Bretton Woods Institutions

The World Bank and the International Monetary Fund (IMF) are together known as the Bretton Woods institutions. They were created at a meeting of 44 countries in Bretton Woods, New Hampshire, in July 1944. Their goals were to assist in rebuilding the shattered postwar economy and to promote international economic cooperation. The original Bretton Woods Accord also mandated a plan to create an international trade organization, but this was not realized until the formation of the World Trade Organization (WTO) in the early 1990s.

The formation of these two “sister institutions” came at the end of World War II, and was based on the initiatives of a trio of key experts—U.S. Treasury Secretary Henry Morgenthau, Jr., his chief economic adviser Harry Dexter White, and the noted British economist John Maynard Keynes. The goal was to establish a postwar economic order based on consensual decision making and cooperation in the realm of trade and economic relations. A multilateral framework was envisioned to overcome the destabilizing effects of the previous global economic depression and trade wars.

World Bank Group

The goal of the World Bank Group (WBG) was to improve the capacities of countries to trade by lending money to war-ravaged and impoverished countries for reconstruction and development projects. WBG currently lends over $20 billion annually to developing economies worldwide, and is made up of two main institutions—the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA)—and three subsidiary organizations: the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Center for Settlement Investments Disputes (ICSID). The WBG comprises 185 member countries and is based in Washington, D.C. Membership varies across the institutions—all members of the World Bank are members of the IMF, while IDA has 116 members, the IFC has 174; MIGA has 154, and ICSID has 133 members.

The president of WBG (Robert Zoellick as of June 2008) is the president of all five WBG institutions as well as chairman of the board of the 24 executive directors—five of whom are permanent and represent the United States, the United Kingdom, France, Germany, and Japan, while the remaining 19 are elected by groups of members every two years. The U.S. government has 20 percent of the vote and is represented by a [Page 186]single executive director. In contrast, the 47 sub-Saha-ran African countries have two executive directors and hold only 7 percent of the votes between them.

Each member state's vote is tied to its level of financial contribution. An 85 percent majority vote is required to pass any supermajority, which gives the United States veto power in all but one of the WBG institutions, the IDA, where it has approximately 13 percent of the votes.

International Monetary Fund

The IMF's original goal was threefold: To promote international monetary objectives, to facilitate the expansion of international trade, and to promote exchange rate stability. The IMF provides several types of loans to member countries. Concessional loans are granted to low-income countries at a concessional interest rate through the Poverty Reduction and Growth Facility (PRGF), while nonconcessional loans are offered with a market-based interest rate through five mechanisms: the Stand-By Arrangements (SBA); Extended Fund Facility (EFF); Supplemental Reserve Facility (SRF); Contingent Credit Lines (CCL); and the Compensatory Financing Facility (CCF).

...