July 17 - 23, 1944
Conclusion of the Bretton Woods Conference
July 2011
 Photo: World Bank. FDR acted to blunt the attempt by the “notably evil” John Maynard Keynes, shown here addressing the Bretton Woods conference in July 1944, to impose his monetarist influence on that gathering; however, with Roosevelt’s death, Truman adopted Keynesian economic dogma, in violation of the U.S. Constitution. |
July 22, 1944 marked the conclusion of the Bretton Woods Conference, the singular event which established the postwar monetary system, and launched approximately 20 years of growth and prosperity internationally. A look at the principles established there, from the standpoint of the statesman who shaped them—President Franklin Delano Roosevelt—is vital to be understood today, as the world faces the need to establish a new monetary system, aimed at promoting economic growth and development, and a rescue from a New Dark Age.
Recall the stark similarities between the period of 1945 and today: While, today, the world is not emerging from a world war, nonetheless, devastation, breakdown, and enforced underdevelopment exist everywhere, just as they did 67 years ago. The old system is beyond repair, and a new financial system is required, in order to permit the long-term investment and growth so desperately needed. Today, as then, the new system must be constructed to foster peace and cooperation, in lieu of war.
There were two great objectives Roosevelt was trying to accomplish with the Bretton Woods System: 1) to free more than half the world's population from the British, French, Dutch, Belgian, and Portuguese Empires, and 2) to unleash global economic reconstruction and development, that is, to "reconstruct" shattered Europe's and Japan's economies and to "develop" the former colonial sector, eliminating enforced underdevelopment (this is where the World Bank's name came from). Roosevelt proceeded from the American System of economics, of anti-usury,
The means for accomplishing this which FDR proposed, were several. First, to make the environment conducive to economic growth, he insisted upon currency stability—i.e., exchange rates fixed by governments. Second, he called for two institutions to be established, which would facilitate relations between states toward the above objectives: first, the International Monetary Fund, and second, the International Bank for Reconstruction and Development, today known as the World Bank.
Debating these objectives were 44 nations, including China, 19 nations of South and Central America, a Committee of Liberation for France, the Soviet Union, Great Britain, the United States, and more than a dozen other nations of Asia, Africa, and Eastern Europe. From the conclusion of the meeting, the proposal went back for ratification by the several states, which process was not completed until 1946.
To be sure, the death of President Roosevelt, which occurred a few weeks after he introduced the legislation authorizing U.S. participation into the U.S Congress, had a huge impact on the outcome of the new system. But the fact that Bretton Woods functioned as well as it did, in accomplishing the rebuilding of Europe and Japan, and palpable improvements in living standards in South America, was largely due to the impetus which Roosevelt gave it.
Excerpts from Roosevelt's message to Congress on Feb. 12, 1945 follow.
"In my Budget Message of January 9, I called attention to the need for immediate action on the Bretton Woods proposals for an International Monetary Fund and an International Bank for Reconstruction and Development. It is my purpose in this message to indicate the importance of these international organizations in our plans for a peaceful and prosperous world.
"As we dedicate our total efforts to the task of winning this war, we must never lose sight of the fact that victory is not only an end in itself, but, in a large sense, victory offers us the means of achieving the goal of lasting peace and a better way of life. Victory does not insure the achievement of these larger goals; it merely offers us the opportunity—the chance—to seek their attainment. Whether we will have the courage and vision to avail ourselves of this tremendous opportunity—purchased at so great a cost—is yet to be determined. On our shoulders rests the heavy responsibility for our making this momentous decision. I have said before, and I repeat again: This generation has a rendezvous with destiny.
"If we are to measure up to the task of peace with the same stature as we have measured up to the task of war, we must see that the institutions of peace rest firmly on the solid foundations of international political and economic cooperation. The cornerstone for international political cooperation is the Dumbarton Oaks proposal for a permanent United Nations. International political relations will be friendly and constructive, however, only if solutions are found to the difficult economic problems we face today. The cornerstone for international economic cooperation is the Bretton Woods proposal for an International Monetary Fund and an International Bank for Reconstruction and Development.
"These proposals for an International Fund and International Bank are concrete evidence that the economic objectives of the United States agree with those of the United Nations. They illustrate our unity of purpose and interest in the economic field. What we need and what they need correspond—expanded production, employment, exchange, and consumption—in other words, more goods produced, more jobs, more trade, and a higher standard of living for us all. To the people of the United States this means real peacetime employment for those who will be returning from the war, and for those at home whose wartime work has ended. It also means orders and profits to our industries, and fair prices to our farmers. We shall need prosperous markets in the world to insure our prosperity, and we shall need the goods the world can sell us. For all these purposes, as well as for a peace that will endure, we need the partnership of the United Nations.
"The first problem in time which we must cope with is that of saving life, and getting resources and people back into production. In many of the liberated countries, economic life has all but stopped. Transportation systems are in ruins, and therefore coal and raw materials cannot be brought to factories. Many factories are shattered, power plants smashed, transportation systems broken, bridges blown up or bombed, ports clogged with sunken wrecks, and great rich areas of farmland inundated by the sea. People are tired and sick and hungry. But they are eager to go to work again, and to create again with their own hands and under their own leaders the necessary physical basis of their lives....
"The main job of restoration is not one of relief. It is one of reconstruction which must largely be done by local people and their governments. They will provide the labor, the local money, and most of the materials. The same is true for all the many plans for the improvement of transportation, agriculture, industry, and housing, that are essential to the development of the economically backward areas of the world. But some of the things required for all these projects, both of reconstruction and development, will have to come from overseas. It is at this point that our highly developed economy can play a role important to the rest of the world, and very profitable to the United States. Inquiries for numerous materials, and for all kinds of equipment and machinery in connection with such projects, are already being directed to our industries, and many more will come. This business will be welcome just as soon as the more urgent production for the war itself ends.
"The main problem will be for these countries to obtain the means of payment. In the long run, we can be paid for what we sell abroad chiefly in goods and services. But at the moment, many of the countries who want to be our customers are prostrate. Other countries have devoted their economies so completely to the war, that they have not the resources for reconstruction and development. Unless a means of financing is found, such countries will be unable to restore their economies....
"The United States should act promptly upon the plan for the International Bank, which will make or guarantee sound loans for the foreign-currency requirements of important reconstruction and development projects in member countries. One of its most important functions, will be to facilitate and make secure wide private participation in such loans. The Articles of Agreement constituting the charter of the Bank have been worked out with great care by an international conference of experts, and give adequate protection to all interests. I recommend to the Congress that we accept the plan, subscribe the capital allotted to us, and participate wholeheartedly in the Bank's work.
"This measure, with others I shall later suggest, should go far to take care of our part of the lending requirements of the postwar years. They should help the countries concerned to get production started, to get over the first crisis of disorganization and fear, to begin the work of reconstruction and development; and they should help our farmers and our industries to get over the problem of reconversion, by making a large volume of export business possible in the postwar years. As confidence returns, private investors will participate more and more in foreign lending and investment, without any government assistance. But to get over the first crisis, in the situation that confronts us, loans and guarantees by agencies of government will be essential.
"We all know, however, that a prosperous world economy must be built on more than foreign investment. Exchange rates must be stabilized, and the channels of trade opened up throughout the world....
"A good start has been made. The United Nations Monetary Conference at Bretton Woods has taken a long step forward on a matter of great practical importance to us all. The conference submitted a plan to create an International Monetary Fund which will put an end to monetary chaos. The Fund is a financial institution to preserve stability and order in the exchange rates between different moneys. It does not create a single money for the world, neither we nor anyone else is ready to do that. There will still be a different money in each country, but with the Fund in operation, the value of each currency in international trade will remain comparatively stable....
"The International Fund and Bank together represent one of the most sound and useful proposal for international collaboration now before us. On the other hand, I do not want to leave with you the impression that these proposals for the Fund and Bank are perfect in every detail. It may well be that the experience of future years will show us how they can be improved. I do wish to make it clear, however, that these Articles of Agreement are the product of the best minds that forty-four nations could muster.... It would be a tragedy if differences of opinion on minor details should lead us to sacrifice the basic agreement achieved on the major problems....
"In this message I have recommended for your consideration the immediate adoption of the Bretton Woods Agreements, and suggested other measures which will have to be dealt with in the near future. They are all parts of a consistent whole. That whole is our hope for a secure and fruitful world, a world in which plain people in all countries can work at tasks which they do well, exchange in peace the products of their labor, and work out their several destinies in security and peace; ...
"The point in history at which we stand is full of promise and of danger.... We have a chance, we citizens of the United States, to use our influence in favor of a more united and cooperating world. Whether we do so will determine as far as it is in our power, the kind of lives our grandchildren will live in."
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The fact that the promise of FDR's words was subverted beginning in the mid-1960s, should not obscure the fact that those principles which worked, must be put in place today.
The original article was published in the EIR Online’s Electronic Intelligence Weekly, as part of an ongoing series on history, with a special emphasis on American history. We are reprinting and updating these articles now to assist our readers in understanding of the American System of Economy.
