The World Bank and International Monetary Fund (IMF) are fraternal twins born of the global economic collapse of the 1930s and sired by the cataclysm of World War II.
In July 1944, with the unconditional defeat of Germany and Japan on the horizon, the UN -- as the global allies called
themselves -- held a monetary and financial conference at the exclusive mountain resort of Bretton Woods in the northeastern state of New Hampshire.
The International Bank for Reconstruction and Development (later redubbed the World Bank) and the IMF were both up and running by the summer of 1946.
To commemorate the 60th anniversary of the New Hampshire meeting, the IMF is co-hosting a conference on Monday and Tuesday in Madrid: Dollars, Debt, and Deficits -- 60 Years After Bretton Woods.
The World Bank was meant to rebuild the developed economies whose physical assets had been wrecked in the war. Issuing bonds guar-anteed by its member governments, the bank was able to raise money from private capital markets for reconstruction loans to the bombed out countries of Europe.
Meanwhile, the IMF was created to revive world trade, lending foreign exchange to cash-strapped post-war economies and using the US dollar secured by gold as the foundation for global commerce.
But both institutions saw their original mandates fade over time.
For the World Bank, Western Europe was largely rebuilt by the late 1950s. At the same time, dozens of new nations emerged in the post-war era as the once-great colonial powers dismantled their empires in Europe and Asia. So the bank's mission shifted to the Third World.
The IMF was able to stay in business by becoming the lender of last resort to help developing countries steer their economies out of the ditch.
It's sometimes described as a good cop-bad cop system: the World Bank aims to build infrastructure and foster development, while the IMF tries to straighten out mismanaged economies.
Traditionally, the World Bank has been headed by an American while a European directs the IMF; former Spanish economy minister Rodrigo Rato just took over the fund this month. British aid group Oxfam, a frequent critic of both institutions, calls the arrangement an outdated "gentlemen's agreement."
Several of the world's richest countries each appoint their own member to the agencies' boards of directors, while 27 African countries share a single director and other poor regions of Latin America and Asia are similarly lumped together. But the management is meant to represent not global population but who picks up the tab.
The policies espoused by the agencies have come under criticism from both wings of the political spectrum.
On the left, many criticize the agencies for loaning money to poor countries that is too often wasted on the wrong projects or lost down the sinkhole of mismanagement and graft.
Often, corrupt or undemocratic regimes have run up huge debts that cripple successor governments, a complaint that has rained down on the World Bank and IMF.
In May, the US Senate heard testimony from one American economist who suggested that at least US$100 billion -- one fifth of all loans in World Bank history -- has been lost to corruption. A bank spokes-man insisted that the allegation had "no basis in fact."
Some critics accuse the IMF in particular of imposing free-market reforms -- such as privatization of state-owned industries -- as a prerequisite for helping countries in desperate need of cash to stave off economic collapse.
From the other side, though, free marketeers accuse both institutions of encouraging government intervention in developing economics where overregulation has discouraged private investment and initiative. IMF demands for budget discipline have often produced steep tax hikes on already-contracting economies, which conventional economic theory suggests would exacerbate a slowdown.
Ed Lotterman, a columnist at the Pioneer Press of St. Paul, Minnesota and former economist for the Minneapolis Federal Reserve Bank who has worked on development projects in Latin America, said that the shift from bombed-out Europe to developing countries left the World Bank continuing to do what it knew how to do.
For years, the bank was neglecting the human capital -- education and health care -- that was underdeveloped in the Third World while overemphasizing the same heavy infrastructure that had been needed in Europe.
"There was this implicit assumption that that's also what Brazil and Zaire needed," Lotterman said. "Well, it's not what they needed."
The institutions have also critiqued themselves.
Vijayendra Rao was one of two World Bank economists who co-edited Culture and Public Action, a book arguing that culture must be considered along with economics when designing anti-poverty and development programs.
"What we're arguing for is a much more participatory dialogue," Rao said. "It should be more listening than telling."
He offered two examples from the book.
During a famine among the Dinka ethnic group of Sudan in 1998, aid workers found that old women were giving their consignments of grain to their clan chiefs. The relief workers perceived it as looting, a case of the elites capturing scarce resources.
But the Dinka were following a redistributive principle of sharing resources equally within the kinship group.
"An anthropologist in the field was telling [the aid workers] these things," Rao said, "and they weren't listening."
Noting the shift by the development agencies from their original mandates, Lotterman suggested that a "Bretton Woods II" meeting to re-evaluate their functions is long overdue.
"Sixty years have passed. Let's explicitly talk about what we should do," he said. "I don't think given the world leadership that's likely to happen, but it would be good."
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure