Table of Contents

  • Commonwealth Finance Ministers, representing 51 countries, which include members of the G-7, some of the poorest countries and a number of small states, had a very useful exchange of views on the role of the International Monetary Fund (IMF) and World Bank, at their last annual meeting in Valletta, Malta (26-28 September 1994). This paper by Prof Bird and Mr Killick on 'the Bretton Woods Institutions (BWIs) and the Commonwealth Perspective' was prepared for the Commonwealth Secretariat as a background document on the subject and contained a number of proposals which enriched Ministers' discussions. Given the proximity in time of the two meetings, many of the ideas in the report were also carried forward to the Special Seminar, in Madrid, 29-30 September, to help celebrate the 50th Anniversary of the Bretton Woods Conference.

  • Against the background of changes that have occurred since their creation 50 years ago, this paper surveys issues concerning the future of the Bretton Woods Institutions (BWIs). Much has happened to the world economy in this time and there are doubts whether the Fund and Bank have adapted adequately. We concentrate on two subject-areas: Part II examines systemic issues of international exchange rate and policy co-ordination; the shifting finance-adjustment balance; and the changing roles of the BWIs in the international system.

  • To the extent that there can be said to be an international financial system, the IMF and World Bank are at its centre, siblings of the creation at the 1944 Bretton Woods conference of a new international economic order, to avoid repetition of the self-destructive policies of the inter-war years.

  • A number of lessons may be drawn from the recent past to help inform future policy. First, flexible exchange rates have been both volatile in the short run and subject to misalignment over the long run. These features carry with them potentially significant costs even in a world where hedging against exchange rate risks is available.

  • The BWIs impinge directly upon the development of the countries to which they lend in two principal ways: through the productivity of the financial (and technical) assistance they provide, and through their influence on the policy choices of the governments of those countries. Indirectly, as shown in Part II, they also impinge through such influence as they have on policies within industrial countries, and on the workings of the international trading and financial 'system', but we confine ourselves here to their direct effects.

  • Instead of attempting a summary, we conclude by reverting to our initial suggestion that the social utility of the BWIs has been called into question by the growing discrepancies between the present-day global economy and the world for which they were designed, and ask what kind of arrangements a 'new Bretton Woods' might create.