From the beginning of 19th century to I. World War, the Britain was the global hegemonic power and they established and international monetary system that called the gold standard which means all currencies fixed to gold. After the I. World War, the gold standard lost its power and all attempts until 1925 were failed. After II. World War, America become the global hegemonic leader and established a new monetary system called Bretton Woods in 1944. In this system, countries indexed their currencies to the US dollar. The US dollar was pigged on gold and it helped the US dollar rise its value against other currencies. It seems like something good. However, it had bad consequences for the US. The high-value dollar meant that products from abroad are cheap for US costumers but US products are expensive for foreign customers and it caused trade deficit because the US import high intensity but could not export as much as import due to the high value of the dollar. In 1971, President Nixon changed the monetary system which cutting the link between the US dollar and gold and also imposed 10% of tax on imports. All these changes helped the US dollar devaluate and restore the competitiveness of the US economy. Floating in exchange rates created new opportunities to make a profit by using the fluctuation and people started to earn money with this rather than doing international trade or investment. This floating rate started to be a problem for the US in the 1980s. The US increased the interest rate to solve this problem but it did not work. The higher interest rates stimulated foreign investors to invest on the dollar which caused the appreciation in the dollar against other currencies by about %30.1985, 5 biggest economies, G5 (Germany, US, Japan, UK, and France) came together to devaluate and stabilize the value of the dollar with Plaza Accord. After the meeting, the dollar decreases rapidly and lost %40 of its value against other currencies. After 2 years, the Louvre meeting of the G7 ( G5 plus Canada and Italy) agreed to mutual recognition for protection of dollar and the US will stabilize the dollar with increasing the interest rate and Germany will cut the tax. Also in 1986, A common market was initiated to establish within Europe called the Single European Act. Free capital and labor flow started within the countries that agreed on it. Unexpectedly, in 1987 American Stock Exchange Market crushed. It affected lots of countries but the most in America. A. Greenspan as the head of FED after this crush started to print money to keep the economy alive and reduced the interest rates to courage the people to invest and continue to their businesses. Financial markets and free capital movements has been encouraged. These interventions caused the increase of Information and communication technologies, expansion of derivatives in Wallstreet. At the end of 1988, the dollar continued to its depreciation due to the continuous effect of the 1987 American Stock Exchange Market crush. Depreciation of dollars threatened other countries' international trade. Respond to this downward trend of the dollar, Europe created its zone of currency stability which called the European Monetary System. Investors who moved out of the dollar started to interest with the German currency, Deutsche Mark(DM) and it caused to DM appreciate. This appreciation of German currency harmed Germany export as it happened to the US before. The depreciation of other currencies in Europe caused inflation in those states and the solution was to create the own currency mechanism. First, Europe did it with ERM (Exchange Rate Mechanism). Central Banks of European countries worked together to keep the currencies within some borders.
The Washington Consensus refers to a set of free-market policies advocated by international institutions such as the IMF and the World Bank. The ideas were intended to help developing countries that struggle with economic crisis based on neoliberal view. For example, revaluation of the dollar in the 1980s caused debt crises such as the 1982 Mexican Crisis in Latin American countries. Neoliberalism is the belief of a fully free-market economy with minimum state intervention. This free market and upward economic acceleration could be achieved by the tax cut, public spending cut, reducing the regulations for the economy, allow free trade and capital flow between countries, encourage FDI, and advocation of privatization. After this consensus, the world had a new order that countries were willing to work together to benefit of all. Today's major organizations were established following years. In 1990, in the same year with the Washington Consensus, two-part of Germany have been merged. It was a signal for the future that European countries will emerge to become stronger. In 1992, the European Union has been established with the Maastricht Treaty. They agreed on economic and monetary union, working together in police and judicial cooperation in criminal matters and the establishment of common foreign and security policies. In the 1993 Copenhagen Summit, criteria for membership of union have been created in 2 aspects, political criteria that democracy and human rights, and economic criteria. In 1998, The European Central Bank established and it was a signal for the common currency which will actualize in 2002. In 1999, G20 has been organized to involve more countries to new world order. In 2002, European Union member countries started to use the same currency called the Euro and prevented the fluctuation of currency.