We need a new Bretton Woods moment, says António Guterres. What was the original Bretton Woods and what did it achieve?

“It is time for a new Bretton Woods moment,” according to United Nations (UN) Secretary-General António Guterres in his briefing to the UN's General Assembly on Priorities for 2023 last month.

Why? Because he thinks our “global financial architecture” is failing to ensure globalization benefits all, and it therefore needs a “radical transformation”.

But what was the original Bretton Woods moment, and how did it restructure the world’s financial framework?

The Bretton Woods Agreement was signed in July 1944 by 44 countries at the UN Monetary and Financial Conference in the US town of Bretton Woods. The aim of the deal was to create a new system of economic order and international cooperation that would help countries recover from the Second World War and provide the conditions for long-term economic growth, according to the World Bank.

The World Bank was in fact one of the institutions to be created as a result of Bretton Woods but it was initially called the International Bank for Reconstruction and Development. The deal also led to the foundation of the International Monetary Fund.

The World Bank’s main aim is to reduce levels of poverty around the world, which it does by providing loans at lower interest rates than commercial banks, and by giving advice to member countries about how to improve their economic systems.

The IMF has been described as the world’s “financial firefighter”. It promotes economic stability worldwide by monitoring the economic health of its member countries and provides loans for governments in financial distress.

The Bretton Woods Agreement also led to the creation of what is known as the Bretton Woods System. At the heart of this was the “gold standard”, which pegged the value of the US dollar to the value of gold. At the same time, the value of all other currencies was pegged to that of the US dollar.

This essentially made the US dollar the world’s dominant reserve currency. The idea behind this was to bring uniformity to global exchange rates.

However, the gold standard and the Bretton Woods System only lasted around 25 years, it collapsed after the dollar began to be seen as overvalued. The temporary suspension of the dollar's convertibility into gold was announced in 1971, and by March 1973, the world’s major currencies began to float against each other instead, according to the IMF.

IMF members have since been able to choose whichever form of exchange arrangement they want, other than pegging against gold. The options are:

Bretton Woods was also intended to facilitate trade. Its currency pegs were seen as a way of helping this, as they were intended to stabilize currencies against one another, making cross-border sales easier to carry out.

However, a large agreement on international trade proved difficult to reach. Bretton Woods did play a part in leading to the General Agreement on Tariffs and Trade (GATT) in 1947, which was in place for 50 years.

“GATT helped establish a strong and prosperous multilateral trading system that became more and more liberal through rounds of trade negotiations,” the World Trade Organization (WTO) says. “But by the 1980s the system needed a thorough overhaul. This led to the Uruguay Round, and ultimately to [creation of] the WTO.”

António Guterres says the new Bretton Woods Agreement should:

The World Economic Forum’s Global Risks Report 2023 highlights “new developments in the global risks landscape, including unsustainable levels of debt, a new era of low growth, low global investment and de-globalization, a decline in human development after decades of progress… and the growing pressure of climate change impacts”.

It says that 2023 is “the moment to act collectively, decisively and with a long-term lens to shape a pathway to a more positive, inclusive and stable world”.