Two institutions born at the same 1944 New Hampshire conference, now facing each other across 19th Street in Washington (1944)
The Fund and the Bank, the surviving offspring of Bretton Woods
General knowledge · Economics & society
The IMF and the World Bank
Founded 1944; operations from 1946–47
Economics — the Bretton Woods institutions
The twin institutions created at the 1944 Bretton Woods conference and still facing each other across 19th Street in Washington DC. The International Monetary Fund lends to countries in balance-of-payments difficulty and monitors the world economy; the World Bank Group lends and grants for long-term development. Voting in both is weighted by financial contribution rather than by one country one vote, and by an unwritten convention dating from the founding a European heads the Fund and an American the Bank. Their conditions on borrowers — the structural adjustment programmes of the 1980s and 1990s above all — have made them among the most criticised bodies in international life, from the left and the right alike.
How to spot them
- ▸Two institutions facing each other across 19th Street NW in Washington DC
- ▸By convention a European heads one, an American the other
- ▸Quotas, not one country one vote; the United States alone holds a veto over major decisions
- ▸Special Drawing Rights, a reserve asset made of a basket of five currencies
Key facts
By an unwritten convention dating from 1946, a European heads one and an American the other
A carve-up increasingly resented by emerging economies, which have repeatedly challenged it without success
Its very first loan, in 1947, went to France for postwar reconstruction (1947)
$250 million to France — reconstruction came before development, as the institution's original name said
The reserve asset created in 1969, valued from a basket that added the Chinese renminbi in 2016 (1969)
Special Drawing Rights; the basket is the dollar, euro, renminbi, yen and pound
Britain's humiliating $3.9 billion loan of 1976, and a Chancellor turning back at Heathrow (1976)
Denis Healey abandoned a flight to a Labour conference to deal with the sterling crisis
John Williamson's 1989 label for the package of liberalisation, privatisation and fiscal discipline these bodies were said to prescribe (1989)
The 'Washington Consensus' — Williamson later complained his descriptive list had become a term of abuse
The five arms of the larger group: IBRD, IDA, IFC, MIGA and ICSID
Reconstruction lending, concessional credits, private-sector investment, guarantees and investment arbitration
Key ideas
- The division of labour: the Fund is a short-term lender addressing balance-of-payments and currency crises; the Bank is a long-term lender for infrastructure, health, education and poverty reduction. In practice their advice overlaps a great deal.
- Quota-based voting means influence follows money. The United States' share has long been just above the 15 per cent needed to block decisions requiring an 85 per cent majority — an effective veto.
- Conditionality is the heart of the controversy. Supporters argue that lending without conditions rewards the policies that caused the crisis; critics, including Joseph Stiglitz, a former World Bank chief economist, argue that the standard package has repeatedly deepened recessions and cut social spending.
Quick-fire facts
- •Both institutions were agreed at Bretton Woods in July 1944; the Fund began financial operations on 1 March 1947
- •The World Bank's first loan, of $250 million, was made to France in 1947
- •The IMF has 191 member countries; Liechtenstein became the 191st in October 2024
- •The World Bank Group comprises five bodies: the IBRD (1944), the IFC (1956), the IDA (1960), ICSID (1966) and MIGA (1988)
- •Kristalina Georgieva of Bulgaria has been Managing Director of the IMF since October 2019 and began a second term in 2024
- •Ajay Banga has been President of the World Bank since June 2023
- •Special Drawing Rights were created in 1969; the valuation basket comprises the US dollar, euro, Chinese renminbi, Japanese yen and pound sterling, the renminbi having been added in 2016
- •Britain's 1976 loan of $3.9 billion was the largest the Fund had then made; Chancellor Denis Healey famously turned back at Heathrow to deal with the crisis
- •The phrase 'Washington Consensus' was coined by the economist John Williamson in 1989
- •Joseph Stiglitz, chief economist of the World Bank from 1997 to 2000 and a Nobel laureate in 2001, became a prominent critic of Fund conditionality
- •The two bodies hold Spring Meetings and Annual Meetings together each year
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Sources
- International Monetary Fund — Liechtenstein Becomes the IMF's 191st Member October 2024 announcement; cited without URL.
- Joseph E. Stiglitz — Globalization and Its Discontents 2002; the best-known critique of Fund conditionality