The Bretton Woods system was an international monetary framework established in 1944, aimed at creating a stable economic environment post-World War II. It introduced fixed exchange rates, with currencies pegged to the US dollar, which was convertible to gold. The system was supervised by the International Monetary Fund (IMF) and sought to promote international economic cooperation and prevent competitive devaluations (Wu, 2022; Kugler and Straumann, 2020).
Significance to International Political Economy (IPE)
Monetary Transformation: The collapse of the Bretton Woods system in 1971 marked a significant shift in global monetary policy, leading to the rise of floating exchange rates and the expansion of global financial markets. This transition is considered a transformative moment in IPE, influencing the politics of exchange rates and financial globalization (Lim, 2022; Subacchi and Vines, 2023).
US Hegemony: The system reinforced US monetary dominance, as the dollar became the central reserve currency. Even after its collapse, the US maintained significant influence over global finance, highlighting the enduring impact of Bretton Woods on international monetary relations (Eichengreen, 2021; Wu, 2022).
Economic Policy Shifts: The end of Bretton Woods led to a shift from Keynesian economic policies focused on full employment to inflation-targeting regimes. This change reflects broader trends in IPE, where economic policies have adapted to new global challenges, such as financial crises and demographic shifts (Subacchi and Vines, 2023; Vines and Subacchi, 2023).
Institutional Legacy: The Bretton Woods institutions, primarily the IMF and World Bank, continue to play crucial roles in global economic governance. They influence economic transparency and development policies, particularly in post-colonial states, though their impact remains debated (Hollyer et al., 2024; Alaye, 2024).
The Bretton Woods system’s establishment and subsequent collapse significantly shaped the landscape of international political economy. It laid the groundwork for modern financial systems, reinforced US monetary hegemony, and influenced global economic policies and institutions. Understanding its legacy is essential for studying the evolution of global economic governance and the dynamics of international finance.
References
Lim, K., 2022. Monetary transformation: revisiting the end of the Bretton Woods order. Globalizations, 19, pp. 989 – 1012. https://doi.org/10.1080/14747731.2021.2023387
Subacchi, P., & Vines, D., 2023. Fifty years on: what the Bretton Woods System can teach us about global macroeconomic policy-making. Oxford Review of Economic Policy. https://doi.org/10.1093/oxrep/grad016
Vines, D., & Subacchi, P., 2023. From the Bretton Woods system to the global non-system: the trials and tribulations of slow learning. Oxford Review of Economic Policy. https://doi.org/10.1093/oxrep/grad017
Hollyer, J., Pang, X., Rosendorff, B., & Vreeland, J., 2024. Do the Bretton Woods Institutions promote economic transparency?. Political Science Research and Methods. https://doi.org/10.1017/psrm.2024.28
Alaye, A., 2024. Bretton Woods and Underdevelopment of the Post-Colonial States of the Global South. Global Journal of Political Science and Administration. https://doi.org/10.37745/gjpsa.2013/vol12n24348
Eichengreen, B., 2021. Bretton Woods After 50. Review of Political Economy, 33, pp. 552 – 569. https://doi.org/10.1080/09538259.2021.1952011
Wu, J., 2022. U.S. Monetary Hegemony after the Collapse of the Bretton Woods System. BCP Business & Management. https://doi.org/10.54691/bcpbm.v17i.340
Kugler, P., & Straumann, T., 2020. International Monetary Regimes: The Bretton Woods System. Handbook of the History of Money and Currency. https://doi.org/10.1007/978-981-10-0622-7_25-1
