Question

During World War II in the early 1940s negotiations took place, mainly between the United States and the United Kingdom, on the rules for a new international economic order. The negotiators realized that after the war the US economy would be intact and productive, while the European economies would be devastated and would need help to get back on their feet. However, the negotiators failed to recognize the magnitude of the assistance Europe would need, and the provisions of the Bretton Woods system were inadequate to provide the needed financing of Europe’s balance-of-payments (BP) deficits. In 1947 the United States enacted the Marshall Plan to provide massive assistance to non-communist European countries.

a. largely correct

b. seriously misleading

Answer 1

The Bretton Woods system and the Marshall Plan were key components of the post-WWII international economic order, with the latter providing crucial aid to European countries for reconstruction and stabilizing Western economies to counter communism.

Step-by-step explanation:

The negotiations during World War II between the United States and the United Kingdom on the rules for a new international economic order led to the establishment of the Bretton Woods system. While the system aimed to promote international economic stability and prevent future economic crises like that of 1929, it underestimated the financial aid required to rebuild Europe's economies post-war. To address this inadequacy, the United States enacted the Marshall Plan in 1947, providing massive assistance to non-communist European countries to help them recover and rebuild, with the underlying strategy of preventing the spread of communism.

The Marshall Plan eventually pumped a total of $12 billion into Europe's economy, crucial for rebuilding the infrastructure and restoring industrial capacity. Implemented from 1948 to 1952, the plan significantly contributed to the economic stability and revival of Western Europe, while indirectly bolstering the US economy by opening markets for American goods. The outcome was a largely capitalist Western Europe juxtaposed with a Soviet-influenced Eastern Europe undergoing industrialization through Five-Year Plans.

The Bretton Woods Agreement and the Marshall Plan together laid the foundation for the postwar economic order, with the aim of fostering international trade, preventing competitive currency devaluations, and encouraging economic cooperation among nations.