The World Bank And The International Monetary Fund

The prosperity of much of the world today is due to the inter-related missions of the International Monetary Fund and the World Bank.

The two sister organizations of the World Bank and the International Monetary Fund have grabbed headlines in the press as of late. Meetings between both groups have drawn large crowds of demonstrators that protest the role the organizations are playing on the world stage. Activists accuse both the World Bank and the IMF of encouraging poverty, shifting good jobs away from industrialized nations and dictating austere economic policies to world governments. But the two institutions maintain that nothing is further from the truth, and the prosperity of much of the world today is due to the inter-related missions of the Fund and the Bank.

American tourists receiving instant British pounds at their local currency exchange office before jotting off to Great Britain have the International Monetary Fund to thank. Before the Great Depression of the 1930s, the convertibility of foreign money was never guaranteed. Due to their own economic reasons, governments would limit the exchange of their currency. This caused delays for tourists, but it was disastrous for international trade. If a new manufacturing order from Denmark was ready for the French, the French buyers might find that their shipment would be delayed until the Danish government allowed the French to purchase its currency to pay for the goods. The problems worsened as the economy began to slow with the Great Depression. Eager to find willing buyers for their goods, governments would sell their money for less than it was worth making goods artificially cheaper to undermine the competition. But other governments, in order to compete, resorted to the same practices and the true value of money came into question. The situation spiraled downward until supplier and buyers alike had little faith left in money.

A financial crisis ensued, and World War II only complicated matters. To avoid a repeat of the financial tactics responsible for the Great Depression, governments and scholars set about to find a solution. The American scholar Harry Dexter White and the British economist John Maynard Keynes suggested the idea of a voluntary international financial forum, and the International Monetary Fund was created. Understanding that no financial cooperation among nations could exist when most of Europe was in ruins, government leaders also agreed to create the World Bank, which would develop programs to reconstruct Europe. Both institutions were formally adopted by leading world government leaders in 1944 at the Bretton Woods Conference in Bretton Woods, New Hampshire.

The role of the International Monetary Fund has remained fairly steady over its sixty-four year history. The IMF is a financial forum for openly discussing the fiscal policies of its members and to avoid a return to severe exchange restrictions on international currencies. IMF membership is open to any government which conducts foreign policy and accepts that statues under which the IMF is run. Each participating government is also asked to contribute funds to the operation of the organization. Most funds are put into a special account upon which the organization draws if a member-country needs emergency loans to stabilize its economy. Although voting procedures in place at the IMF are weighted in favor of the largest financial contributors, members reach a consensus before loaning money. Recipient governments are encouraged to restructure their economies to promote free trade, but are under little obligation to follow the measures dictated by the Fund. In its publication materials, the IMF describes itself as "╦ť"┬Žneither a development bank, nor a world central bank, nor an agency that can or wishes to coerce its members to do much of anything." The Fund believes its strength lies in communication between governments and the elimination of monetary surprises in the international marketplace. Today the IMF has nearly 182 members. The IMF headquarters are located in Washington, DC, but IMF sub-offices exist around the world.

If the IMF has maintained a steady course, the World Bank has done quite the opposite. The original purpose of the World Bank was to organize development projects for reconstructing much of Europe. But as Europe recovered, the organization turned its skills and attention to other countries needing development - mainly Latin America and Africa. With its overriding mission to eliminate poverty worldwide, the World Bank has exploded into a developmental powerhouse that supports a myriad of projects in countries all over the world. The World Bank is owned by 182 member countries and divides its responsibilities among five divisions. The main thrust of the Bank's work comes from the International Bank for Reconstruction and Development (IBRD). The IBRD provides loans and grants to middle to lower income countries. The second division - The International Development Assistance (IDA) - focuses only on the world's poorest countries that are ineligible to borrow from the IBRD. Technical assistance and interest free loans are used to fight poverty. The International Finance Corporation (IFC) is tasked with promoting growth in developing countries. This arm of the Bank works closely with private business and investors to infuse developing economies with much needed private sector funds. The Multilateral Investment Guarantee Agency (MIGA) is the newest area of the Bank, having been created in 1988. MIGA support s the IFC by creating a security net for investors seeking to invest in high-risk developing countries. Knowing that some of their investment will be guaranteed by MIGA, investors are more willing to venture into these risky, but needy markets. Finally, the International Centre for Settlement of Investment Disputes (ICSID) seeks to negotiate disagreements between foreign investors and developing countries. The ICSID is technically autonomous from the World Bank, must remains closely in tune with their projects.

The World Bank headquarters is in Washington, DC, but offices are present in almost every developing country in the world. In their effort to eliminate poverty, the World Bank has developed programs to attack the roots of poverty from every angle. World Bank employees in DC and abroad direct projects in health care, maternity, scholarization, agriculture, technology, energy, children, women's rights, sanitation and so many more.

Despite the Bank's noble mission, many detractors see their work as harmful. Labor unions protest that the IFC's encouragement of private business to go abroad reduces needed jobs in industrial countries. Human rights workers feel the private sector investment does not help the local people but enslaves them in factory and assembly line jobs. As the IDA grants a poor country money to build a damn that will provide electricity, environment activists complain that river wildlife will die as a result. The competing interests of worldwide organization groups can make project implementation difficult. The IMF has not avoided criticism. Many feel the IMF wastes money to prop up under-achieving economies. Often money loaned to support currencies is diverted to support political parties. When no measures are taken to restructure a failing economy, the loans are never repaid. All member governments of both organizations continue to support the IMF and the World Bank as evidence by their continued contributions. Although public scrutiny has forced the IMF and the Bank to reassess some of their policies, neither appears in danger of dissolving under this minor public pressure.

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