The Bretton Woods Institutions 1945

The Bretton Woods institutions named after the area where the meetings for the establishment of these institutions were held, gathered forty-four delegates⁶⁹

65 Paragraphs 2 and 4 of the United Nations Charter, 1945 respectively.

66 Articles 1 (2) and 2 (1) of the United Nations Charter, 1945.

67 Article 55 of the United Nations Charter, 1945.

68 Articles 73 and 76 (b) of the United Nations Charter, 1945 respectively.

69 Department of State, Proceedings and Documents of the United Nations Monetary and Financial Conference Vol. I at 5 (1948) [hereinafter referred to as Breeton Woods Conference Vol. I] cited in Wolff Mark J., Failure of the International Monetary Fund and World Bank to Achieve Integral Development: A Critical Assessment of Bretton Woods Institutions, Policies Structures and Governance, 41 Syracuse Journal of International Law and Commerce, (2013 -2014) p.77. The forty four countries includes; Australia, Belgium, Bolivia, Brazil, Canada, Chile Colombia, China, Costa Rica Cuba, Czechoslovakia, Dominican Republic, Ecuador, Egypt, El

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from the allied nations with the objective of creating institutions through the unified purpose, rules, and policies that will regulate the international monetary system and strengthen international relations which had deteriorated in the World War II.⁷⁰ It is worth noting from the outset that the international trading system had collapsed after the World War I and subsequently in the Great Economic Depression of the 1930s. This was caused by the implementation of nationalistic policies by developed countries aimed at protecting the domestic production through the imposition of superfluous import tariffs and lowering export tariffs significantly.⁷¹

The developing countries and non-self governed territories which, by and large, depended on the export of their locally produced goods were highly devastated by the protectionist policies. They no longer had a secured purchaser of their goods. However, it was not long before the pinch was also felt by the developed countries. Two reasons account for this, firstly, the developed countries had erroneously assumed that they are self-sustained with the locally produced

Salvador, Ethiopia, France, Greece, Guatemala, Haiti, Honduras, Iceland, India, Iran, Iraq, Liberia, Luxembourg, Mexico, Netherlands, New Zealand, Nicaragua, Norway, Panama, Paraguay, Peru, Philippines Commonwealth, Poland, Union of South Africa, Union of Soviet Socialist Republics, United Kingdom, United States of America, Uruguay, Venezuela and Yugoslavia.

70 French Duncan, F., The Role of the State and International Organisations in Reconciling Sustainable Development and Globalisation in Schrijver Nico and Weiss Friedl, (ed.) International Law and Sustainable Development Principle and Practice, Laiden, The Nertherlands, Martinus Nihjoff Publishers Vol. 51,(2004), pp. 53, arguing that the ‘Bretton Woods’ group were to be the three main international financial institutions established after the Second World War, viz., the World Bank (formally the International Bank for Reconstruction and Development), the International Monetary Fund and the International Trade Organisation. Only the first two were ever established. The Inter- national Trade Organisation never came into being – with the General Agreement on Tariffs and Trade [GATT 1947] only ever being applied provisionally.

However, since the entry into force of the 1994 Uruguay Round, the World Trade Organisation now provides the revised GATT and its related instruments with an institutional structure as was originally envisaged in 1944.

71 Kent Albert Jones, Who's Afraid of WTO? Oxford, Oxford University Press, (2004) p. 68, arguing that the world trading system collapsed partly due to states preference of the bilateral over the multilateral trade agreements. These policies were popularly known as 'beggar thy neighbour' i,e., government's protectionist mechanism which discourage foreign imports thereby raising tariffs and instituting tariff barrier; usually to reduce domestic unemployment and increased domestic output.

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goods and services without necessarily a need for importing goods and services from other countries. Secondly, World War I and the 1930's economic depression had far-reaching economic consequences internally, in particular, in the British Empire.⁷²

Due to the destruction of the physical infrastructures during the two wars, the costs for restoration were exorbitantly high. The administrative costs of running her colonies were escalating while the economic capacity to absorb the pressure was deteriorating steadily. Apart from that, the capacity of colonies to produce and supply requisite industrial raw materials was devastated by the war too. With these challenges in mind, the developed countries had to succumb to the pressure and agreed to go back to the drawing board on how they can best balance the world trading system.⁷³

Initially, the Great Britain advocated and sought to retain her imperial preferential system of the bilateral trading, while the United States called for an open door policy and the multilateral trading system.⁷⁴ Nevertheless, it was fundamentally agreed by all parties that any attempts to create the trading barrier in a bid to finance the reconstruction of devastated Europe against the vanquished states of the World War II are a condition precedent to the preparation of another global

72 Vandevelde, Kenneth, J., A Brief History of International Investment Agreement, (2005), pp.

161 - 162.

73 Schrijver N.J., Sovereignty over Natural Resources, (1997), pp.4-6. He argues, for example, the 1947 International Timber Conference of the Food and Agriculture Organization and the 1949 UN Scientific Conference on the Conservation and Effective Utilization of Natural Resources aimed at establishing a system based on equitable utilization of natural resources by all nations.

See the preamble of the General Agreement on Tariffs and Trade (1947), in which the contracting parties recognize that their relations in the field of trade and economic endeavour should be conducted with a view to 'developing the full use of the resources of the world and expanding the production and exchange of goods.

74 Ikenberry John G., The Political Organs of Bretton Woods . A Perspective on Bretton Woods System, in Bordo Michael, D., and Eichengreen Barry, (eds.), A Retrospective on the Breton Woods System: Lessons for International Monetary Reform, University of Chicago Press, (1993), p. 156. Britain maintained its position to secure employment and economic stabilization within its borders for its citizen.

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disaster.⁷⁵ The Bretton Woods meeting resulted in the creation of the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF).⁷⁶ The purpose of the IBRD is articulated clearly in the articles of agreement as amended from time to time. Article 1 provides the purpose of the bank, thus;

(i) To assist in the reconstruction and development of territories of members by facilitating the investment of capital for productive purposes, including the restoration of economies destroyed or disrupted by war, the reconversion of productive facilities to peacetime needs and the encouragement of the development of productive facilities and resources in less developed countries.

(iii) To promote the long-range balanced growth of international trade and the maintenance of equilibrium in balances of payments by encouraging international investment for the development of the productive resources of members, thereby assisting in raising productivity, the standard of living and conditions of labor in their territories. [italics are mine]

The purposes of the IBRD under article 1 quoted in extenso above fortifies the argument that, from the inception, the developed countries devised an international economic mechanism that will regulate the sharing of the global

75 See Ciorciari, John, D., The lawful Scope of Human Rights Criteria in World Credit Decisions:

An Interpretive Analysis of the IBRD and IDA Articles of Agreement, 33 Cornell International Law Journal (2000) pp. 361-69, arguing the victors were determined not to repeat mistakes of World War one which imposed strenuous economic and political conditions against the vanquished states which eventually culminated aggression hence World War two. The conditions included disarmament policy, deprivation of overseas colonial possession (in particular Germany) and trading barrier among others; See also, Wachtel Paul, Understanding the Old and New Bretton Woods, 6 New York University, Stern School of Business Working Paper No. 2451 ( 2007) cited in Mark J. Wolff, Failure of the International Monetary Fund and World Bank to Achieve Integral Development, (2013 -2014), p.79.

76 See Articles of Agreement of the International Bank for Reconstruction and Development, Dec.

27, 1945, 60 Stat. 1440, 2 U.N.T.S. 134, amended as 16 U.S.T. 1942, 606 U.N.T.S. 294 (Dec.

17, 1965) (establishing the International Bank for Reconstruction and Development (the IBRD).

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resources in a peaceful manner. The early attempts were made in 1880's during the Berlin Conference and the partition of Africa.⁷⁷ The aftermath was a series of conflicts between the developed states over the strategic natural resource areas.

It was not a surprise that one of the immediate causes of World War I were, among others, the antagonistic economic relationship between states orchestrated by a quest to controlling and managing the world natural resources.⁷⁸

Therefore, as stated above, the creation of a global economic body that regulates the world trading system was, undoubtedly, necessary to enable an equitable sharing of the world resources. Although sharing the global resources is not clearly stated in the articles of the Bretton Woods agreement, one can reasonably make inference on various provisions. For instance, an inference can be made in articles relating to the creation of the favourable investment environment and accessibility of the investment capital by the member states.⁷⁹ It is worth noting that the timing of the creation of these institutions resonated parallel with other international efforts which had established United Nations Organisation in 1945 (U.N.O) which aimed at promoting and protecting world's peace and security among its member states.

77 Schrijver, N.J., The Origin and Development of Permanent Sovereignty over Natural Resources, Max Planck Encyclopedia of Public International Law, Laiden and Oxford, (2010), p.

2.

78 See Boahen Adu, African Perspectives on Development, cited in Haskell Ward, African Development Reconsidered: New Perspectives from the Continent (New York, Phelps-Stokes Institute Publication, (1989), p. 14; See David P. Obrien, Structural Adjustment Programs in Sub-Saharan Africa, 19 Fletcher Forum World Affairs, (1995), p. 121.

79 Duruigbo Emeka, The World Bank, Multinational Oil Corporations and Resource Curse in Africa, 26 University of Pennsylvania Journal of International Economic Law (2005). pp. 26-7. See also Wadrzyk Mark, E., Is It Appropriate for the World Bank to Promote Democratic Standards in a Borrower Country? 17 Wisconsin International Law Journal (1999) p. 553; see also Moris Halim, The World Bank and Human Rights: Indispensable Partnership or Mismatched Alliance 4 ILSA Journal of International & Comparative Law, (1997), pp. 178 - 179.

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2.3 The Struggle for Political and Economic Sovereignty over Natural