As an initiative to work out the postwar international economic governance, during 1944,  the Allied forces came together ( US, Britan etc ) and formed what we call today as IMF and World Bank. This union took place in the  New Hampshire resort of Bretton Wood. Hence these organizations are sometimes called Brettonwood institutions.

The purpose of IMF formation is to help nations with the Balance of Payment ( BOP ) crises. BOP comprises of, in financial terms, Capital Acount and Current Accounts. In simple terms, it is the balance sheet of any nation’s in and out, flow of money in any form. Export and import of goods and services, capital assets, Foreign Direct Investments, Shares, Bonds, Forex Transfers, Liabilites, Assets etc.

The purpose behind World Bank is to help the war torn nations with moeny to restructure themselves. Usually World Bank ( WB )  is supposed to help such a nation with infrastructure like, roads, dams and bridges.

According to the korean Economist, Ha-Joon Chang, in his book, “Bad Samaritans” the Brettonwood institutions are taking advantage of the third world and the developing contries. Unlike the WTO ( World Trade Organization ), the WB and IMF are having a one-dollar-one-vote system. This makes more than half of the votes to the Developed nations and they can control the way in which these policies can be set. Post Third world debt crisis of 1982, the bretten wood institutions have spread them selves into various sectors of economy of the developing countries than what is mandated to them.

However, they ( IMF/ WB )  hold a valid argument, that they ( Developing Countries ) have borrowed money from WB / IMF and since they dont have a concrete plan of how to return these investments, they are involving to help them. They have already reached to the unthinkable areas like democracy, corporate governance etc.

Lets hope they are helping …