The original Bretton Woods system came into being at a conference of 44 nations beginning on July 1, 1944, in Bretton Woods, New Hampshire, convened on the initiative of U.S. President Franklin D. Roosevelt. On July 22, the group agreed to create an International Monetary Fund (IMF) and a Bank for Reconstruction and Development, later known as the World Bank. The main purpose of these institutions was to deal with the economic problems of the European countries that had been devastated by war. They began to function in early 1945, as World War II was nearing its end.
The core of the new system was the arrangement for fixed currency parities, which would make it possible to revive world trade. The value of the dollar was pegged to a specific weight of gold, and, until the end of the 1960s, it functioned as the accepted substitute for gold. Exchange rates of other currencies were to be changed in relation to the dollar or gold, only as a measure of last resort, after national policy measures had been exhausted. Long-term investment and trade could thus be undertaken on a stable currency background, and risk of dramatic currency losses and speculation was nonexistent at that time.
From the beginning, however, there were clashes between the "free-trade" colonial policies of the British delegation, and the concepts of President Roosevelt, who had told Britain's Sir Winston Churchill as early as 1941 that the United States was not going to fight the war in order to restore Britain's colonies. After Roosevelt's death, unfortunately, his understanding of postwar economic policy was abandoned by successive Presidents (with the exception of John F. Kennedy), and the IMF and World Bank increasingly came to play the role of instruments of neo-colonial looting, on behalf of the British-based financier oligarchy. When President Nixon finally took the dollar off its gold backing in 1971, the Bretton Woods system became defunct.
In calling for a New Bretton Woods, Lyndon H. LaRouche, Jr. has specified five steps that must be taken today:
1. Governments must not attempt to bail out the speculators. Let the derivatives market and other paper values collapse as they may: it's only paper! The only necessary action of government on this account, is to protect people, productive enterprise, and useful trade in hard commodities and science-related services.
2. The credit and issued public Treasury debt of national governments must be protected at all costs; otherwise, the necessary measures of economic recovery and growth would not be possible.
3. There must be no mass evictions, or breaks in continuity of operations of essential production and distribution of goods and essential services. During the 1929-31 Depression, terrible blunders were imposed upon the Hoover administration by Andrew Mellon et al. This must not be repeated today, in any country.
4. The President of the United States must act in concert with other governments, to put the existing financial and monetary system into bankruptcy, and to put a new world monetary system into place.
5. A global recovery program must be adopted to foster immediate recovery in world hard-commodity trade, and to provide an urgently wanted general stimulant for the private economies of the participating nations. The core of such a recovery program is the Eurasian Land-Bridge, creating corridors of high-technology infrastructural and industrial development, with "spiral arms" extending to Africa and the Americas.
Background: See William Engdahl, "What the Bretton Woods System Really Was Designed to Do," EIR, Aug. 15, 1997.
