ABSTRACT
This chapter reviews the key arrangements that undergirded the postwar economic system. It emphasizes the international systemic, the domestic macroeconomic structural, and the economic doctrinal elements of policy change. The chapter discusses the complex and sometimes paradoxical role of governments in the establishment and character of external currency markets. The trauma of unemployment on a mass scale changed the way people throughout Europe and North America would think about the role of government. The absence of major power war and the widespread belief that governments had few responsibilities for economic management or social welfare allowed private activity to expand with few impediments. Freed from gold-standard discipline, governments printed inconvertible paper money to mobilize domestic resources, and inevitably inflation advanced unevenly, distorting the relative values of national currencies. The US government, reflecting the evolution of attitudes among both the policy and the business communities against protectionism, held a bias against controls.
