4 - The IMF and the creation of the Bretton Woods System, 1944–58

Summary

Faced with a task of immense complexity, we often search for historical parallels. Currently, two contrasting approaches are offered to the problem of economic reform in East European and former Soviet republics and their integration into the world economy. On the one hand, there is full and rapid international integration (with multilateral trading practices and immediate currency convertibility), on the other, a regional approach (with regional trade preferences, and non-convertible currencies grouped in a clearing union).

In arguments against sudden “big bang” transitions to full convertibility, the example of post-war Europe is frequently cited (see the discussion of Polak, 1991; van Brabant, 1991; Williamson, 1991). European states did not return to convertibility on current account transactions until after 1958, thirteen years following the end of World War II. Yet they provided the most convincing example in all of economic history of an “economic miracle.” Do they in fact give a historical argument against quick convertibility?

While advocates of the multilateral approach emphasized Bretton Woods and the Marshall Plan, the regionalist approach saw the European Payments Union as the key institution in the international restructuring of Western Europe. Alan Milward (1984) examined the development of trade policy and argued that the drive to European integration came not so much from American pressures or from the European Recovery Program (Marshall Plan) but from French, Belgian, and German calculations of national interest.