Prime Minister Kevin Rudd and 19 other leaders are in London today for the G20 conference to reform the international economy and avoid another Great Depression.

  The Prime Minister is talking down expectations. We should not expect too much to emerge from such a single gathering.

OK. But there was once a gathering when people did design a better international economic order.

In 1944 the US hosted an international conference at Mount Washington Hotel, Bretton Woods, New Hampshire to create a new international economic order which would have the US at its centre. It was one of the most successful gatherings in history.

This new order was based on the US$ (rather than the British pound) and it created two international financial institutions: the World Bank and the International Monetary Fund (IMF), both based in Washington DC. The World Bank provides long-term loans and the IMF helps governments with short-term economic crises.

The Bretton Woods conference was the beginning of what is now the common pattern of international conferences. First, it was held in very pleasant circumstances. For the delegates coming in from war torn countries, Bretton Woods was a wonderful location. Diplomats have continued to live well at international conferences.

Second, the conference was huge: 700 delegates and support staff from 44 countries.

Third, the conference was chaotic. For example, thanks to the Americans English replaced French as the language of international diplomacy. But the Russians did not speak English; neither did their interpreters. The French spoke English but complained about the quality of the interpreters. The UN now has to operate in six languages, though English and French are the main working ones.

Finally, with such important international issues at stake, feelings were running high. When the American delegation met in their first private session, they surveyed how the other countries were likely to vote on key matters.

The American head of delegation said "The most troublesome will be Australia who is participating to all extent far beyond the proper role of its size and importance". Australia had been hit hard by the Great Depression (with 30 per cent unemployment) and so it was anxious that it would do well in the new international economic order to be created at the conference.

It did not want to be tricked by the Americans, British and Russians into accepting deals that undermined its economy. It had done well in the old economic order (until the 1930s) and it wanted to do even better in the Bretton Woods era. Australian delegates did not worry whom they offended in safeguarding Australia's national interest.

The conference decided that the international economy had to be rebuilt. This would be done with the US at the financial centre - in 1945 the US commanded 40 per cent of the world's economy - with the US dollar (rather than the UK pound) as the basic currency, and with countries committed to free trade.

The US had got itself out of the Great Depression by the "New Deal", which resulted in the government becoming far more involved in the US economy than ever before, and the war further encouraged that involvement. The same type of thinking would now be required for the international economy.

The World Bank and International Monetary Fund (IMF) were established as part of the Bretton Woods system. The World Bank provided, via grants from developed countries, a system of long-term loans to help economic development. The World Bank's lending policy was conservative: it liked infrastructure projects (such as roads and dams). The biggest World Bank loan in the late 1940s was to Australia to help finance the Snowy River scheme. The IMF was concerned about short-term liquidity problems in government expenditure and national income.

The US dollar was linked to gold: US$35 equalled the price of one ounce of gold. This was the cost between the US Reserve and foreign central bankers (such as Australia's Federal Reserve). There was little point in collecting US dollars to buy gold since central banks could do nothing with it; gold earned no interest. US dollars, by contrast, could be used to buy goods and services overseas which could then assist a country's economic development.

The Bretton Woods system - in which Australia had an active role in creating - formed part of the basis of the 1950s as a golden period of economic growth. The system removed the fear of another 1930s-style Great Depression. It was one of the most productive conferences held last century.