Bretton Woods: Preparing the Postwar Economy

The disagreement came when further, more ideological and political attempts to prevent a future war were contemplated. The proximate cause of the German, Italian, and Japanese turns to fascism seemed to have been in the Great Depression of the 1930’s. In the United States, the assumption that victory in the war had come from the American way of doing things – in particular, the fact that the United States had supplied most of the hardware, and most of the cash that led to the allied victory in Europe seemed to suggest that American capitalism was the most effective way of organizing an economy – led to the desire to, in effect, share the wealth. The United States came to be committed to a new world order which was beneficial to the needs of capitalism – an all inclusive capitalism that would allow all to share in the wealth of the world through trade and cooperation. Thus, in 1944, at a resort in New Jersey called Bretton Woods, the United States sponsored delegates from 44 different countries at a conference to discuss economic measures to prevent another postwar depression by setting in place a financial and trade system so strong, and so cooperative that such a global cash crisis could not occur again. The “Bretton Woods Agreement” led to the creation of some critical world financial programs that are still with us today. They include the World Bank (The International Bank for Reconstruction and Development – its official name), the International Monetary Fund, the General Agreement on Tariffs and Trade (the GATT, the precursor to the World Trade Organization), and the designation of the US Dollar as the international currency of choice. These measures were intended to help provide money, particularly for European redevelopment and recovery, but also for the growing of global trade infrastructure; a system for helping insolvent or financially troubled nations through difficult periods, so that they could continue making payments and global cash flow could be maintained; a system for gradual elimination of trade barriers globally, and a common currency by which trade and economic measurements could be conducted.

There is little doubt that these organizations have made massive contributions to global financial security and increases in wealth. However, it is also clear, partly because the United States controlled 60% of global trade at the end of WWII, and partly because there were no other currencies as strong, and partly because the efforts were happening under the auspices of the United States, that participation in this system was not automatic. To recieve loans, assistance, and membership in the GATT, nations had to conform to American style capitalism. This was not, apparently, an attempt to undermine communism in the Soviet Union, but was certainly seen as being so, which caused diplomatic tensions.

The Marshall and Dodge Plans: Building the Economy and Undermining Communism

The work of the Bretton Woods Agreement was completed by 1946. By 1948, the United States had also put in place the Marshall Plan. This was a system to provide technical and economic aid to European countries devastated by the war. The idea was that the United States would provide large amounts of money for investment and redevelopment of infrastructure, but that it had to be distributed by the European participants as a group. The Marshall Plan, which led by 1952 to about $13 billion in aid, was certainly meant in part to undermine the efforts of socialists and communists in Europe, whose ideas had be receiving growing audiences in devastated postwar Germany, France, England, and other European nations. The other effect of the Marshall Plan, however, was to encourage European cooperation. The European Coal and Steel Community, the commission set up by the participants in the plan as the body to distribute the aid, became the precursor to the European Union of today. The Soviet Union, which was invited to participate, declined, and required its client states in Eastern Europe to decline as well. Once again, then, the American vision of the creation of a global community, beginning with joint economic activity, was at odds with the Soviet vision of a dis-integrated Germany. Interestingly, the Marshall Plan was so successful in increasing American popularity in Europe, improving European economies, and creating a bulwark against communism that the United States attempted something similar with what came to be known as the Dodge Plan in Japan.

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