"The Bretton Woods Institutions" is an umbrella term that may sound familiar. It refers to a diverse group of actors on the international financial scene: the World Bank, the International Monetary Fund, the World Trade Organization, and the numerous Regional Development Banks. The Bretton Woods Institutions, or International Financial Institutions (IFIs) work together to create a comprehensive network of resources and regulators. Through the IFIs, trade is fostered around the world, development projects are pursued, and the international financial system as we know it is debated and discussed by nations and private interests.

International Financial Institutions regulate much of the world's trade and development and, in this eminent position, greatly influence modern international relations. They cannot, however, perform their functions without contributions from member countries, among which the US is the largest. The member country contributions are used to support IFIs' work around the world, primarily in the form of loans and credits. The International Financial Institutions regularly mandate trade liberalization and economic austerity measures as conditions of their loans, which is called conditionality. Although you and I would not be able to take out a loan for a house or car without facing loan conditions, the practice of conditionality is viewed as political and has become an increasingly contested issue. This is because IFIs can ask a nation to make large changes (in its internal programs allocations or its trade regulations, for example) that some say violate its sovereignty as an independent country.

The IFIs face criticism, but there are also those who see the Institutions' system of regulation and aid as the key to reducing global poverty and making the financial world into a safer, steadier place. They argue that IFIs work with struggling nations raises the quality of life for ordinary people, and also reduces the attraction of desperate terrorist activities.

International Financial Institutions regulate much of the world's trade and development and, in this eminent position, greatly influence modern international relations.

The Bretton Woods Committee is a group of informed private citizens who promote IFI interests and policies in the United States. The Committee was created two decades ago by a number of opinion makers and business leaders for the purpose of supporting IFIs. Many Bretton Woods Committee members have real reason to be knowledgeable about international trade and finances—they are economists, educators, financiers, and CEOs, as well as lawmakers and heads of state, both former and future.

The membership roster is several hundred strong and includes some of the most powerful figures in US government. Dick Cheney, Donald Rumsfeld, and Condoleezza Rice once participated in the Committee and may resume their association once their terms in public office end. The former presidents George Bush Sr., Jimmy Carter, and Gerald Ford serve as honorary co-chairs. More than thirty former cabinet members, including all the past Secretaries of State and Treasury living during the Committee's existence, have been members.

The Bretton Woods Committee put their heads together to advise the IFIs, but their main mandate is to educate US decision makers about the group of institutions that it takes its name from and to join the debate centering on multilateral trade and globalization.

What Are the Bretton Woods Institutions?

The present day international economic system has its roots in a small New Hampshire town. In June of 1944, representatives of the Allied Nations met in Bretton Woods, NH, for the United Nations Monetary and Financial Conference. Here, they began planning for post-war reconstruction, though WWII combat would not end for another year. The conference lasted for twenty-two days. By the time it ended the groundwork had been laid for a number of programs intended to encourage and regulate international trade in order to avoid the economic pitfalls that had led to the depression of the 1930s. Among the plans ratified by the participants were those for the creation of three central international financial institutions - the International Bank for Reconstruction and Development (a part of today's World Bank), the International Monetary Fund, and after a time, the World Trade Organization.

These International Financial Institutions establish an international system for development and trade, and while they operate in diverse ways, they all work on the principals that free trade will hasten development.

The IFIs were founded by the delegates in Bretton Woods with the purpose of leading the world toward a well-ordered international economic system. They began their work by rebuilding industrial sectors leveled by the war, lowering trade and investment barriers, and recalibrating international currency valuation.

The Bretton Woods Institutions are largely credited for the expansion of the global economy during these difficult postwar years and were essential architects of the current international economic system. They are not banks or organizations in the traditional sense. They are, as the World Bank's website explains, international organizations owned by their member countries. These organizations provide an infrastructure for policy makers, monetary authorities and financial market actors to cooperate on market stability issues. They open space for dialog and debate about issues on the global table and provide resources and advice to nations and financial interests all over the world. As such, they are an integral part of national and international structures worldwide.

The International Bank for Reconstruction and Development and the World Bank Group

The International Bank for Reconstruction and Development (IBRD) is still in existence, though the larger institution of the World Bank has grown up around it. The IBRD was created with the express purpose of lending money and providing development assistance to Japan and the nations of Europe to aid in their recovery efforts. Once the reconstruction efforts were finished, the institution refocused and currently does most of its lending to the governments of poor countries to enable development projects.

The initial funds for the World Bank came from its member countries, which put up preliminary money to serve as a guarantee for the bank to borrow against in international financial markets. The World Bank explains on its web site that it now raises its funding by "tapping the world's capital markets, and, in the case of the International Development Assistance, through contributions from wealthier member governments."

The International Development Association (IDA) is a part of the World Bank that was established in 1960. It gives assistance to countries that are too poor to take out a loan from IBRD funding. The IDA and IBRD together constitute the World Bank, which has 184 member states. The World Bank offers long-term loans to developing countries at low rates, funding social and infrastructure programs. To further add to the complexity of the institution, when these two are associated with three more institutions, they are referred to all together as the World Bank Group.

The other Group members are the International Finance Corporation (IFC), established to provide loan guarantees and subsidized loans to businesses in less developed countries, the Multilateral Investment Guarantee Agency (MIGA), which removes some risk for investors who put their money into poor countries, and the International Centre for Settlement of Investment Disputes (ICSID), which promotes increased international investment in unlikely areas.

The International Monetary Fund

The World Bank Group and the IMF often face blanket accusations of doing more harm than good. The Bretton Woods Committee educates decision makers about the details of IFI roles and functions.

The International Monetary Fund (IMF) is also a multilateral lending institution, but with a focus on the macroeconomic policies of its 184 member states. Its funding comes from interest on loans as well as contributions from its member countries. The IMF monitors the world's currencies, exchange rates, rates of inflation and budget deficits, and also loans money to stabilize the international financial situation.

Though both are large lenders, the World Bank and the IMF are distinct institutions with distinct mandates and rules. While the former provides lending, aid, and technical support to developing countries, the loans of the latter exist primarily to stabilize the international monetary system and can be taken out by both developing and developed countries. Unlike the 15-35 year loans extended by the World Bank, IMF loans are short-term, 3.5-5 years. The IMF often distributes funds to member nations having difficulties meeting their debts to other nations, or to the World Bank, at near-market rates, while the World Bank loans have rates which are lower than market rates, sometimes without any interest at all.

There is a reason that there are the same amount of member states in both the World Bank and the IMF: in order to receive money from the World Bank, a country must be a member of the IMF. Both institutions require that any country they extend a loan to must agree to strict conditions.

The World Trade Organization

Although the World Trade Organization (WTO) was conceived at the Bretton Woods Conference, the plan was not put into action for many years due to dissention from the United States Congress. Instead, a framework called the General Agreement on Tariffs and Trade (GATT) was used until 1995 when there was enough agreement between major economic powers on trade issues to finally create the present-day World Trade Organization.

The modern WTO establishes and enforces agreed upon rules of trade between nations in an effort to promote a multilateral trading system where trade is smooth, predictable, and largely unfettered by tariffs. It has 149 member states, a number which includes most of the trading nations in the world. Unlike the GATT, the WTO deals with trade in services as well as goods.

Regional Development Banks

There are four Regional Development Banks around the world, which cover the territories of Africa, Asia, Europe, and the Americas. They work with developing nations to provide financial support and professional advice for economic and social development in specific regions. They are often associated with the World Bank Group.

IFIs Under Fire

These International Financial Institutions establish an international system for development and trade. While they operate in diverse ways, they all work on the principal that free trade will hasten development.

Their position has been widely questioned by anti-globalization activists and fair trade supporters. Among critiques are assertions that the IFIs infringe on the sovereignty of their less powerful member states. Some also allege that IFIs support corporate interests over human ones, and that, under current rules, multinational corporations are given too much scope to move their operations and direct investment freely from country to country, looking primarily for the best rates of return and not concerning themselves with the turmoil they leave in their wake. The World Bank Group and the IMF are often accused of doing more harm than good and hindering economic progress with the rules and conditions that they impose along with their loans.

Despite the many detractors of the international financial framework provided by the IFIs, these institutions remain the driving force behind the expansion of the global economy. The Bretton Woods Committee has taken on the role of advocating for better institutions as well as educating those who are debating the future of the IFIs.

Committee in Action

For two decades, the Bretton Woods Committee has been monitoring the activities of the International Financial Institutions as well as trends of international economic development. The Committee offers its input by providing issue briefs, organizing workshops and events, and formulating proposals for the US government and for the institutions themselves.

The Bretton Woods Committee is a non-profit organization comprised of private US citizens and is a uniformly strong advocate of trade liberalization. The Committee advocates policies that open economies to trade and investment with the rest of the world as measures to bring about sustained economic growth to assist with humanitarian needs and to protect US interests.

The Bretton Woods Committee is a bipartisan, non-profit group organized to build public understanding of international financial and development issues and the role of the Bretton Woods institutions-- the World Bank, the International Monetary Fund, the World Trade Organization and the regional development banks-- in the global economy.

The Committee asserts that working closely with IFIs is commensurate with US interests in economic prosperity, national security, and worldwide humanitarian action. General Colon Powell, former US Secretary of State, asserts that "America's prosperity and well-being are linked ever more closely to expanding growth and stability worldwide." He supports the Committee, going on to say that the US's continued strong involvement in the IMF, World Bank, and WTO is crucial to America's future, and the world's.

The Bretton Woods Committee is forward-thinking in its approach to private sector leadership and wants to increase the presence of non-government affiliated voices in IFIs. Recently, the US-based and US-focused Committee added an International Council to its roster, reflecting the nature of the IFIs themselves.

Bill Early, the founder of Global Envision, recently joined the list of the involved citizens on the Bretton Woods Committee. His active involvement in the arena of international financial systems and worldwide problem-solving institutions makes him an excellent addition to the Committee's membership.

Washington, D.C. is alive with debates about the role and actions of the Bretton Woods Institutions. The Bretton Woods Committee is devoted to giving lawmakers and private citizens access to transparent information about foreign assistance and multilateral economic engagement. Educating supporters and opponents alike is one of the best things that they can do for their cause— and staying informed is never a bad idea.






Contributed by Beth Reddy. She has a BA in Anthropology from Reed College. She is a Global Envision intern.

To read another Global Envision article about International Finance Institutions, see Fate of the Farmers in Balance.



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