The Decision-Making Process in the Origin of Bretton Woods System

Abstract

President Franklin D. Roosevelt envisioned that the United States should lead its allies to establish a Stabilization Fund and a Bank for Reconstruction and Development so that the United States could manage the post-war economic and financial crises. In both international financial agencies, it was proposed that American dollar would be the post-war new reserved currency until the world’s gold supply was re-allocated through international trade. Although they were close allies during the war, the American and British Governments disagreed on many issues. From the perspective of Rational Actor Model, Washington insisted that the post-war world must create two international agencies to tackle its post-war economic and financial problems, whereas London believed that the International Clearing Union would be sufficient to manage the post-war financial and reconstruction crises. In the eyes of the United States, Lord John Maynard Keynes’ proposal simply provided the proposed International Clearing Union with a method of creating money which could be used in settling these balances, British balances in particular. The United States thus believed that such an arrangement would only be favorable to the United Kingdom. In other words, the creation of bancor might be in the interest of the United Kingdom, it was not in the interest of the United States. From the perspective of Organizational Behavior Model, President Roosevelt placed more trust in the Department of the Treasury than the Department of State on the post-war monetary and investment policies in part because the head of the Treasury was FDR’s closest friend. In addition, it was natural for the Department of the Treasury, which was an organization in charge of routine economic and financial affairs, to gain the upper hand over the Department of State because the former had more economic and financial experts and more practical experience in tackling monetary and financial affairs than did the latter. The tension between the Department of State and the Departm