ABSTRACT
Figure 25.1 The World Bank Group 396 Figure 25.2 The managing directors of the IMF and the presidents of the IBRD 397 Figure 25.3 The eight GATT trade rounds 1947-94 405
Dollars instead of gold A stable monetary climate and the recovery of the European economies were essential to restart international trade after the Second World War. The International Monetary Fund (IMF) had been devised at Bretton Woods in 1944 to deal with the former. The US government, which had decided to abandon the gold standard in 1933 (see §18.4), supported the idea of paper money being used as a standard. However, the fact that American bankers were pro-gold meant that Harry Dexter White had to find a compromise at Bretton Woods between ‘a full paper standard and a return to the gold standard’. In order to counter the objections of the New York bankers, White worked out a solution based on equating the American dollar to gold. ‘As a store of value, gold and the dollar were considered equals’ (Moffit 1983, 21). It was agreed that foreigners could exchange dollars at a rate equal to the price of an ounce of gold in 1934 (35 dollars). With a view to avoiding monetary disagreement and in order to ensure stability, the decision was taken at Bretton Woods to impose fixed exchange rates. This meant that states which wanted to change the value of their monetary unit required the agreement of the IMF. So as to end the prewar situation in which states were dependent on private creditors or emergency government loans, both of which were unreliable mechanisms, a new scheme was developed under which states that had to adapt their policy in line with economic problems would automatically be given access to IMF credit facilities. The conditions for getting credit were not worked out in any great detail at Bretton Woods, because of
disagreement between Keynes, who represented a state with substantial debts, and White, who represented the state that would have to provide the funds. It was expected that the rules would be devised within the organization itself. The result was that Keynes reported back to the UK that ‘use of fund credit would not bring foreign intervention into domestic economic policy making in Britain’, while White in the US indicated that the IMF ‘would not simply dole out money to debtor countries’ (Moffit 1983, 22).
