Role of international institutions in the world's economic governance since 1945

INTRODUCTION:

I) A new world economic order

→ Bretton Woods conference (July 1944)

    ↪ aimed to rebuild the economy of the world with a coherent funding system

    ↪ the stability of currencies => a priority because it guarantees economic growth for the        world economy

→ Two main measures:

   ↪ Gold Exchange Standard Act => all signatories states could fix the standard value of their money on dollar which became the only currency convertible into gold => dollar became the keystone of the international monetary system and stability was guaranteed

   ↪promoting free trade

→ Bretton Woods Agreement was the first try to establish rules and economic institutions.

→ Two international institutions became the keystones of BW system (BW twins)

→ IMF: an institution in charge of checking onto the monetary stability and could help states with credits/loans

→ International Bank for Reconstruction and Development (december 1945) : its  goal was to give out long term loans to countries in order to allow reconstruction and investment => now World Bank.

→ Two institutions whose headquarters are located in USA

→ Opening borders to encourage trade

→ The GATT was signed in 1947 in Geneva

↪by 23 countries accounting for 80% of world trade at the time

↪ this agreement forbade protectionist policies

↪ it also encouraged countries to lower their taxes and tariffs

↪negotiations were made in “Rounds” between the signatories (great cycles of negotiations b/w countries)

II) USA’s influence in the word economic governance

→ USA’s hegemony: with the BW agreement the country became the pillar of the new governance

↪WB and IMF have their headquarters in the USA and the country owns a considerable amount of votes in these institutions which reinforced their influence

→ By the end of WWII, USA owned ⅔ of the world gold stocks, its GNI accounted for 40% of the world’s GNI and their exportations made up ⅕ of the world’s exportations.

→ From 1947, thanks to their economic supremacy, the USA helped Western Europe to rebuild/redevelop with the Marshall plan.

III) Limits of the system

→ limited efficiency of BW system

↪ no real global economic cooperation

→ GATT had a limited impact

↪ many countries and regional organisms (trade blocs) refused to drastically lower their tariffs/ taxes

→ protests against the system

↪ the economic domination of the USA remained limited because communist countries didn’t participate in its system ( + third world= ex-colonies)

↪ these countries called for a New International Economic Order (N.I.E.O)

→ Southern countries created in 1964 the UNCTAD ( United Nations Conference on Trade and Development )

↪ its first summit called for a more balanced new global economic order with less disadvantages for the poor South => the Northern countries helping them develop with fair trade exchanges

→ the 70’s and the system’s failure:

↪BW system was questioned in the 70’s due to USA’s economic problems and loss of competitivity + Vietnam War which put a strain on US economy

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