IntroductionAccording to Van (1978), the Bretton woods system involved management of money. The system established regulations and control systems that could guide both commercial and financial relations. This was majorly among the major industrial states in the world in the middle of the 20th century. The independent nation states were therefore expected to comply fully with the obligations of the Bretton woods system. It was the first system which comprised of an entirely initiated monetary order which was aimed at governing the monetary relations among the chosen independent nations.
The Bretton Woods Agreement was signed and sealed in July 1944 in Bretton woods, New Hampshire and the United States. The agreement was made to assist in reconstructing the world economic system which was destroyed by the raging World War 11. The representatives included 730 delegates from the 44 allied nations who gathered in the United Nations Monetary and Financial Conference. With a common concern, they deliberated upon the Bretton Woods Agreement. (Van, 1978)In regards to the Bretton woods agreement, the developed nations agreed over the US vision of improving the international economic systems.
This was possible through integrating currencies such that a single currency system was in use. The system therefore was designed basically for the purpose of establishing, controlling and sustaining an international monetary system that could allow for easy trading transactions within the nations. This also aimed at fostering free flow trade ventures and eliminating the discriminatory trade barriers to ensure free flow of capital. The US dollar was the currency to be used by all nations which was reallocated through international trade transactions. (Senior Official of the Bank of England, 1944)During this venture, the International Monetary Fund and the International Bank for Reconstruction and Development were established with the aim of planning and managing the entire project.
Besides, a system of rules was established, institutions created and procedures to regulate the functioning of the project was set. After various nations ratified the program and agreed upon the set system, the organizations started operating by the year 1945. (Mason & Asher, 1973). Features of the Bretton Woods AgreementThe most significant feature of the Bretton woods system was the compulsion for each member country to apply the monetary policy that was supposed to guide and maintain the rate of exchange by tying its currency to the standard currency which was the U. S dollar.
In addition, the IMF was given accountability to manage the imbalances of payments for a specified period of time. The United States dollar officially became the reserved standard currency used my many states who adopted the Bretton Woods System. (Michael, 2003) Secondly, due to the great depression the agreement among the economically powerful nations was based on the strategy of attaining a well managed international economic system.
The goals and means were based on the collective belief in the philosophy of capitalism. Some nations however objected this idea such as France which preferred planning and intervention by the state. The US on the other hand was not for the idea of great state intervention. It was very limited instead. All in all, the main feature dwelt in primary marketing mechanisms and the private ownership of the various means of production. (Van, 1978)