14.4 Post-war economic planning and international agreements

The Bretton Woods Agreement of 1944 reshaped the global economy after World War II. It established a new monetary system, created the IMF and World Bank, and set the stage for unprecedented international cooperation and trade growth.

The Marshall Plan and post-war economic planning efforts fueled Europe's recovery and America's economic boom. These initiatives modernized industries, promoted integration, and laid the groundwork for decades of prosperity in the Western world.

International Economic Agreements and Institutions

Origins of Bretton Woods Agreement

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• Conference convened July 1944 in Bretton Woods, New Hampshire brought together 44 Allied nations to design new global monetary system
• Aimed to prevent economic turmoil that followed WWI by establishing stable exchange rates and promoting international trade
• Led by US Treasury official Harry Dexter White and British economist John Maynard Keynes who proposed competing plans
• Resulted in compromise system centered on US dollar linked to gold at $35/oz
• Created International Monetary Fund to oversee system and provide short-term loans
• Established International Bank for Reconstruction and Development (World Bank) to finance post-war rebuilding
• Fixed exchange rate system lasted until 1971 when US ended dollar's convertibility to gold

Marshall Plan's economic impact

• $13 billion aid program proposed 1947 by Secretary of State George Marshall to rebuild war-torn Western Europe
• Aimed to increase industrial and agricultural production, restore international trade, and contain spread of communism
• Funds used to modernize infrastructure and industry (steel mills, power plants)
• Promoted European economic integration through creation of Organization for European Economic Cooperation
• Accelerated recovery led to 35% rise in Western European industrial production 1947-1952
• Increased demand for US exports strengthened economic ties between US and Europe
• Solidified US leadership in Western bloc during early Cold War years

International organizations for economic cooperation

• IMF established to promote monetary cooperation and provide short-term loans to countries facing balance of payments difficulties
• World Bank initially focused on post-war reconstruction expanded to finance development projects in poorer nations (dams, roads)
• GATT negotiations reduced tariffs among member countries from average 22% in 1947 to 5% by 1990s
• Organizations facilitated unprecedented growth in international trade rising from $58 billion in 1948 to$7 trillion by 2000
• Provided forum for resolving economic disputes between nations (WTO dispute settlement system)
• Critics argued institutions favored developed countries' interests over developing nations

Post-war economic planning effects

• Demobilization of 12 million US troops required reintegration into civilian workforce
• War Production Board coordinated conversion of military factories to consumer goods production (aircraft to automobiles)
• Employment Act of 1946 committed government to promoting maximum employment and economic stability
• GI Bill provided education benefits to 8 million veterans fueling growth of skilled workforce
• Gradual lifting of price controls and rationing 1946-1947 led to brief spike in inflation before stabilizing
• Shift from manufacturing to service sector employment accelerated (manufacturing 38% of jobs 1943 to 32% by 1960)
• Suburban housing boom driven by FHA and VA loan programs increased homeownership from 44% in 1940 to 62% by 1960
• Period of sustained economic growth 1950s-1960s with GDP growing average 4% annually strengthening US global economic position