In What Way Has the Bretton Woods Conference Created a Hegemonic Structure In the International System?

Written by Surina Bhatt


“The past is never dead. It isn’t even past” – William Faulkner

The Bretton Woods conference (1944), was an agreement on how the new world would be re-funded and re-constructed after WWII (Schifferes, 2008) (Del Castillo, 2010). The word ‘new world’ is used since the economies of Britain, Germany and Japan were decimated after the war. This included both infrastructure and economic functioning. It was an effort by the United States (US) to facilitate trade as well as, provide aid to these countries (Stephey, 2008) (Del Castillo, 2010). Two influential international organisations, the International Monetary Fund (IMF) and World Bank were set up (Stephey, 2008) (Gavin, 1996). This was to enable a fixed exchange rate system, with the US dollar as the international reserve currency (instead of the bancor, as suggested by Keynes) (Schifferes, 2008) (Gavin, 1996). The World Trade Organisation (WTO) was then established to further drive economic cooperation (Ogunwa, 2012). Despite the downfall of this monetary system, the post-Bretton Woods era witnessed an explosion in financial innovation, global lending and global capital mobility (which increased globalisation). Trade continued to expand, parallel to that during the Bretton Woods time (Ogunwa, 2012) (CQ Press, 2015). Although, developments in global finance rearranged state relationships. It created a structure of superiority in which the West benefitted (Woods & Lombardi, 2006). For example, the GATT policies (WTO, 2015). Therefore using a realist and post-colonial perspective to international relations, this essay will argue that the Bretton woods conference created a western hegemonic structure in the international system. However, the opposite can be debated.

This essay will argue whether or not the Bretton woods conference has created a hegemonic structure in the international system.

The Bretton woods conference and its creation of a western hegemonic structure in the international system

Structural Adjustment Programmes (SAPs) in Jamaica and Niger

Firstly the Bretton Woods conference in 1944, introduced a system to ensure financial stability and economic expansion of countries in the North (in this context referring to the more industrially developed areas of the world). This left the South (Third World countries) at a disadvantage (Ogunwa, 2012). With the intensification of globalisation, this asymmetrical relationship between the North and South has continued (Ogunwa, 2012). For instance, the North has dictated economic and developing strategies for the South. These strategies include: democracy, accountability, good governance and SAPs (Ogunwa, 2012) (Bradshaw & Huang, 1991). Although, these strategies have had severe consequences on some developing countries (Vidal, et al., 2013) (WHO, 2015).

In Jamaica, SAP’s have had a negative effect on the country’s economic stability (Dearden, 2013) (Vidal, et al., 2013). In a period of 40 years, Jamaica has been countlessly recused by the IMF (which is staged on the basis of structural adjustment). Jamaica is a highly indebted country which spends twice as much on debt repayments, than it does on education and health combined (See Figure 1) (Dearden, 2013). In 2013, the IMF announced a $1 billion loan to help Jamaica meet future debt payments (IMF, 2013) (Dearden, 2013). The loan was accompanied with four years of austerity, including a pay freeze (amounting to a 20% real-terms cut in wages) (Dearden, 2013) (Vidal, et al., 2013). However, Jamaica’s economy has not grown since 1990. Foreign debts have been a constant burden which amounts to more than 20% of government revenue a year (Dearden, 2013). The North continues to encourage economic dependence without political independence (Bradshaw & Huang, 1991). Therefore, the benefits of such international economic relations between rich and poor countries are distributed unequally to favour the rich, “…in the end, we were living to pay the IMF, nothing else!” (Bradshaw & Huang, 1991). Thus it can be argued that the Bretton Woods conference allowed for the creation of a dominant but yet, exploitative western structure in the international system.

Bretton Woods

Figure 1: An illustration of a relatively low Quality of Life Index in Jamaica which SAP’s cut spending on. Source: (Bradshaw & Huang, 1991).

Using a neo-realist perspective to international relations, the IMF and World Bank are viewed as instruments to achieve the survival requirements of a state. Neo-realists perceive the international system as an anarchy; therefore, a partition exists between domestic and international politics. For this reason, the IMF and World Bank are viewed as mirrors of state interest, “stronger states use institutions, as they interpret laws, in ways that suit them” (Waltz, 2000). Hence the IMF and World Bank, create a structure of western superiority which dictate policies to developing countries (Anyangwe, 2015) (Bradshaw & Huang, 1991). This then encourages dependency on developed countries who profit from the payment of loans. This is the same as that in 1944, where the rich benefited from the Bretton Woods system (Ogunwa, 2012). Thus arguing that the Bretton woods conference, moulded a Western hegemonic structure in the international system.To add, the IMF and World Bank have also fuelled suffering in Niger. Since 1982, Niger has been a victim of the SAP. Similar to that in Jamaica, the IMF loaned money to Niger to pay off its debts (IMF, 2013). Although, Niger had to pay the price for careless lending through austerity and a sequence of economic reforms. For instance the IMF and World Bank, prioritised exporting as a vital means of receiving foreign currency to repay debt. This was put in to play by opening up the food sector to the uncertainty of international markets (Dearden, 2012). As a result, subsidised foreign foods flooded local markets, destroying the unprotected agricultural sector (Dearden, 2012) (Herbst, 1990). With 85% of the population involved in this sector, Niger experienced drastic consequences from such economic reforms. These include: lower production, rural migration and an increase in shantytowns (Riddell, 1992) (Dearden, 2012). As a result, Niger’s debt levels increased to $1.8 billion in 1990 (comparable to the effect of SAPs in Brazil) (Dearden, 2012) (Strydom & Fišer, 1995).

Moreover, it can also be argued, that the IMF and World Bank introduced the Structural Adjustment Facility (SAF) to assist developing countries. This was a macro-economic strategy to increase economic growth (Butkiewicz & Yanikkaya, 2005). However, the policies associated with lending have wrecked the economies of Third World countries. For instance, “per-capita income growth in developing countries plunged to half its previous levels” (Anyangwe, 2015). These benefits were then reaped by the developed countries. For example, new trading markets in Niger (Ogunwa, 2012) (Dearden, 2012). Therefore from a post-colonial lens, the IMF and World Bank have replicated authoritarian processes of colonialism through austerity and economic reforms (Ogunwa, 2012). This has fashioned an arrangement in which previous colonies are politically and economically subservient the coloniser. Thus the Bretton woods conference which initially created a system to benefit the west, has trailed a western hegemonic structure in the international system.

The global digital divide mirrored in Nigeria 

As mentioned above, the intent of globalisation is to carry forward the trend (of inequality) which started with the establishment of the Bretton Woods and its relationship with the IMF, World Bank and WTO. Globalisation gave birth to privatisation and commercialisation for governmental owned enterprises in developing countries (Ogunwa, 2012) (Pitcher, 2012). This allowed new-comers to provide basic amenities and dictate the price of goods and services in developing economies. As a result, economies remained controlled by Multinational Corporations (MNCs) who fitted into privatisation and commercialisation of services. These include: education, health, energy and security (Ogunwa, 2012). In alliance with the Peace of Westphalia 1648, these developing countries have lost their state sovereignty since the national government acts to the script by MNCs (Gasparini, 2008) (Croxton, 1999). This goes against the notion of statehood which is grounded upon independence. For this reason it is said, that globalisation has swept inter-dependence in the south which has directed economic dependency on the North (Ogunwa, 2012). Hence, the concept of winners and losers arranged the global digital divide which created a western hegemonic structure in the international system (Klikauer, 2006) (O’Brien & Leichenko, 2003).

The inclusion of Nigeria into the world capitalist system, marked the beginning of its globalisation era. This was an effort to transform its resources and products into commodities to create a dependent capitalist economy (Ogunwa, 2012). Nigeria is at present Africa’s main oil producer and the 8th largest exporter in the world (accounting for 8% of US oil imports) (Smith, 2010). Although, Nigeria’s integration in the world system has several consequences on its polity (Frynas, 1998). These include: the creation of an unhegemonic state, the vulnerability to price instabilities and the domination of its economy by MNCs (Ogunwa, 2012). For example, Shell is deeply rooted in Nigeria’s system and has exploited political networks to its own advantage (Smith, 2010) (Frynas, 1998). Therefore in alignment to the Peace of Westphalia 1648, Nigeria has lost its state sovereignty to MNC’s such as shell (similar to that in South Africa) (Croxton, 1999) (Frynas, 1998). According to the World System Theory (WST), this integration leaves Nigeria at the Periphery and Shell at the Core (Ogunwa, 2012) (Chirot & Hall, 1982). This in turn crafts a divide between the haves and the have-nots. Thus, the Bretton woods conference has created a western hegemonic structure in the international system.

The Berlin conference in 1884/85, marked the end of slave trade and beginning of a European imperialist aggression – the scramble for Africa (Turner, 2007) (Florestal, 2007). The European colonisers traded the African states in terms of their national interests. They carved lines across the African continent in order to allocate various pieces of land to respective colonial powers (Florestal, 2007). The European colonisers exploited Africa’s resources such as: oil, gold, diamonds and timber. This was to determine their destiny of dependency and underdevelopment (Florestal, 2007) (Abrokwaa, 1999).

At present, a new scramble for Africa is ongoing. MNCs (large energy players such as: Shell, Chevron and ExxonMobil) rush to control land and exploit natural resources in Africa (Akpan, 2008) (Turner, 2007). According to the UN World Investment Report, Nigeria and five other oil-producing countries “hogged” approximately 48% of the continent’s investment inflows (Turner, 2007). This is predominantly from investment by American, European and French firms. For instance, European firms have invested about two-thirds of total Foreign Direct Investment (FDI) in Africa (Turner, 2007). Despite Africa’s large deposits of natural resources, MNC’s exert a form of neo-imperialism whilst dictating the price of raw materials in developing countries like Nigeria (Ogunwa, 2012). Therefore from a post-colonial viewpoint, trade is created and designed to benefit the former colonisers. This corresponds to the Bretton woods system, which was introduced to assist countries in the North after WWII (Ogunwa, 2012). Hence with trading roots in the Bretton Woods era, both poverty and economic dependence have become an integral part of the world economic order (Ogunwa, 2012) (Abrokwaa, 1999). For this reason, it can be argued that the Bretton Woods conference shaped a Western hegemonic structure in the international sphere which generated a gap between the rich (North) and poor (South).

On the other hand, it can be argued that globalisation narrows the gap between the rich and poor. MNCs have engaged in Corporate Social Responsibility (CSR) which is purposed to increase the living standards of local communities in Nigeria. For instance Shell Petroleum along with development agencies, and non-governmental organisations (NGO’s) has introduced the “world class community development” to boost family incomes and improve community well-being (Akpan, 2008). In the long run, this will increase incomes at a household level; contributing to economic growth in Nigeria. Therefore, eliminating the trend of inequality which commenced in the Bretton Woods era. Although, oil operators in Nigeria now search for oil in deep waters to escape local communities (Akpan, 2008). Thus, the North still remains beneficial in its trading relationships with countries in the South (Abrokwaa, 1999) (Florestal, 2007). This lingers on the inequality onset in the Bretton Woods conference (Ogunwa, 2012). In consequence, proving that the Bretton woods conference created a western hegemonic structure in the contemporary international system.

The WTO in Africa

Following the Uruguay Round (where exports were reduced in developing countries), studies concluded that Africa is the continent least integrated in the world trade system (Florestal, 2007) (Safadi & Laird, 1996). However, South Africa and Southern Rhodesia were original signatories to the GATT on its inception in 1947 (Florestal, 2007) (Wilkinson & Scott, 2008). This was grounded on its historical ties with the North (Wilkinson & Scott, 2008). It was up to the 1960s, that other countries of sub-Saharan Africa believed GATT unwelcoming to their interests (Florestal, 2007). They barely participated in in tariff-reduction negotiations nor did they embrace supplementary rules settled in the Tokyo Round negotiations (Wilkinson & Scott, 2008). For this reason scholars such as Srinivasan argue that, Africa’s failure in the global economy is due to its lack of participation in the world trade system (Florestal, 2007) (Wilkinson & Scott, 2008) (Srinivasan, 1999).

Nevertheless, Africa’s infrequent participation in the global economy is justified as a method of protectionism (Florestal, 2007). Its rejection to development is dated back to the Berlin conference in 1884/85. Therefore with domination rooted in Africa’s origin, GATT imitates processes of Neo- imperialism through the removal of trade boundaries (Ogunwa, 2012) (Zack-Williams, 2013). For example foreigners will be guaranteed free movement in the region, the right to own property and practice their own profession. Imports also remain exempted from all duty and transit charges (Florestal, 2007) (Bergan, 2011). This is parallel to the European commercial interaction in Africa which began in 1884/85. Hence, GATT will legitimise Africa as a source of wealth to be exploited by its previous colonisers (Ogunwa, 2012) (De Sousa & Lochard, 2012). Thus, organisations such as the WTO were established to benefit the west. This validates that the Bretton woods conference created a western hegemonic structure in the international system.

Finally for the Third World, GATT can be seen as a sort of perpetual global structural adjustment programme. This is because it has initiated deregulated, export-oriented reforms which have swept the economies of developing countries (Florestal, 2007). For example negotiations between Africa and the EU, have forced Africa to eliminate up to 90% of tariffs (Walker, 2011). This has been driven further by the IMF and World Bank who have opened the economies of the Third World (Ogunwa, 2012) (Dearden, 2012). As a result, trade liberalisation has allowed for deeper foreign penetration and control which has had several consequences in developing countries (Florestal, 2007). For instance: discouraging local productions, local industries, local experts and other services which host and peripheral countries cannot produce (Ogunwa, 2012). Therefore, the poor remain poor. Hence, the system remains the same as that structured during the Bretton Woods era (one where the rich benefit) (Ogunwa, 2012). Thus, confirming that the Bretton woods conference shaped a western hegemonic structure in the international system.

To conclude the Bretton Woods conference (1944), shaped a western hegemonic structure in the international system. This conference was purposed to re-fund and re-construct economies in the North after WWII. In an effort to provide aid and facilitate trading links with the destroyed economies, three international organisations were set up. These include: the IMF, World Bank and WTO. This marked the beginning of a western dominant prearrangement in the international system. This essay has argued from a bottom-top perspective, that the Bretton Woods conference disregarded Third World countries. As a result, the South was left disadvantaged. This is demonstrated in an unequal relationship between the North and South in the globalised world. For instance, through SAPs and GATT negotiations. This essay has also drawn upon the global digital divide which highlights the North as winners of an integrated market economy. Third World countries are used as key instruments to provide resources and raw materials to developed parts of the globe e.g. oil in Nigeria.

Using Africa as a principal example, colonialism plays an eminent role in the Western fashioned system. Its patterns and processes have been replicated under the Bretton Woods system which has encouraged dependency and underdevelopment in the South. Moreover a realist perspective to international relations, has illustrated how the West advantageously uses international organisations to drive forward its national interests. This stands to contradict the Peace of Westphalia 1648, which is grounded upon the concept of statehood. However, these institutions have also made an effort to eliminate the gap between the rich and poor but not to a large extent. Therefore, this paper has concluded that the Bretton Woods conference created a western hegemonic structure in the international system.

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