The United States, the United Kingdom and the international financial system since 1945

What was the nature of the international financial system that emerged at the end of the Second World War and how did it change over the next 75 years? Within this system, what were the roles of the United States and the United Kingdom? What were the comparative influences of the Americans and British in shaping international finance? In addressing these questions, this paper examines the interplay of the attitudes and actions of the two governments, the activities of bankers and major economic trends. Was it possible for governments to have an impact or were they reduced to responding to larger economic forces? Was this especially true for the UK?
To understand this vast canvas across such a crowded period this paper focuses on four snapshots. First, it considers the immediate implementation of the Bretton Woods system in 1945-1949. Second, it addresses the resurgence of Britain’s role in international finance in the second half of the 1950s and early 1960s. Third, it investigates the collapse of Bretton Woods in the early 1970s. Fourth, it examines the financial collapse of 2007-2009.
The paper has three main conclusions. First, the United States played the most important role throughout this period, even though the scale of its dominance progressively declined in the face of rival economic powers. Its government’s decisions and its financiers’ actions shaped developments. Second, the UK had real influence at certain times. Although a much reduced economic power after 1945, sterling was a reserve currency and much of world trade was denominated in pounds. There was, however, a basic tension for the British in trying to operate as a global financial power while being a supplicant for US and IMF assistance. At the same time, the City of London since the early 1960s has been a major financial centre, the leading place in the world for international banking. Third, governments played important roles at key moments, such as the creation of Bretton Woods, the 1971 decision to end convertibility of dollars into gold and the response during the great recession of 2007-2009.

Dr Michael F. Hopkins is Reader in History at the University of Liverpool. His two most recent books are British Financial Diplomacy with North America 1944-1946: the Diary of Frederic Harmer and the Washington Reports of Robert Brand Camden Fifth Series (Cambridge University Press, 2021) and Dean Acheson and the Obligations of Power (Rowman & Littlefield, 2017). He will be a Sassoon Visiting Fellow at the Bodleian Library in Hilary Term 2023 working on the project, “Banker, internationalist and diplomat: Robert Brand and international finance.”