bretton woods organization

1. CONTEMPORARY WORLD
“CHANGES BRETTON WOOD IN ERA
ORGANIZATION”
Prepared BY : Melanie Fabillar
BSOA 1.2

2. THE BRETTON WOODS INSTITUTION:
EVOLUTION, REFORMS and CHANGES.
 The Bretton Woods institutions (BWIs), the International Monetary Fund (IMF), and the World Bank were created to
bring about orderly development of the world economy in the post-World War II era. This chapter makes an attempt to
suggest broad directions of reform. It employs historical and institutional approaches in trying to understand the sources
of failures and limitations of the BWIs. A detailed blueprint for reform would require much technical and analytical work
on specific issues, but at this stage, it is more important to forge a consensus on the direction of reform.
The chapter reviews the evolution of the BWIs, identifying the main driving forces behind the changes in the role and
functions of the system, and discusses institutional reform, including the reform of governance and conditionality.

3. CHANGES IN, AND CRITIQUES OF, BRETTON-WOODS-ERA ORGANIZATIONS.
 In the twenty-first century, the organizations that were spawned by Bretton Woods – the World Bank, the International
Monetary Fund, and the World Trade Organization – are undergoing dramatic changes.
 Recent changes in the organizations are traceable to several major forces including globalization (a concept and a process
not even dreamt of in 1944), major trade disputes, and the increasing power and ambition of growing economic powers,
especially in Asia. In terms of the latter, the World Bank has been loaning large sums of money to countries (e. g. China;
including $710 million in early 2009 to help rebuild areas hit by a 2008 earthquake) whose economies did not Global
Economic need such loans.
 In fact, of the bank’s $23 billion in loans in 2006, $13 billion went to “middle-income” countries rather than to poor
countries. Furthermore, the Bank’s loan to “middle income” and “high-income” economies have far exceeded the loans
given to “low-income” economies (in recent years, more than half of the IMF’s lending has gone to European countries).
Even in terms of the funds that do go to poor countries, the World Bank is an increasingly small player in comparison to
various international and private aid organizations.
 As a result, one professor said: “. It’s hard to see what good it [the World Bank] has done anywhere”. The Bank argues it
is helping large numbers of the poverty-stricken in less developed countries, while its critics say it is the opening of
markets there, and not bank loans, that have helped in poverty reduction.

4. Divergent Interests at Bretton Woods
- In July 1944, delegates from 44 Allied nations gathered at a mountain resort in Bretton
Woods, NH, to discuss a new international monetary order.1 The hope was to create a system
to facilitate international trade while protecting the autonomous policy goals of individual
nations. It was meant to be a superior alternative to the interwar monetary order that arguably
led to both the Great Depression and World War II.
- Discussions were largely dominated by the interests of the two great economic superpowers of
the time, the United States and Britain. But these two countries were far from united in their
interests, with Britain emerging from the war as a major debtor nation and the U.S. poised to take
on the role of the world’s great creditor. Wanting to open the world market to its exports, the U.S.
position, represented by Harry Dexter White, prioritized the facilitation of freer trade through the
stability of fixed exchange rates. Britain, represented by John Maynard Keynes and wanting the
freedom to pursue autonomous policy goals, pushed for greater exchange rate flexibility in order
to ameliorate balance of payments issues.

5. Globalization and the Logic of International Collective Action, Re-examining the Bretton Woods
Institutions.
 The fixed exchange rate system had been abandoned back in 1971, raising questions at that time about the role of the
International Monetary Fund. However, the abandonment of the fixed exchange rate system did not mark an end to
crises; rather, they seemed to become both more frequent and of greater depth. When the Bretton Woods institutions
were founded, there was a less well-developed theory of collective action that outlined the circumstances under which
public, as opposed to private, action was desirable. There was, in particular, a less well-developed theory of market
failure, of the circumstances under which markets by themselves did not yield efficient outcomes. This chapter explores
the role of the Bretton Woods institutions from the perspective of global public goods and externalities. The discussion
begins by focusing on the IMF, simply because there was, in its establishment, a clear vision of a global market failure
that it was supposed to address.

6. THE CRITICISMS OF BRETTON WOOD SYSTEM.
 For decades, the Bretton Woods institutions have drawn hefty criticism for imposing "neoliberal" economic
policies, involving financial deregulation, mass privatizations and austerity. The IMF has faced flak for
forcing debtor countries around the world to open their markets and weaken labor protection
 Bretton woods system, increasing US monetary growth led to rising inflation, which spread to the rest of the
world through growing US balance of payments deficits. A key reason for Bretton Woods' collapse was the
inflationary monetary policy that was inappropriate for the key currency country of the system

7. INTERNATIONAL MONETARY FUND and WORLD BANK CRITIQUES.
 Founded in 1944, the World Bank Group (WBG, or Bank) and the International Monetary Fund (IMF, or Fund) are twin
intergovernmental institutions that are influential in shaping the structure of the world’s development and financial order.
Also known as the Bretton Woods Institutions (BWIs), they were initially created with the intention of rebuilding the
international economic system following World War II (WWII). The key decisions leading to the establishment of both
institutions were largely steered by the US, and to a lesser extent the UK, and during the post-war period the BWIs were
significantly influenced by the US’s geopolitical strength. Their mandates, focus and programs have evolved greatly over
time, as seen, for example, by the shift of their pivotal role as designers of the fixed exchange rate regime created by the
Bretton Woods System, to their active promotion of a fluctuating exchange rate system after its collapse in 1973. Their
functions are detailed in the World Bank’s and IMF’s respective Articles of Agreement.

8. THANK YOU 

9. QUIZ:
1. It was created to bring about orderly of the world economy in the post-World War.
Give The 3 groups (3 points)
2. The year were the world Bank Group & The IMF Created? (2 points)
3. Year did the 44 allied national Gathered at a mountain resort in Bretton Woods? (2 points)
4. He wanted the Freedom to pursue autonomous policy goals pushed for greater exchange rate
flexibility? (3 points)