The IMF, World Bank and GATT created stable rules for money and trade, and regional arrangements widened markets.
The Bretton Woods conference of 1944 created the International Monetary Fund (IMF) and the World Bank. The IMF managed fixed exchange rates and lent to countries with short-term payment problems. The World Bank lent first for reconstruction and then for development.
The General Agreement on Tariffs and Trade (GATT) was signed in 1947. Through eight rounds of talks it cut tariffs on industrial goods to low levels. Members had to treat each other equally, so each cut spread to all of them.
The Uruguay Round of 1986 to 1994 extended trade rules to services and intellectual property. It created the World Trade Organization (WTO) in 1995, with a stronger system for settling disputes.
Other arrangements mattered too. The European Payments Union of 1950 restored trade within Europe. From 1975 the leaders of the major economies met in annual summits, later called the G7. In the Plaza Accord of 1985 they acted together to lower the dollar.
These bodies had limits. The Bretton Woods system collapsed in 1971-1973. GATT did little for farm goods and textiles for decades, and many developing countries felt the rules favoured the rich.
- IMF and World Bank
- Created at Bretton Woods, 1944.
- GATT
- Signed 1947; eight rounds of tariff cuts.
- WTO
- Created 1995 after the Uruguay Round.
Worked example: Linking organisations to growth
How did GATT help trade grow?
- Rule: members must give each other equal treatment.
- Process: rounds of talks cut tariffs step by step.
- Effect: cheaper imports and larger markets.
- Limit: farming and textiles were left out for decades.
Watch out for this
International organisations ran the world economy.
They depended on their members, above all the USA. When the USA ended the dollar's link to gold in 1971, the IMF could not stop the fixed-rate system from collapsing.
Check your understanding
What did the Uruguay Round create in 1995?
- The World Trade Organization
- The IMF
- The EEC