The occurrence of wars all over the world induced various alterations to the economic situations of all countries and states on the globe; therefore, the conclusion of World War 1 left nations without much of a choice but to work hard to improve their typical stable economies. This then led to the emergence of the gold mechanism, enabling world-class nations to have their economies stabilized once again. In this system, every nation’s currency had to gather the help of other nation’s money and mineral stores to a particular extent.However, the gold mechanism resulted in the breakdown of communications among the economies of nations, leading to the Great Depression which happened during the early 20th century (James, 1996). So the nations could negate the impacts of this financial distress, each country made initiatives to improve the efficiency of their goods and services due for exportation; this was meant to minimize the nations’ deficits through deflation of their money. This mechanism however, looked to be perfect only when the nation’s deflation level is quicker and more stable than others.
The consequence is that the fighting for global deflation significantly increased, resulting to major losses of different businesses, tremendous lack of job opportunities, unfair inflation rates and the loss of trust on financial institutions. While certain meetings have been accomplished in the early 20th century to find solutions to the global financial dilemmas that have been the major impacts of the Great Depression, all of these meetings did not bore any significant results.
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After the conclusion of World War 2, the countries came to the realization of the immediate importance to establish a mechanism that will help control all operations of economies. Particularly, this very creative financial mechanism will take over the evaluation of global economic initiatives. This then led to the meeting at Bretton Woods in America. The significant achievement of the meeting is the establishment of two primary world institutions. The Bretton Woods Conference
The meeting in Bretton Woods happened in 1944, and there were a total of 44 nations present during the meeting. The main goal of this meeting was to establish changes and initiatives within global money flows and economic interactions. The strategy to establish the Bretton Woods mechanism was suggested by two leading economic experts during that period: John Maynard Keynes, a leading economics expert based in the UK, and Harry Dexter White, the American secretary of treasury.
As stated by both economics experts, the establishment of the Bretton Woods mechanism is a daunting and difficult endeavor because the economic policies have to be agreed upon by each and every participating nation (Hallerberg, 2004). The formulation of the Bretton Woods strategy resulted to the establishment of America as a superpower. In comparison to other countries and taking into consideration the tremendous consequences of the recently concluded World War, America still possess the financial stability that other nations crave for.
Aside from having an astounding amount of mineral stores, the American money during that period was the money with the most stable buying privilege. The World War 2 relegated all nations based in Europe into having to suffer from huge financial deficits in spite of the fact that they had the most mineral stores given to America; therefore, the emergence of America as a superpower did not came as a shock to everyone. This situation was used then by the Bretton Woods mechanism in selecting the American currency as its primary monetary unit, upon which all member countries agreed in unison.
The mechanism is under the control of two primary organizations: The International Monetary Fund (IMF) and the World Bank. These organizations had also been founded in America. The mechanism functioned through the application of stable exchange rates utilizing the American currency as the primary monetary unit (Bordo, 1993). The major mechanism that identified its functions was based after the strategic ideas of White and not Keynes. With these circumstances and with the other elements under consideration, the superb power of America over the Bretton Woods mechanism was obvious.
Effectiveness in relation to its Objectives Based on the situations identified above, here is no doubt that the primary goal of the Bretton Woods is to give aids with regards to the financial stability of countries globally as well as initiate financial strategies for growing and emerging countries. These goals are primarily attained through the allotment of loans that can be attained by all member countries. The long duration of functioning of the Bretton Woods mechanism proved that these goals had been attained.
One of the proofs was that the situations of global monetary currencies changed in accordance with level that most nations can afford in the previous and succeeding years. Aside from these, the Bretton Woods era also resulted in the establishment of unreal growth in terms of financial opportunities (Culpeper, 1997). It has also been proven that the growth of the financial opportunities during the Bretton period had been valuable. Specifically, the level of inflation was minimized in accordance to the basic level for each country excluding Japan.
Through the initiatives of these organizations the goal of enhancing profit was attained as the development of GDP during that period had been larger as compared to any other economic period; moreover, the level of interests, with the help of the Bretton Woods organizations, is still strong and affordable. Aside from these tremendous benefits, the goals of both organizations had been attained through their consistent initiatives and application of beneficial economic policies, particularly for growing countries.
For example, the World Bank has an organization under its control called Multilateral Investment Guarantee Agency (MIGA) which primarily offers loans to enable that start of various programs of the growing countries. Loans for political initiatives are also being given by MIGA in order to give protection for investors against abuse and corruption. This results into the fulfillment of programs since all delays caused by financial problems are being stopped. Through MIGA, growing countries are also able to encourage and manage their economic policies and programs, enabling the stability of their economies (Boughton, 1995).
Composed of almost all nations globally, the purpose of the existence of the International Monetary Fund (IMF) is based on the provision of global economic interaction through the establishment of a global evaluation organizations, which will do all the monitoring, support and communications regarding financial dilemmas and current news. Its primary goal is to help in the emergence of global trade in order to attain profitable options and abundance of job opportunities. It is also the goal of the IMF to guarantee the fairness of the trading, thereby, eliminating the possibility of unfair competition.
Its objective is also based on the deletion of complicated policies that prevent the establishment of payment mechanism for economic transactions (Helleiner, 1996). Most significantly, nations having economic dilemmas are provided with chances to solve them with the guidance of the IMF and its current economic conditions. The foundation of the World Bank is an integral factor in the worldwide economic mechanisms, especially among growing nations. As an important organization that provides economic support, growing nations are able to gain access to loans annually.
Through its highly-qualified personnel, money and information database, the World Bank has the capability to help each growing nation towards attaining a manageable plan and program to counter poverty (Battilossi, 2005). The primary goals of the organization involve the enhancement of the growing nations’ ways of survival as well as the deletion of mediocrity. Primarily, is objective is to manage the financial plans and programs of the growing countries and give ample financial aid.
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Did the Bretton Woods Conference help the world economy after World War II?. (2016, Aug 27). Retrieved from https://phdessay.com/did-the-bretton-woods-conference-help-the-world-economy-after-world-war-ii/