Bretton Woods Agreement Contribution to Globalization
The critical debate on globalization, although temporarily hampered by the events of 11 September 2001, continues to raise issues that are at the heart of national and international political agendas. This note provides a conceptual framework for the IMF`s engagement in the global economy. It describes what the IMF is doing as part of its mandate to (1) protect the international financial system and (2) empower more countries to reap the benefits of globalization while minimizing risks. At the same time, it recognizes that the IMF is part of a broader network of international institutions, each of which plays an important role in improving globalization. Unit 6: Financial Crisis, IMF and World Bank Part 3: The International Monetary Fund (IMF) Before WI, foreign exchange markets were relatively uneventful. Monetary values were defined in accordance with the gold standard which (as shown in Unit 5) guaranteed fixed exchange rates between participating countries. However, after the war, the system collapsed when countries began printing money to pay for the war and tried to boost their economies by devaluing their currencies to sell more exports. Growing exchange rate uncertainty and newly introduced protectionist policies have crippled the global economy. The Bretton Woods Conference. Towards the end of the Second World War, the Bretton Woods Conference met in the hope of establishing, among other things, a new international monetary system.
The “Bretton Woods” system that emerged was a modified variant of the previous gold standard. The value of the U.S. dollar was set in gold, and all other currencies were given U.S. dollar exchange rates, effectively linking them to gold as well. ==References=====External links===* The official website agreed to keep the value of the dollar at $35 per ounce of gold, and the other countries agreed to keep the value of their currencies within one percent of their assigned values through the intervention of the central bank in the foreign exchange markets. Under the agreement, countries were only allowed to change their official exchange rates with the consent of a newly created institution, the International Monetary Fund or IMF, whose main objective was to promote stability within the system. The modern and globalized world is developing increasingly complex structures. Globalization takes many forms, social, political, economic and cultural. It cannot be calculated effectively as a condition and process because it is not a concept that is complete both in its content and in the way it works as a whole.
Its main feature is connectivity, followed by the expansion, growth, acceleration and intensity of interconnectivity across political and geographical boundaries. Procedures in a region are becoming increasingly important for individuals and societies, regardless of their geographical distance. The current form of globalization presents dense and diverse interdependencies of connectivity, characterized by unprecedented institutionalization. International institutions such as the IMF and the World Bank play an important role in the process of organizing the global system. Their decisions shape and promote the fundamental principles of globalization and combine them with legitimacy and ideological orientation. The new models created by institutions are reinforced and disseminated by their dominant position in the organizational system of globalization. On a larger scale, however, the agreement united 44 countries from around the world and brought them together to resolve a growing global financial crisis. It has helped strengthen the global economy as a whole and maximized gains from international trade. The Bretton Woods Agreements of 1944 established a new global monetary system. It replaced the gold standard with the US dollar as the world currency. In this way, he established America as the dominant power in the global economy. After the agreement was signed, America was the only country capable of printing dollars.
A reversal of the process of globalization would not solve the problem of poverty – this has been sufficiently demonstrated by the events of the 20th century. Instead, the world needs a new approach to globalization that harnesses its enormous potential to improve human well-being. To move the process forward and strengthen support for better globalization, a common political understanding of how to maximize benefits while minimizing risks must be developed. Supporting money with the gold standard began to become a serious problem in the late 1960s. In 1971, the problem was so serious that US President Richard Nixon announced that the ability to convert the dollar into gold would be “temporarily” suspended. This decision was inevitably the straw that broke the camel`s back for the system and the agreement it described. The IMF seeks to mitigate the negative impact of globalization on the global economy in two ways: by ensuring the stability of the international financial system and by helping countries take advantage of investment opportunities offered by international capital markets, while reducing their vulnerability to adverse shocks or changes in investor sentiment. The Bretton Woods countries chose not to give the IMF the power of a global central bank. Instead, they agreed to contribute to a fixed pool of national currencies and gold that would be held by the IMF. .