The important reasons behind the end of Bretton Woods system are :
(i) A decline in economic power of the USA.
(ii) Change in the international financial system.
(iii) Unemployment in industrialized countries.
(iv) Shifting of production enterprises.
(v) Changes in China.
(i) Decline in economic power of the USA :
(a) US dollar no longer commanded confidence.
(b) US dollar could not maintain its value in relation to gold.
(c) A collapse of fixed exchange rates on floating exchange rates.
(ii) Change in the international financial: The International Monetary Fund and the World Bank were created to meet the financial needs of the industrial countries. The international financial system changed, and developing countries were forced to borrow from western commercial banks.
(iii) Unemployment in industrialized countries: Industrial world was hit by unemployment. The number of unemployed started rising and people
trudged long distances looking for any work they could find.
(iv) Shifting to production enterprises: MNCs shifted their production units to Asian countries because of cheap labor and low wages.
(v) Changes in China: China became an attractive destination for investment by foreign MNCs.
