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Essay / The Bretton Woods System - 1773
The theme of this essay emphasizes two things. Firstly, the key elements of the Bretton Woods system and, secondly, Ruggie's characterization of the Bretton Woods system as "integrated liberalism", and the extent to which he achieves this. The Bretton Woods system broadly refers to the international monetary regime that prevailed from the end of World War II until the early 1970s. After the end of World War II, the need for an international monetary framework to stimulate trade and the economy; growth and stability, were important. Taking its name from the site of the 1944 conference, attended by the forty-four Allied nations; The Bretton Woods system consisted of four key elements. First, create a system in which each member country must fix or peg its exchange rate to gold or the US dollar, as the key currency. Second, the free exchange of currencies between countries at the established and fixed exchange rate; more or less a margin of one percent. Third, create an institutional forum, called the International Monetary Fund (IMF), for international cooperation in monetary matters: establishing, stabilizing and monitoring exchange rates. Fourth, remove all existing exchange controls limiting members' (protectionist) policies on the use of its currency for international trade. In practice, the first draft, as well as its further development and eventual demise, depended directly on the preferences and policies of its most powerful member, the United States. According to John Gerard Ruggie, 1982, this Bretton Woods system of monetary cooperation represented the type of liberalism that characterizes "domestic socio-economic stability accompanied by a liberal trading order." He called this system "embedded liberalism"... middle of paper ...... characterized the Bretton Woods system as "embedded liberalism" to show how market forces were surrounded by social and political constraints . Integrated liberalism therefore means a compromise between excessive international market economics and excessive domestic protectionist policies. Ruggie's liberalism represented international liberal trade locked into the postwar consensus on fixed exchange rates and capital controls. The fixed exchange rate helped promote stable liberal trade by eliminating any future uncertainty about exchange rate movements. While for national social and economic stability, the national government would use capital controls. All these practices were the key elements of the Bretton Woods system and also constitute the institution of entrenched liberalism. The Bretton Woods system can therefore be described as “integrated liberalism ».’.