The Breton Woods institutions are named that because in 1944 at a conference in a place called Breton Woods in New Hampshire, USA. This is where the International Monetary Fund and World Bank were formed – it was due to the financial turmoil of the 1930’s in particular the Wall Street Crash in 1929, where the American Stock market (which was the largest market at the time) plummeted. It was implemented to offer financial support and rebuild its economy, most recently after the institution was formed Europe needed the most help after the Second World War - but soon it was there for the developing world. Harry Dexter White was the first to propose a ‘new economic world order based on a Bank’ , and he was convinced that ‘the US needed to reconstruct Europe, and create a stable world market in the Third World.’
The IMF acts as a bank to its 184 members offering loans to severely deprived countries, an example would be the IMF giving a loan to Indonesia where millions were facing extremely depleted food shortages. However, there are real strict conditions to the loan which the country has not choice but to adhere to, otherwise they don’t receive the loan. This loan is meant to help the countries get ‘back on their feet’ as it were, however but has sometimes leading to ‘serious recession’ in places like Indonesia.
However, there have been immense problems with the Breton Woods institutions and whether it should remain or not? For instance ‘Congress has given over $18Billion in extra funding’ There have been loans which total to tens of billions that have seriously drained the Breton Woods fund., the Asian crisis did not help this and some critics even argue that the IMF could have foreseen the crisis and ceased it much sooner, ‘the IMF has also been attacked for not trying to avert the Asian market crisis, and for not doing enough to the contagion spreading.’ More importantly, the Breton Woods institutions have been under morale scrutiny due to the supposed ‘secrecy’ of the IMF and some critics say ‘its rescue packages reward imprudent lenders.’
This essay will try to address the fundamental issue and the on going debate of whether the IMF and World Bank should still exist, and if so how should it be reformed, if at all? One would argue that the IMF and World Bank are in a bit of a catch 22, because if it was to be removed what would replace it?
Firstly, let us look at some of the positives that the IMF and World Bank have achieved. As mentioned previously the whole aim of the institutes being implemented was to learn from the Crash of 29’ and not make the same mistake of economical depression again. It was there also (and now more notably) to support Europe’s financial state after the Second World War. Not forgetting that credit should be given where credit is due, and therefore the IMF and World Bank did wonders helping out Europe and America and it appears that mistakes have been learn, oweer sme may disagree.
The IMF had good intentions when starting out, as President Truman said in this inauguration speech in 1949, ‘For the first time in history, humanity possess the knowledge and the skill to relive the suffering of these people…a key to greater production is a wider and more vigorous application of modern scientific and technical knowledge.’ Truman saw scientific and expert knowledge as the solution of world poverty in the third world, hence the importance of the IMF and World Bank, Robert Gilpin aggress with this and mentions in his book, that, ‘the world economy would have difficulty in functioning without these institutions. Therefore, under standing their function has become an extremely important concern of political economist.’
Just to emphasize the positives of Woods institutions, because they have enabled developing countries to keep afloat and...