The IMF is the IGO that has been entrusted with the responsibility of promoting the IPGs of international economic and financial stability. This chapter deals with the establishment of the IMF after World War II and its responsibilities within the Bretton Woods system that lasted from 1945 through 1973. In succeeding chapters we will contrast the record of the IMF’s activities within this rule-based system with its actions during the post–Bretton Woods era.

The first section provides an account of the founding of the Bretton Woods system and the specific responsibilities of the IMF. The Allied victors of World War II established a new international monetary regime to prevent a repeat of the economic chaos of the 1930s. The system was based on fixed-but-adjustable exchange rates and the removal of restrictions on current account transactions. The IMF monitored the observance of its members of these commitments while providing credit to those with balance of payments disequilibria. The Bretton Woods system differed from the Gold Standard (1870–1914) in its reliance on controls on capital flows to provide members with the ability to use monetary policy to achieve full employment.

The second section describes the governance structure of the IMF, which was shaped by the United States, the postwar hegemonic power, and its West European allies. These countries devised a voting system based on economic size that allowed them to dominate the actions of the IMF and its policies. The new organization created lending programs that required members that borrowed from it to implement policy measures before credit was disbursed.