Postwar: A History of Europe Since 1945

by Tony Judt

Led by Maynard Keynes—the moving spirit behind the July 1944 meeting at the Bretton Woods conference center in New Hampshire—economists and statesmen sought an alternative to the international financial system of pre-war days: something less rigid and deflationary than the gold standard, but more reliable and mutually sustaining than a floating-rate currency regime. Whatever this new regime was to be, it would need, Keynes argued, something resembling an international bank, functioning rather like the central bank of a domestic economy, to administer it: to maintain the fixed exchange rate while at the same time encouraging and facilitating foreign exchange transactions. That, in essence, is what was agreed at Bretton Woods. An International Monetary Fund was set up (with US cash) ‘to facilitate the expansion and balanced growth of international trade’ (Article I). The initial Executive Board, modeled on the UN Security Council, had representatives from the US, UK, France, China and the USSR. An International Trading Organisation was proposed, which would eventually take shape in 1947 as the General Agreement on Trade and Tariffs (later the World Trade Organisation). Members agreed to tariff and other concessions for contracting partners, as well as codes for trade practices and procedures for handling breaches and disputes. All of this was in itself a dramatic break from earlier ‘mercantilist’ approaches to trade and was intended, in due course, to inaugurate a new age of...