3. Critically evaluate the debates surrounding the continuity of Bretton Woods’s institutions. Which of these institutions would you recommend to be discontinued? Justify your choice.
While preparing to rebuild the international economic system after WWII, 730 delegates of the 44 allied nations met in New Hampshire, United States, to form the Bretton Woods agreement. The aim was to set up rules and regulations to stabilize the global monetary system and ensure the free movement of capital goods through a global market. The agreement established two regulatory institutions, firstly the International Monetary Fund (IMF) to control the exchange rates and bridge temporary imbalances of payment. Secondly, the International Bank of…show more content… Furthermore, critics say; “the IMF frequently argues for the same economic policies regardless of the situation.” (Pettinger, 2008) The IMF blindly imposed the same “conditionality’s” to all its loans. What policies might have worked for one country might make matters even worse in others.
The Argentinean financial crisis (1999-2002), underlines that the policies imposed by the IMF can lead a country into a severe recession. The IMF convinced the Argentinean government to maintain its fixed rate of exchange: one peso for one U.S. dollar. This made imports artificially cheap but exports too expensive. Consequently, Argentina had a severe trade deficit. Secondly, in order to maintain the overvalued currency, a country needs large reserve of dollars. The IMF lent $40 billion to support the Argentina peso, enhancing the debt of the country. On top the IMF made its loans conditional to a „zero deficit“ policy. „Argentina's implosion has the IMF's fingerprints all over it.“ (Weisbrot, 2001) However the IMF has also been the last opportunity for many countries to avoid a default. Most currently, the IMF has given Greece a 1.6 billion euro loan, to keep the Greek economy floating, and stabilize the euro zone.
Another criticism of the IMF is that decisions made on which countries have the right to borrow money are made by a handful of nations who have the main rights. Out of the 24 board members in the IMF, only 10 are occupied by