Understanding International Organizations and Their Functions

International Organizations (IOs)

Entities formed by states to cooperate on issues.

Elements of IOs

Obligations- An IOs treaty spells out the goals and powers of the organization and the obligations and rules that govern member states. Treaties contain explicit rules(like the UN charter says that members must "refrain from the threat or use of force") and indirect obligations(e.g., the UN Charter gives the Security Council the authority to create new legal obligations.)

Compliance- Explicit Choices: States can choose to comply or violate the rules of international organizations. Structural and Constitutive Effects of IOs: IOs influence the interests and goals that states have, and they contribute to the implicit sense of what is reasonable and normal in international politics.

Enforcement- Direct enforcement and threats of enforcement: Very few IOS have robust means of enforcing the rules against violators.

Institution

A set of rules that organizes social and political practice.

State Sovereignty

The institution that purports that states are the final authority over their territory and the people within it, and they are not subject to any higher political or legal authority.

Legalization

Refers to a particular set of characteristics that institutions may or may not possess." As a particular form of institutionalization characterized by three components: obligation, precision, and delegation.

Obligation (Legalization)

Range from nonlegal norms to binding rules (jus cogens).

Precision (Legalization)

Vague principles to highly detailed rules.

Delegation (Legalization)

Authority transfer from states to organizations.

Enchanted Approach

Assumption that IO compliance leads to positive outcomes.

Disenchanted Approach

Recognition of varied uses and effects of IOs.

Global Governance Approach

Studying the broad range of rules and actors that make up the international regime on an issue; can include many international forces, actors, and rules that might be formal or informal, explicit or implicit, regulative or constitutive, state or non-state, etc.

International Organizations/Law Approach

Focuses on the particular rules that define or issue from a specific legal body.

Joint Approach

Examines treaties and their political implications.

International Regimes

"Sets of implicit or explicit principles, norms, rules, and decision-making procedures around which actors' expectations converge in a given area of international relations (Krasner 1982)"

Principles (International Regimes)

Fundamental beliefs about fact, causation, and rectitude.

Norms (International Regimes)

Standards of behavior defined in terms of rights and obligations.

Rules (International Regimes)

Specific prescriptions or proscriptions for action.

Decision-Making Procedures

Prevailing practices for making and implementing collective choice.

Grovogui's View

"The Westphalian common sense and he marvels at the fact that it remains in wide circulation despite all its empirical anomalies and conceptual contradictions."

Consent

Due to state sovereignty, states can choose to make the rules not apply to them by withdrawing from an organization or by not joining it in the first place. IOs are thus legally subordinate to states; they are stuck in the position of trying to influence actors that have the legal right and often the political power to resist that influence.

Reputation Loss

Consequences for states violating international norms.

General Assembly of the UN

1. Regular sessions meet every Tuesday of the second week in September.

2. General Debate opens for 9 working days.

3. General Committee recommendation + at the beginning of each session, a closing date for the session will be determined. Meeting takes place in NY headquarters.

4. Special sessions are summoned at the request of the Security Council or Members.

5. Emergency special sessions will convene within 24 hours of the receipt by the SG.

6. Any member may request the SG to a special session.

Regular Session of the UN

1. Provisional Agenda is drawn up by the SG and communicated to the members of the United Nations.

2. Delegation of a Member shall consist of not more than five representatives and five alternate representatives. (Rule 25)

3. GA will elect a President and 21 Vice-Presidents at least 3 months before the opening of the session.

4. The president and vice-presidents will assume their functions at the beginning of the session.

Role of the President of the UN (Rule 36)

1. The President declares the opening and closing of each plenary meeting of the session.

2. Directs the discussion at plenary meeting.

3. Ensure observance of the rules.

4. Accord the right to speak.

5. Put questions and announce decisions.

6. Rule on points of order.

7. And have complete control of the proceedings at any meeting and over the maintenance of order thereat.

8. Can propose to the GA limitation of the time to be allowed to speakers.

9. Limit the number of times each representative may speak.

10. The President and Vice-President cannot vote, and shall designate another member of his delegation to vote in his place.

General Committee of the UN

1. At the beginning of each session, consider the provisional agenda, and shall make recommendations as to whether an item proposed is included in the agenda (Rule 40).

2. It shall also make recommendations.

3. The GC cannot discuss the substance of any item.

4. GC can revise the resolutions adopted, changing their form but not their substance.

Additional Rules of the UN

Rule 68- No representative may speak without having previously obtained the permission of the president. The president shall call upon speakers in the order in which they signify their desire to speak.

Rule 71- Point of order, a representative may rise to a point of order.

Rule 73- During the course of the debate, the President may announce the list of speakers and, with the consent of the GA declare the list closed. But, the President may also accord the right to reply to any member.

Rule 78- Proposals and amendments shall be submitted in writing to the SG who shall circulate copies to the delegations.

Voting Rules for the UN (Rule 82-95)

1. Each GA member has one vote.

2. Votes on important questions shall be made by a ⅔ majority of the members present and voting.

3. Decision on amendments to proposals, and on parts of such proposals put to the vote separately, ⅔ majority.

4. Rule 87- (a) The General Assembly shall normally vote by show of hands or by standing, but any representative may request a role-call. The roll-call shall be taken in the English alphabetical order of the names of members, beginning with the member whose name is drawn by lot by the President. The name of each member shall be called

International Institutions

Set of rules meant to govern international behavior.

Rules

Statements that forbid, require, or permit particular kinds of actions. (Ostrom 1990)

International Organizations

Association of actors, typically states. • IOs have membership criteria, and membership may entail privileges. • Includes staff that work for these organizations. • Are entities.

Realism Approach to IR

Begins from the assumption that states are motivated by their own insecurity to continually look for ways to increase their power.

Power for realists is military might, and does not include ideas or social forces.

Realism suggests that international politics should be understood as the pursuit of military dominance by states in an effort to reduce their sense of insecurity in relation to other countries.

Paths of Research for Realism in IOs

Empirical: How do IOs influence the decisions of states as they pursue their military objectives relative to one another? Do strong states defer to, care about, or worry over international organizations?

Normative: Promotes the view that international organizations should not be allowed to interfere with the military pursuit of great powers.

Key Assumptions of Realism

1. States are dominant actors.

2. World politics is characterized by anarchy.

Implications of Anarchy

1. Due to anarchy, states must and foremost look out for its own survival and security.

2. This leads to states' interest in acquiring power, which inevitably leads to conflict (the security dilemma).

3. States attempt to achieve bigger power and stronger security, which leads interactions between states to involve bargaining and coercion.

4. "Cooperation is difficult and rare."

5. International institutions are weak and exert little independent effect on world politics.

Liberalism Approach to IR

Governments, in the pursuit of what they see as their interests, make the best possible policy choice that they can in light of information, resources, and options they have available. IOs should be understood as a series of voluntary, contractual agreements that states enter into with the expectation of a beneficial payoff . Liberalism sees IOs as fundamentally cooperative since they arise out of the consent of the states involved; consenting governments are pursuing mutual gains.

Paths of Research in Liberalism

1. What kinds of international coordination might produce mutual benefits for their members?

2. What unintended consequences might follow from the cooperative arrangements that they make?

"Interest-Group Liberalism"

Instead of treating governments as unified, singular agents, focuses on how domestic actors come together to produce the policy positions that the state adopts and then pursues through international organizations.

Regime Theory

Focuses on the web of international rules and norms that govern an issue, which includes both formal international organizations and the governments and substate actors that come up with policy preferences.

Constructivism

International politics is shaped by the ideas that people and states have about themselves and the world around them. These ideas are shaped by past interaction and therefore are constantly changing. Does not deny that states seek to pursue their interests and that they desire power - but directs attention to examining how states come to see certain things as being in their interest, or as being useful tools of power, and how these ideas change in the course in events.

Paths of Research in Constructivism

1. Consider how ideas, identity, and discourses change over time through the interactions of people and institutions

2. Examine the recursive process of "co-constitution": the rules of IOs change as states invoke and interpret them in particular cases, and states are changed as their decisions and sovereignty are redefined by international rules.

Finnemore's Theory

State behavior is defined by identity and interest. Identity and interests are defined by international forces: the norms of behavior embedded in international society. The norms of international society are transmitted to states through international organizations. They "socialize" and teach states what their interests should be.

Marxist Approach to IR

International politics and international economics are one singular system; this system is inherently unequal. Sees IOs as being built on and reinforcing the unequal power relations between rich states and poor states. IOs serve the interests of a transnational capitalist class of elites to maintain a stable political system that enables the accumulation of wealth in ever fewer private hands.

Marxism in the study of Political Economy

1. States are not autonomous, they are driven by ruling-class interests, and capitalist states are primarily driven by the interests of their respective bourgeoisies. Struggles between states should be seen in the economic context of competition between capitalist classes of different states.

2. Capitalism is expansive: a never-ending search for new markets and more profit. Conflict expands around the world in the wake of capitalism. Takes the form of imperialism and colonization. Now, it takes the form of economic globalization led by giant transnational corporations.

World System Theory Model

Proposed by prominent Marxist Immanuel Wallerstein. It posits that Core countries provide high-profit consumption goods while periphery nations are extracted from cheap labor and raw materials. Semi-periphery nations are in between and experience both.

Actor

IOs are legally independent entities, have the capacity for independent action that can influence the shape or practice of world politics for other actors.

Forum

IOs act as meeting places where states and other actors discuss interests and problems of mutual concern.

Resource

IOs can be instruments that states use as they pursue their goals, both domestic and international.

UN's Mandate

To end international war and to promote social and economic development.

UN Charter

The founding document of the United Nations; it is based on the principles that states are equal, have sovereignty over their own affairs, enjoy independence and territorial integrity, and must fulfill international obligations. The Charter also lays out the structure and methods of the UN.

6 Principal Organs of the UN

1. General Assembly: consists of all UN members, can make recommendations to states, controls the UN's budget

2. Security Council: fifteen members, can determine threats to or breach of international peace and security take enforcement action

3. International Court of Justice: decides legal disputes between states

4. Secretariat: Secretary-General and staff

5. Economic and Social Council: fifty-four members, makes recommendations on economic and social questions

6. Trusteeship Council: manages "non-self-governing territories" (now defunct)

UN Member State Obligations

1. States must give up the use of force except for self-defense

2. States must carry out Security Council decisions

3. States must consider UN General Assembly recommendations

4. States cannot sign a treaty that contradicts the UN Charter

UN Security Council's Mandate

1. The Security council has the primary responsibility for the maintenance of international peace and security" (Art.24 (1))

2. It "shall determine the existence of any threat to the peace, breach of the peace, or act of aggression and shall...decide what measures shall be taken... to maintain or restore international peace and security." (Art. 39)

Structure of the UN Security Council

1. Made up of 15 members. 5 permanent members: Republic of China, France, the Soviet Union, the United Kingdom, and the United States. The remaining 10 are elected for two-year terms.

2. Decisions are passed when 9 members (including the 5 permanent members) support a resolution.

Pernicious Consequences of the UN Security Council Membership

Nations elected as temporary members have lower levels of economic growth, become less democratic, and experience more restrictions on press freedoms than comparable nations not elected to the UNSC.

UN Security Council Member State Obligations

1. Give up the use of force except for self-defense;

2. Carry out Security Council decisions;

3. Provide military resources to the Council for its enforcement actions.

Voting Requirements

9 votes needed in Security Council for decisions.

Peacekeeping Missions

They are impartial between the sides in the conflict, are authorized to use force only to defend their own lives, and are consented by the relevant governments.

Peacekeeping Charter Status

Not explicitly defined in UN Charter.

Key Peacekeeping Examples

Rwanda (1993-1994), Cyprus (since 1964), Lebanon (since 1974).

Top Peacekeeping Contributors

Nepal, Bangladesh, India, Rwanda contribute most personnel.

Current Peacekeeping Operations

1. MINURSO- UN Mission for the Referendum in Western Sahara

2. UNMIK- UN Interim Administration Mission in Kosovo

3. UNFICYP- UN Peacekeeping Force in Cyprus → Resolution 2025

4. UNDOF- UN Disengagement Observer Force

5. UNIFL- UN Interim Force in Lebanon

6. UNTSO-United Nations Truce Supervision Organization

7. MONUSCO-UN Stabilization Mission in the Democratic Republic of the Congo → Resolution in 2025

8. MINUSCA: UN Multidimensional Integrated Stabilization Mission in the Central Africa Republic

9. UNISFA: United Nations Interim Security Force for Abyei

10. UNMISS: UN Mission in the Republic of South Sudan

11. UNMOGIP: UN Military Observer Group in India and Pakistan

MONUSCO

The new mission has been authorized to use all necessary means to carry out its mandate relating, among other things, to the protection of civilians, humanitarian personnel and human rights defenders under imminent threat of physical violence and to support the Government of the DRC in its stabilization and peace consolidation efforts.

UNFICYP

originally set up by the Security Council in 1964 to prevent further fighting between the Greek Cypriot and Turkish Cypriot communities. After the hostilities of 1974, the Council has mandated the Force to perform certain additional functions. In the absence of a political settlement of the Cyprus problem, it has remained on the island to supervise ceasefire lines, maintain a buffer zone, undertake humanitarian activities and support the good offices mission of the Secretary-General.

Peace-Enforcement Missions

These occur when the Security Council:

1. Deem something a threat to international peace and security.

2. Decides what measures are necessary to respond to those threats, including economic sanctions, blockades, and other non-military means (Art. 41) as well as collective military force (Art. 42), and gets cooperation and contributions from member states.

Libya Intervention (2011)

1. Protests began in February 2011 against Muammar al-Qaddafi. People were angered by the arrest of a human rights lawyer Fethi Tarbel. The protests intensified with demonstrators taking hold of Benghazi, spreading to Tripoli.

2. The Libyan government used lethal force against demonstrators. Arbitrary detensions, enforced disappearances, torture and summary executions took place. Libyan ambassador to the UN and other diplomats and officials resigned in protest to the regime.

Darfur Genocide

In the 2000s, the government organized genocide against 3 ethnic groups in the Darfur region. Unclear if these actions could be classified as a threat to "international peace and security" since it could be understood essentially as a domestic issue. So the UNSC did not send a peace-enforcement mission.

Janjaweed

In 2003, rebels launched an insurrection in Sudan. In response, the government equipped and supported Arab militias (Janjaweed) to fight against the rebels. The militias in the process terrorized civilians and prevented international aid to organizations.

UNAMID

By 2007, thousands were killed, 2 million displaced, and forced to flee from the fighting. On July 31st, 2007, the UNSC authorized a joint UN-AU peacekeeping mission (UNAMID) to replace the AU mission. The ICC issued arrest warrants against Sudanese officials and Omar al-Bashir for crimes against humanity (July 2008).

Syrian Civil War

The UNSC has not made use of its enforcement powers in the Syrian Civil War because the Permanent Members disagree on how the conflict should be resolved. This makes it unable to authorize the use of force in the conflict.

UNSMIS

The UN Supervision Mission in Syria was launched (UNSMIS), and on April 21, 2012, UNSC resolution 2040 was passed.

Six-Point Plan of the Joint Special Envoy

1. Commit to work with the Envoy in an inclusive Syrian-led political process to address the legitimate aspirations and concerns of the Syrian people, and, to this end, commit to appoint an empowered interlocutor when invited to do so by the Envoy.

2. Commit to stop the fighting and achieve urgently an effective United Nations supervised cessation of armed violence in all its forms by all parties to protect civilians and stabilise the country. [...]

3. Ensure timely provision of humanitarian assistance to all areas affected by the fighting, and to this end, as immediate steps, to accept and implement a daily two hour humanitarian pause and to coordinate exact time and modalities of the daily pause through an efficient mechanism, including at local level.

4. Intensify the pace and scale of release of arbitrarily detained persons, including especially vulnerable categories of persons, and persons involved in peaceful political activities, provide without delay through appropriate channels a list of all places in which such persons are being detained, immediately begin organizing access to such locations and through appropriate channels respond promptly to all written requests for information, access or release regarding such persons.

5. Ensure freedom of movement throughout the country for journalists and a non-discriminatory visa policy for them.

6. Respect freedom of association and the right to demonstrate peacefully as legally guaranteed.

Rwanda Genocide

During the genocide, peacekeepers who were already in the country could not intervene to save lives due to their obligation to remain impartial and only use force in self-defense.

UNSC initially deemed the genocide as a domestic issue, but eventually called it a threat to international peace due to the increasing refugee flows that it caused. By the time it sent a peace-enforcement mission, the killing had already been stopped.

WTO Membership

Made up of 164 members, including some that are not states. Founded in 1995, but a key governing agreement in the 1947 General Agreement on Tariffs and Trade (GATT) which specifies how countries can regulate their imports and exports of most goods.

Goals of the WTO

1. Sets limits on government policies that have an impact on international trade.

2. Strives to create a stable regulatory environment for international trade.

3. Aims for "rule-governed" trade, and not "free trade".

4. Settles disputes between members regarding violations of these rules and authorizes retaliatory tariffs under the Dispute Settlement Understanding.

Member State Obligations to the WTO

1. "Most-favored nation": For any product, a country must offer all its trading partners the same tariff rate that it offers to its most-favored trading partner (GATT Art. I)

2. "Schedule of concessions": Maintain a public and fixed set of tariffs for imports (Art. II)

3. "National treatment": Treat imports no worse than domestically produced goods (Art. 111)

4. Antidumping and Countervailing Duties: "Contracting party recognize that dumping, by which products of one country are introduced into the commerce of another country at less than the normal value of the products is to be condemned if it causes or threatens material injury to the established industry [...]" Art. VI.

GAAT's Basic Principles

Rules (not results) based system. Non-discrimination (at and behind the border barriers). Flexibility: "safeguards" and other escape hatches.

Decline of the NIEO and Shift Toward Trade Openness

Goal #1 = Closing the trade gap

Goal #2 = develop a system of buffer stocks, primary commodities, agricultural products, fuel, goods in which developing countries specialized in.

3. The new "neoliberal" consensus: market-oriented export-led growth is superior to statist import-substitution industrialization.

Initial Goals of the WTO

1. To set and enforce rules for international trade.

2. To provide a forum for negotiating and monitoring further trade liberalization.

3. To resolve trade disputes.

4. To increase the transparency of decision-making processes.

5. To cooperate with other major international economic institutions involved in global economic management.

6. To help developing countries benefit fully from the global trading system.

Compliance with the WTO

Conventional economists would argue that since trade is good for all parties, compliance with the WTO should be automatic out of purely self-interested motives. In practice, states frequently "cheat" or bend WTO rules for political reasons such as pressure from domestic industries.

Enforcement of the WTO

1. The WTO itself does not initiate or execute enforcement of its rules.

2. The dispute-settlement mechanism is activated when a member complains that it has been harmed by another member failing to meet its obligations, then:

3. WTO then creates a panel of three experts who hear arguments and make recommendations.

4. WTO membership meets (this is called the Dispute Settlement Body) and either approves or rejects the recommendations.

5. The "guilty" state is given an opportunity to change its policies or to negotiate compensation to harmed states.

6. If it does not, the DSB can authorize other countries to impose economic sanctions.

Case Study: Shrimp-Turtle Dispute

1. In 1989, the US passed a law that banned imports of shrimp from countries that had not proved that their shrimping industry did not harm turtles.

2. India, Malaysia, Pakistan, and Thailand complained that the US was not treating all sources of imported shrimp equally because some Caribbean countries "were given technical and financial assistance and longer transition periods" than the Asian countries.

3. The US was found to be violating its commitments by discriminating amongst its trade partners (violating MFN).

Rule of Positive Consensus

1. In order to refer a dispute to a panel, positive consensus was required.

2. No objection from any contracting party.

3. Parties related to the dispute were included in the decision-making process.

4. The adoption of the panel report also required positive consensus.

5. Worked well in 1947, but the system started to deteriorate in the 1980s as contracting parties blocked the establishment of the panels.

6. Panel reports were also written in consideration of diplomatic solutions

The Uruguay Round (1986-1994)

1. General Agreement on Trade and Services (GATS)

2. Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

3. Marrakesh Agreement (1994) WTO

4. Annex 2: Dispute Settlement Understanding

5. 1995, WTO was established.

Marrakesh Agreement

Established the WTO in 1994.

Dispute Settlement Body's Authority

1. Establish dispute settlement panels.

2. Refer matters to arbitration.

3. Adopt panel, Appellate Body and arbitration reports.

4. Maintain surveillance over the implementation of recommendations and rulings contained in such reports.

5. Authorize suspension of concessions in the event of non-compliance with those recommendations and rulings.

Dispute Settlement Body (DSB)

Authority overseeing trade dispute resolutions in WTO.

DSB Procedures

1. Trade member adopts a policy that is inconsistent with the obligations of the WTO.

2. Fails to reach a mutual agreement to solve this inconsistency.

3. State may request Consultations. If consultation fails to settle dispute within 60 days, the complaining party requests a panel (Art. 4)

4. Panel is then established by the Dispute Settlement Body. (Art 6)

Multi-Party Interim Appeal Arbitration Arrangement (MPIA)

1. Alternative arbitration mechanism for WTO disputes. Any member of the WTO can join.

2. Starting in 2020, MPIA members have been imposing fewer harmful barriers, and more liberalizing measures, against other MPIA members. Most striking, this effect has been growing with every year of the MPIA's existence, presumably reflecting a gradual adaptation of trade policy. The MPIA does appear to be a cooperative club—but one that any country can join on their own initiative.

IMF Mandate

Ensure stability of international monetary system by offering technical assistance and loans to avoid crises in balance of payments.

IMF Member State Obligations

1. To accept periodic surveillance of the domestic monetary position and to abide by any conditions attached to a borrowing arrangement.

2. "Conditionality"- A government receiving a loan must make changes to its policies that the Fund believes will remedy the underlying economic problems that led to the crisis.

Enforcement and Compliance in IMF

1. The IMF has no legal power to punish states that fail in their commitments.

2. Loans are disbursed in stages, and future stages (as well as future loans) are in theory dependent on compliance with past conditions.

3. In practice, around half of loans remain compliant with their original terms; governments often force the Fund to renegotiate the conditions or to accept non-compliance.

Criticism of IMF Conditions

Concerns over negative impacts on vulnerable populations.

Origins and Motivations of the IMF

1. Shaped by the perceived failures of the interwar gold-exchange standard and the chaos of the 1930s (e.g., destabilizing speculation under floating rates, "beggar-thy-neighbor" devaluations, and bilateral exchange restrictions.)

2. The US and Britain led the planning, with John Maynard Keynes (UK) and Harry Dexter White (US) proposing rival blueprints, eventually blended into a compromise.

3. The resulting goal: stable exchange rates (but adjustable in case of "fundamental disequilibrium"), multilateral trade, and national policy spare to pursue full employment.

Bretton Woods Conference (July 1944)

1. Delegates from 44 Allied nations met in Bretton Woods, New Hampshire.

2. Produced the Articles of Agreement for the IMF and for what became the World Bank(International Bank for Reconstruction and Development).

3. Intended to create an adjustable peg system: each currency would have a fixed parity (±1% band) relative to gold or the US dollar, with the possibility of changing the parity if truly necessary.

Immediate Post War Challenges (1946-1949)

1. Despite the formal creation of the IMF in 1946, Europe and Japan emerged from WWII with shattered economies, severe balance of payments deficits, and heavy reliance on exchange controls.

2. Widespread talk of a persistent "dollar shortage" because the US held most of the world's monetary gold and was running current account surpluses.

3. Many countries adopted initial official exchange rates in 1946 but found them increasingly unrealistic; sterling's failed attempt at dollar convertibility in 1947 underscored that full convertibility was not yet feasible.

Key Devaluations and Slow Path to Convertibility (Late 1940s-1950s)

1. In September 1949, Britain and 23 other countries devalued against the dollar—an abrupt, large realignment that helped reduce external deficits but signaled how resistant countries were to frequent parity changes.

2. Canada, in a departure from the IMF's preferred practice, floated the Canadian dollar (1950-1961) rather than persist with repeated revaluations; this move helped demonstrate that floating rates need not always be disruptive.

3. The European Payments Union (EPU, 1950) centralized clearing for intra-European trade and served as a stepping-stone toward multilateral convertibility.

4. By late 1958, major European currencies (e.g., German mark, French franc, Italian lira) declared external convertibility for current account transactions.

Heyday of Bretton Woods (1959-1967)

1. Often viewed as the system's most stable period. Western Europe and Japan had largely rebuilt, global trade and output were expanding quickly, and inflation in most advanced economies was relatively low.

2. The IMF's official role as global monetary manager was overshadowed by the reality that the US dollar had become the principal "key currency." Most countries anchored directly to the dollar, while the US pegged the dollar to gold at $35 per ounce.

3. Sterling continued to be held as reserves by Commonwealth nations and some others, but its importance steadily declined as British economic difficulties persisted.

Problems with the Bretton Woods System

1. Adjustment: How deficit or surplus nations would correct imbalances without repeated exchange-rate changes.

2. Liquidity: Whether the world had enough international reserves—mainly gold plus dollar holdings—to keep pace with rising trade and avoid deflationary pressure.

3. Confidence: Fear that rising dollar liabilities might eventually exceed US gold backing, prompting a potential run on the dollar for gold.

Sterling Crisis and the 1967 Devaluation

Britain was repeatedly forced into deflationary or stop-go measures to defend the pound. In November 1967, the UK devalued sterling from $2.80 to $2.40. Although the pound's role as a major reserve currency was already much diminished, the move rattled confidence in the fixed-rate system more broadly.

Transition to Breakdown (1968-1971)

1. The run on gold in March 1968 caused the collapse of the London Gold Pool; a two-tier gold market emerged (an official market at $35 and a separate, higher-priced private market).

2. Persistent US deficits, fueled by both domestic spending (including Vietnam War expenditures) and easier monetary policy, worsened the glut of dollars held abroad.

3. European countries grew reluctant to keep accumulating dollars. France, in particular, demanded gold in exchange for its mounting dollar reserves.

4. On 15 August 1971, US President Nixon suspended gold convertibility. This effectively ended the Bretton Woods gold-dollar link.