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Bretton Woods Revisited: The IMF (part 3 of 4)

© Bryan Johnson

(Editors note: This is the third part of a four-part series analyzing the three major international organizations created out of the Bretton Woods agreement in 1944. The first article dealt with the General Agreement on Tariffs and Trade, now known as the World Trade Organization (WTO). This second article dealt with the International Bank for Reconstruction and Development, commonly known as the World Bank. This third article deals with the International Monetary Fund. The fourth article in the series will review the criticism of these organizations from various perspectives, and the justifications given for their continued existence by proponents.)

After World War II, the global economy was rife with high barriers to trade and investment, decimated industries in Europe and Japan, and an exchange rate system where the value of currencies were askew. In 1944, some 24 nations met in Bretton Woods New Hampshire to map out a post-war strategy to revitalize the global economy. In 1947, this agreement forged the creation of three international organizations: the General Agreement on Tariffs and Trade (GATT), the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund.

The International Monetary Fund

Founded in 1944 by the 44 nations that met in Bretton Woods, N.H., the International Monetary Fund is a multilateral organization with 181 member nations. Its original purpose was to maintain the stability of the world monetary system through buying and selling member country currencies on the world market. The IMF also provides a forum through which nations can notify other nations of domestic monetary policy changes that could impact public or private payments from one country to another.

The IMF also functions as an international lender. The Articles of Agreement of the IMF allow it to distribute funds to member nations having difficulty meeting their debts to other nations. These debts accumulate when a country assumes financial obligations beyond its ability to generate foreign exchange through exports and exceeding its foreign exchange reserves. The accounting of this situation is referred to as a country's balance of payments.

Governing Structure. The International Monetary Fund has several governing bodies. These are:

1. The Board of Governors. The Board is the highest decision-making body in the IMF and consists of one governor and alternate for every member nation. The IMF derives it powers from the member nations through the Board of Governors. Each member nation is free to appoint its own representatives. Typically, nations appoint their finance minister or the president of their central bank. The U.S. governor is Robert E. Rubin, Secretary of the Treasury. His alternate is Alan Greenspan, Chairman of the U.S. Federal Reserve.

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