The Second World War featured a host of nations battling all around the world for supremacy; it was believed that the victor would have the privilege to shape the future of the world and so it seems. The Allies finally emerged victors in 1945; among them were the powers of today, U. S. A. , China, France, U. K, and Russia. Behind them was a host of other States that had show support during the difficult times. In 1945 the Allies had met in Bretton Woods U. S.
A and came up with strategies that would ensure that he mistakes that had been made over the years would be avoided; it was in this conference that the Bretton Woods Institutions were formed. Among them were the International Bank for reconstruction and Development (IBRD) today known as the World Bank and the International Monetary Fund. The two were formed after a number of states ratified and agreed to the rules as stipulated in the agreement at Bretton Woods (Veseth 2002).
The main role of these institutions was to ensure that the mistakes of the past were not repeated; they were to ensure that the trade among nations would flow freely, to stabilize the world’s financial system, and to encourage international investments (Lechner 2009). In other words these institutions were to assist in the reconstruction and development of Europe after the war; many of its signatory members were European States. It was therefore a Western Idea for the Development of capitalist oriented economies.
This paper will look at the success of these institutions decades later. Today the two institutions are still there; working towards the development of economies. After their formation the two institutions successfully managed to rejuvenate the European Economy. Europe then went a head and through a series of agreements, starting with the integration within the coal and steel industries, formed the European Commission and later on the European Union was formed. It seeks to establish a common Europe; with a common currency, constitution, economy to mention a few (Veseth 2002).
It is therefore correct to say that the Bretton Woods system was successful within Europe as it succeeded jump starting the economies and later on the same economies merged to form a single unit; looking at the objectives, there will always be free flowing trade within EU, by using a single currency to trade within Europe means that the exchange rate is stable thus enabling the Euro to function any where in Europe and finally as it is evident for quit some time the economies of Europe along side those of the world have been stable.
To add to this there has been significant growth for quite some time. It is therefore true to say that the strategy worked (Mansbach & Rhodes 2009 and Spielvogel 2008). The system was also tried within the African economic landscape with different results; the opposite happened as economies that were once growing with high rates slumped down. It was indeed a western idea for a western economy. Some may argue that the strategy worked in Europe because it was created for that purpose.
Unfortunately after the Second World War, the world was once again divided, this time along ideological lines; Capitalism versus Socialism. On e advocated for a market oriented economy while the other called for a strong state control to prevent the exigencies of the very same market. Europe was also divided along the same lines. Eventually Capitalists emerged victorious in 1989. This cemented the role of the dollar within the
This has worked for years; the dollar has managed to give confidence and earn respect of economies in the world for quite some time. The dollar for quite some time was the only universally accepted exchange rate, it was the standard. Unfortunately this was also the mistake the system had (Spielvogel 2008). Over dependence on the dollar was not the key idea behind the founders of the system. I believe it was imposed to ensure the dominance of the U. S. A in the global system; they are the most powerful and everybody wanted to be allied to the West.
This over reliance has over the years made the system shaky; the objectives were to ensure the stability of the global financial system. Unfortunately this was to be proven other wise with the occurrence of a second major global financial crisis; characterized by a weakened dollar and therefore instability within the financial system, a reminder of what happened when the system was over reliant on gold back in the 1920s and 1930s. This is therefore a proof that the Bretton Woods institutions are long over due for an update (Lechner 2009 and Veseth 2002).
In conclusion, the Bretton Woods system was a great idea for the unification of the Global financial system; it has successfully seen the world united through globalization. The whole system is now interconnected and economies are dependent. It has also seen the development of Europe successfully to what is seen today; the European Union. Unfortunately it has failed to ensure that the mistakes of the past are not repeated; the recent financial crisis was a repeat of the Great depression that lasted for almost a decade between 1929 to late 1930s.
Therefore the strategy was a good idea but it needed the input of all economies and therefore interdependence among states and economies. Reference: Lechner Frank J. (2009). Globalization: The Making of a World Society. Chichester U. K; Malden MA: Willey-Blackwell. Mansbach R, W & Rhodes E, J. (2009). Global Politics in a Changing World: A Reader. 4th Edition. Boston: Houghton Mifflin. Spielvogel Jackson J. (2008). Western Civilization Alternate Volume: Since 1300. Wadsworth Pub Co. Veseth Michael (Ed). (2002). The Rise of Global Economy. London: Fitzroy DearBorn Publishers.