In July 1944, delegates from 44 nations met in New Hampshire to design the post-war international monetary order. The system they created governed global finance for 27 years — and its legacy shapes everything today.
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The Bretton Woods conference of July 1944 was one of the most consequential gatherings in economic history. For three weeks at the Mount Washington Hotel in Bretton Woods, New Hampshire, representatives from 44 Allied nations negotiated the framework for the postwar international monetary system — creating institutions and rules that, in modified form, still govern the global economy 80 years later.
The conference took place while World War II was still being fought. The outcome was not yet certain, but American and British planners were confident enough of Allied victory to begin designing what came after. The memory of the interwar period — the competitive currency devaluations, trade wars, financial instability, and economic nationalism that many believed had contributed to the Depression and ultimately to the war itself — shaped everything about what was designed at Bretton Woods.
The conference was dominated by a negotiation between two powerful personalities representing the two most important economies: John Maynard Keynes, representing Britain, and Harry Dexter White, representing the United States.
Keynes proposed an International Clearing Union — a supranational central bank that would issue a new international reserve currency (he called it "bancor"), with automatic mechanisms to reduce imbalances between surplus and deficit countries by penalizing both. Surplus countries would be required to spend or invest their surpluses; deficit countries would face adjustment requirements. This symmetrical system was designed to prevent the deflationary dynamics where surplus countries (like Germany in the 1920s) were never pressured to adjust.
White proposed a more modest system centered on the dollar. The U.S. was the dominant power, held most of the world's gold, and had no interest in creating a supranational currency that would constrain American policy. White's vision prevailed: a dollar-centered system with fixed but adjustable exchange rates, the IMF providing balance-of-payments loans to countries in deficit, and the World Bank providing reconstruction and development lending.
The International Monetary Fund (IMF): Established to provide short-term balance-of-payments financing to countries facing temporary deficits, allowing them to defend their exchange rate pegs without deflating their economies. The IMF's financing comes with conditions — policy adjustments required as a condition of lending — which became the primary mechanism of IMF influence over developing country economic policy for decades.
The World Bank (formally the International Bank for Reconstruction and Development): Created to finance long-term reconstruction and development, initially focused on war-ravaged Europe, later shifting to developing country infrastructure and poverty reduction.
The fixed exchange rate system: Currencies were pegged to the dollar at fixed rates; the dollar was pegged to gold at $35/ounce. Countries could adjust their pegs in cases of "fundamental disequilibrium" with IMF approval, providing flexibility without the chaotic competitive devaluations of the 1930s.
The system functioned reasonably well through the 1950s and 1960s but contained the Triffin Dilemma — the inherent tension between providing global dollar liquidity (requiring U.S. deficits) and maintaining gold convertibility (requiring U.S. surpluses). By the late 1960s, the contradiction became irresolvable. Nixon closed the gold window in August 1971, ending the fixed exchange rate system.
The institutions survived the monetary architecture's collapse. The IMF transitioned from managing fixed exchange rates to providing crisis lending and economic surveillance. The World Bank expanded its development mandate. Both remain central to the international financial architecture, though both face criticism for governance structures that reflect the power distribution of 1944 rather than the multipolar world of 2025. See dollar reserve currency history, what are special drawing rights, and the IMF explained.