A team of 730 policymakers and experts in international finance from 45 nations among which was economist John Maynard Keynes assembled at the Mount Washington Hotel located at Bretton Woods, NH, a few weeks following the Normandy incursion when the World War II was in its second stages during the early part of summer in 1944. They had a job in hand which was to rework on the policies of the international financial system leading to a situation wherein the consequences of the World War II will never be a repeat of the unruly trade and financial policies that marked the period after World War I.
Their work was over after three weeks after establishing the edifice of the World Bank group and the International Monetary Fund. The question on everybody’s mind remains regarding the magnitude of public benefits that these two institutions will deliver at a social benefit higher than the social cost involved. Following twenty years of sporadic disasters, doubts surface regarding the total assistance which these institutions are able to offer.
The International Monetary Fund in concert with the World Bank contributed significantly in the past following the Bretton Woods. However in case of these two institutions, a lot of change has been witnessed across the world, and the matter regarding their future are crucial. The International Monetary Fund – IMF was set up to ease global trade through lowering stipulation of foreign exchange. Besides, it built a repository of funds to be utilized by nations facing short-term balance of payments difficulties so that their businesses do not stop abruptly.
There has been a radical metamorphosis globally and as regards IMF, the current doubts revolve around its task in giving funds for the underprivileged developing nations experiencing balance of payments problems as also its responsibility in case of countries having middle incomes in tiding over financial emergencies. The institutional nature of the World Bank formed during the period shortly after the World War II, facilitated it to protect from its environment the resources it will be requiring to run in an efficient manner.
The most important among these were the belief of the capital markets and the backing of wide array of member nations – thus, the Bank’s uniqueness as a technical and an institution free from political control. The Bank’s coming of age during the past decades of the twentieth century has been propelled to some extent by abrupt and across-the-board modifications witnessed in the developing nations which are the beneficiaries of the World Bank loans. During the 1980s and 1990s, the political and financial structure of the developing nations was changed.
Democratic governments assumed power in Latin America; single-party government culminated in Eastern Europe, the erstwhile Soviet Union, and also major regions of Africa; and the demands for more transparency shaped a new political atmosphere in Southeastern Asia. Coming to its financial aspect, development systems sponsored by the government were discarded in Latin America; economic systems built by communists were torn both in Eastern Europe as well as in Soviet Union, and market-economy accepted across the developing countries.
There was a drastic transformation across the globe and the Bank reacted to it. The dilemma before the World Bank at the moment is, if it is able to and must slowly stop extending loans to the bulk of the middle income nations leaving aside during radical policy restructuring and emphasis on low-income nations, or if it must handle the ‘sensitive’ question of development. Preferably, the World Bank, the IMF, and development organizations, taking the overall situation would not be there.
In their absence, poor nations would require to employ good policies to develop more and create income for the citizens and the government. Nevertheless, these international bodies are doubtful to vanish; therefore restructuring their lending systems is the subsequent method to eliminating poverty. These bodies must deliberate the manner in which to improve their system to facilitate nations to rise and grow.
Important restructuring deliberations must lay emphasis on matters related to governance, especially the structure of the decision-making teams. The current structure that is six decades old is obsolete where more members from the industrialized nations are present as donors and representation from the developing nation is abysmally low. Providing a solution to these inadequacies have increased chances of getting favor from the member nations whose representation is less.