Bretton Woods and Financial Liberation

Abstract

The creation of the Bretton Woods system (1945-1971) and the evolution of the financial liberalization that characterized the last quarter of the 20th century and resulted in the contemporary international monetary system remain the most important developments in the international monetary system over the last century. What were the reasons for and structure of the Bretton Woods system, and what was the intellectual reason for the international monetary system moving towards liberalization in the 1970s? A historical review of the evolution of the international monetary system during the 20th century finds that the development and structure of Bretton Woods can be explained by a collapse of the international monetary system in the interwar period (1918-1939) and state-interventionism, while Ronald I. Mckinnon’s work on financial repression and liberalization provided the intellectual support for liberalization, neoliberalism, and financial globalization.