Bretton Woods System

The Bretton Woods system was the post-Second World War framework designed to provide monetary stability and support economic reconstruction. It combined a fixed but adjustable exchange-rate system with new multilateral financial institutions and rules for economic cooperation.

Exchange-rate framework

Delegates from 44 countries negotiated the arrangements at Bretton Woods in July 1944. Member countries maintained fixed but adjustable exchange rates against the US dollar, while the United States made the dollar convertible into gold for foreign monetary authorities at 35 dollars per troy ounce.

• Countries could alter exchange rates in cases of fundamental external imbalance, subject to the agreed framework.
• Temporary controls on international capital movements were permitted, giving governments greater room to pursue domestic economic stability.

Institutional architecture

The conference created the International Monetary Fund to promote exchange stability and provide temporary balance-of-payments assistance. It also established the International Bank for Reconstruction and Development, now part of the World Bank Group, to support post-war reconstruction and development.

• The General Agreement on Tariffs and Trade, 1947 was not created at Bretton Woods, but became the complementary trade pillar of the post-war economic order.
• Financial contributions and quotas shaped members' access to resources and voting power, making representation a continuing governance issue.

Breakdown and continuing significance

Growing pressure on US gold reserves led the United States to suspend dollar-gold convertibility in 1971. By 1973, major currencies had moved towards floating exchange rates, ending the original monetary arrangement but not its institutions.

• The IMF and World Bank remain central institutions of global economic governance.
• As a founding member of both institutions, India has an enduring interest in quota reform, fair representation, development finance and policy autonomy.