Back to Keynesianism: Reforming the IMF

Abstract

The 1944 Bretton Woods conference may be seen as an attempt to institutionalise at an international level the revolution in economic ideas brought about by John Maynard Keynes. Keynes believed that the prosperity of nations — in particular, their levels of production and employment — did not need to be the unplanned outcome of an uncoordinated and erratic system, but could be controlled by government. At a national level, this revolution in theory did not require new mechanisms and institutions, but rather new approaches to existing ones: adjustments had to be made in government spending and taxation and in central banks’ money creation and interest rate determination. But no mechanisms existed at the international level to perform these functions; there were no international counterparts to central banks or national budgets. In 1941, then, Keynes developed the idea of an International Clearing Union — a sort of world-level central bank. His plan provided the main basis for the Bretton Woods discussions.

World Policy Journal (Summer 1987).