Laboratory readings: Bretton Woods and the path not taken    
 Bretton Woods and the path not taken7 comments
2 Jul 2002 @ 22:10, by Martin Oliver

The Bretton Woods System takes its name from the 1944 conference that gave birth to three international institutions - the IMF, the World Bank and GATT (the General Agreement on Tariffs and Trade). It was the basis for the post-war global economy.

Broadly speaking, the conference was characterised by two rival plans, one proposed by Harry Dexter White on behalf of the US Treasury, the other coming from John Maynard Keynes on behalf of the UK delegation.

In 1938, Keynes had warmed to Benjamin Graham’s proposals for a 'commodity-reserve currency' (linked in value to a basket of commodities to maintain stability), to replace the Gold Standard. This is covered in more detail at:


Inspired by these ideas, around 1943 Keynes drew up a plan for a world reserve currency called the 'Bancor'. He envisaged replacing the Gold Standard with an international clearing union administered by a Global Reserve Bank.

This would achieve a more stable and fair world economy by automatically recycling trade surpluses to finance trade deficits. In other words, creditor countries would be encouraged to spend their excess Bancors with debtor countries (this is similar to the running of a LETS system, where members with high positive balances are encouraged to seek out high negative balance members to spend with).

In his 1936 work 'General Theory of Employment, Interest and Money', Keynes had expressed some support for the principle of demurrage (for more details about this charge and how it worked in practice, see my 26/6/02 news log 'Wörgl's Stamp Scrip – The Threat of a Good Example').

A revolutionary element of Keynes' plan for Bretton Woods was that it incorporated a form of demurrage. Those countries with high surpluses or defecits would be charged proportionally to their negative or positive balance. This provided a strong motivation for countries to keep these two balance sheet items from getting too high or too low.

The result of the Bretton Woods negotiations came much closer to White's plan than to that of Keynes. It opted for the free movement of capital, with the US dollar as the international currency, backed by gold. (This arrangement persisted until Nixon broke with the Gold Standard in 1971; the resulting lack of stability caused by having 'floating' world currencies led to the modern era of currency speculation).

The US wanted an international bank that would penalise debtors but not creditors. However, if Keynes' plan had been implemented, debtor countries' levels of debt would have been reined in, and not allowed to get out of hand.

In his book 'Goodbye America', Michael Rowbotham explains how Bretton Woods set the scene for the Third World debt crisis that arose in the 70's and early 80's. This trap, one that debtor countries often cannot escape from unless their debts are written off, forces them to liquidate their resources to keep up with interest payments, and can lead to their economies being brought under IMF control. On a more hopeful note, the book also looks into ways of solving this problem.

US Economist Jane d'Arista is interested in creating a modern-day Global Reserve Bank, in an updated version of Keynes' ideas. She envisages this creating an International Reserve Asset that would allow countries to engage in trade and financial transactions using their own currencies, rather than having to use the US dollar. In turn, this would, in her words, 'bar speculators from raiding the world’s currency reserves'. More details about her plan are at:


This is an attempt to draw a few strands out of a very complex subject, rather than provide a complete overview. Much more could be said, not all of it likely to generate insights though.

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3 Jul 2002 @ 20:16 by vaxen : The rich get...
richer and 'usury' remains the king. Slavery is rampant under these systems and I suppose that to people who do not want to think at all but are content to be lied to and used in dispicable ways that remains 'OK.'

Thus we shall live to see endless war and slavery rampant worldwide as the so called 'rich' steal everything they possibly can from so called 'debtor' nations.

I appreciate, very much, these articles and links alchemist. The Worgl's Stamp Script article is fine and points out just what happens when real soultions are introduced. Are you at all familiar with 'Ithaca Dollars?' With 'Emperor Norton?'  

4 Jul 2002 @ 04:36 by scottj : Very informative and useful. The most
vital point I get from this is that there is nothing in what we see today that is inevitable in the development of the world economy. The neoliberalists battle cry, first coined by Margaret Thatcher, has always been "There is no alternative" (TINA). This is a lie and the alternatives put forward by Keynes show this. If there is to be a future for us we must begin to move away from the pernicious evils of globalisation as envisaged by the neoliberalists and set a course for a globalisation strategy based on sharing. (The Demurrage system seems like an excellent way of achieving this.)

I believe the issues you are raising here are among the most vital facing us today and a great many of the other problems which often appear more important than the dry economic ones would disappear if inequality and the mechanisms that create it were addressed as real world policy issues rather than some bogus "fact of economic life."  

4 Jul 2002 @ 07:36 by chaiyah : Alternative Currencies
...In the US I understand the largest is Ithaca Money, and that there are at this writing more than forty different community alternative currencies in the nation. Oh, but getting people interested is like pulling teeth--here in the mountains.  

17 Jul 2002 @ 00:15 by alchemist : Thanks
I'm glad it was useful. I think that now is the time to trace the world's many problems back to their common causes. The UK journalist George Monbiot deserves a mention for bringing this to my attention by publicising it.  

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