Chapter 9: The International Financial Institutions

Key Themes 1. Purpose and objectives of the IMF and WB. Historical changes in operations 2. IMF and WB role in structural adjustment and its controversy 3. IMF and WB responses to criticisms and new directions

Overview • High controversy surrounding leading international financial institutions IMF and WB • Objectives: economic stability; poverty reduction; development • Leftist opponents: policies actually serve to entrench poverty and inequalities > protest > criticism that institutionally more like a MNC • IMF and WB suggest that adjustment reforms promote strong and stable economic growth cf. critics: counterproductive to development. • Focus is then broader than just economics: on good governance and policy making > building institutions and markets to ‘empower the poor’.

Origins of the IMF and WB • Bretton Woods Conference, New Hampshire 1944 > end of WWII. • Aim: to create international monetary system for post war order (see previous system in 1930s of flexible exchange rates, encouraged war, Great Depression etc. i.e. what faced with stagnation countries would deliberately devalue currency to cheapen and boost exports). • No clear consensus at conference except for universalism in order. • American proposal laid the basis for current framework (see industrial dominance of US at the time as well as goals for economic expansion). • Bretton Woods System: founded upon fixed exchange rates. Each currency pegged against US dollar (see existence of that today to support arguments for American imperialism by Mann). • IMF set up in 1945 to oversee the emergence of any disruptions to new order • IMF had reserves which countries who were trading badly could draw from to encourage stabilization. • IMF important but still modest in power and magnitude. • International Bank for Reconstruction and Development (IBRD) = WB o