation. Full convertibility for Western European currencies was achieved only in December 1958.
• Regulation of international capital flows, with countries explicitly permitted to maintain controls on capital transactions to reduce financial volatility.
• Subscription of capital by all member states, forming the IMF’s pool of financial resources. Voting power was weighted by quotas, giving greater influence to larger contributors—a system mirrored in the IBRD.

Membership in the IBRD required membership in the IMF, reinforcing the interconnected nature of the new institutions.

Encouraging Open Markets and Managing the International Order

A central philosophical aim of the conference was the rejection of economic nationalism. Henry Morgenthau Jr., the United States Secretary of the Treasury and conference president, argued that the new institutions signalled an end to the beggar-thy-neighbour policies that had deepened the Great Depression. The conference prioritised freer markets, reduced protectionism, and shared responsibility for managing international finance.
The intention was to construct a cooperative Western economic order in which industrial democracies would jointly oversee monetary relations and promote economic stability. The framework sought a balance between national economic autonomy—particularly the ability to pursue policies supporting high employment and real income—and international discipline through stable exchange rates and collaborative oversight.

Structure and Operation of the Conference

The Bretton Woods Conference operated through a structured system of bodies:

• The Plenary Session, which met only at the beginning and conclusion, served primarily to confirm decisions.
• Three Commissions, each responsible for a core area:
  • Commission I (IMF), chaired by Harry Dexter White.
  • Commission II (IBRD), chaired by John Maynard Keynes.
  • Commission III (other forms of international financial cooperation), chaired by Eduardo Suárez of Mexico.

Each commission comprised committees and, where necessary, subcommittees. All countries could participate in commission and standing-committee meetings, although smaller committees had restricted membership for efficiency. Decision-making relied largely on negotiation and informal consensus; formal voting was infrequent, and each country possessed one vote.
The primary objective was agreement on the IMF, but sufficient consensus also emerged to finalise the IBRD agreement. Achieving these goals required extending the conference beyond its initial planned end date of 19 July to 22 July 1944. The United States, as the largest economy and principal expected source of financial contributions, exerted considerable influence over the form and content of the agreements.

The Bank for International Settlements Controversy

One of the more contentious issues concerned the Bank for International Settlements (BIS). Established in 1930 to facilitate the settlement of financial obligations arising from the post-First World War peace treaties, the BIS had, during the Second World War, assisted Germany in transferring assets from occupied territories. The Norwegian delegation presented evidence suggesting that the BIS had been involved in activities considered war crimes.
Given the impending creation of the IMF, some delegates questioned the continued relevance of the BIS. Commission III therefore considered a proposal for its liquidation. The debate highlighted the broader tension between creating a new, cooperative financial architecture and addressing the legacies of pre-war and wartime financial arrangements. Although the proposal did not ultimately lead to the dissolution of the BIS, it remained a significant point of discussion.