The Bretton Woods Institutions: IMF, World Bank, and GATT

In July 1944 the war was not yet over. But delegates from 44 allied nations met in a hotel in New Hampshire to plan the peace. Their aim was to stop a repeat of the economic chaos that followed the First World War.

That meeting is called the Bretton Woods Conference. It gave the world the IMF and the World Bank. A related trade deal, GATT, followed in 1947.

1Why was Bretton Woods held?

The Great Depression of the 1930s had hurt every country. Nations fought each other with currency tricks and high tariffs. Many leaders felt this made the war more likely.

So in 1944 the allied nations met to design a better system. The meeting ran from 1 to 22 July at the Mount Washington Hotel in Bretton Woods, New Hampshire. About 730 delegates from 44 nations took part.

The ideas came largely from two men. They were the British economist John Maynard Keynes and the American official Harry Dexter White.

Why does this matter? Bretton Woods is the root of today’s global money system. It showed how war and crisis can reshape the economy.

• July 1944, New Hampshire, USA.
• 44 nations attended.
• Key thinkers: Keynes and White.

2What three institutions came from it?

The conference led to two lasting bodies. The International Monetary Fund, or IMF, was set up to watch exchange rates and help countries in money trouble. The World Bank, first called the IBRD, was set up to fund the rebuilding of war-hit economies.

The third piece came a little later. GATT, the General Agreement on Tariffs and Trade, was signed in Geneva on 30 October 1947 by 23 nations. Its aim was to cut tariffs and other trade barriers. It began to apply from 1 January 1948.

The IMF came into formal existence in 1945. It began with 29 member countries.

Why does this matter? Many students think GATT was born at Bretton Woods. It was not. It was a separate deal, three years later.

• IMF: exchange rates and financial stability.
• World Bank: rebuilding war-hit economies.
• GATT: 1947, a separate trade agreement.

3How did fixed rates work?

Under the Bretton Woods system, currencies were fixed to the US dollar. The dollar was itself convertible to gold. So gold was the anchor of the whole system.

A country could not freely change its exchange rate. The IMF helped members through short-term money problems.

For about three decades the IMF oversaw this fixed-rate system. Trade grew quickly in these years.

Why does this matter? This is the most common exam trap. Bretton Woods set up fixed rates, not floating ones.

• Currencies fixed to the US dollar.
• The dollar was convertible to gold.
• System ran about three decades.

4Why did the fixed system collapse?

By the 1960s the United States was spending and lending heavily abroad. Inflation was rising. Other countries doubted that every dollar could be swapped for gold.

On 15 August 1971, President Richard Nixon cancelled the direct convertibility of the dollar to gold. This is called the Nixon shock. It also brought in wage and price freezes and a tax on imports.

Attempts to repair the system failed. By 1973, floating exchange rates had in practice replaced it for the major currencies.

Why does this matter? The end of the gold link changed global finance. The IMF kept going, but its role shifted to handling crises.

• 15 August 1971: Nixon ends gold convertibility.
• By 1973: floating rates in practice.
• IMF role: now crisis handling.

5How did GATT become the WTO?

GATT stayed in force for almost fifty years. It was a legal agreement, run through rounds of talks. It was not a full organisation.

That changed after the Uruguay Round. The World Trade Organization began on 1 January 1995. It was agreed by 123 nations at Marrakesh in April 1994.

The World Bank changed too. Its job grew from post-war rebuilding to wider development finance for poorer countries.

Why does this matter? GATT and the WTO are not the same thing. The first was an agreement. The second is a formal body.

• GATT: 1947, an agreement.
• WTO: 1 January 1995, a formal organisation.
• World Bank: from rebuilding to development.

6Why did developing countries push back?

Many poorer nations felt the system favoured rich ones. Voting power at the IMF depends on each member’s quota. Richer countries hold larger quotas. IMF loans also often come with policy conditions, which remain a hot topic.

In 1964, 77 developing countries issued a joint declaration at the first UNCTAD conference. They became known as the Group of 77. They wanted a fairer deal on trade and aid.

Why does this matter? The debate about who controls global economic bodies is still alive. Exam questions on international economics often draw on it.

• IMF votes follow quotas.
• Group of 77: founded 15 June 1964.
• Complaint: rich-country control and loan conditions.

7What are the exam traps?

• Bretton Woods set up fixed rates, not floating ones. The NDA & NA (II) 2025 paper asked exactly this (Source: NDA & NA (II) 2025, Q84).
• GATT (1947) is not the WTO (1995).
• GATT was not made at Bretton Woods. It was a separate 1947 agreement.
• The IMF handles exchange rates. The World Bank handles development finance.