No champagne corks are popping to celebrate the golden anniversaries of the World Bank and the International Monetary dTC Fund. These two global financial institutions, created by World War II allies at Bretton Woods, N.H., 50 years ago, are under attack from left and right, from environmentalists and libertarians, from economists with conflicting ideologies who nevertheless see the power of private financial markets overwhelming these government-supported behemoths.
Consider, first, the International Monetary Fund. At its inception, it was commissioned to enforce the Bretton Woods system of fixed exchange rates -- an unworkable scheme mercifully buried by President Nixon in 1971. Since then it has been funneling billions to support the currencies of governments in dire financial straits. To insure repayment of its loans, it has insisted on austerity programs that fragile governments would not dare to impose themselves. The result is that IMF is almost universally detested in countries it has helped most, especially by the poor who blame the fund for high unemployment and high taxes.
If anything, the World Bank is even more unpopular. Long associated with massive development projects -- dams, highways, power plants -- that have ripped into the environment of recipient societies, World Bank president Lewis Preston now admits his institution has made monumental mistakes in the past. By putting 200 environmental specialists on the staff (up from only threee a decade ago) and by promising to funnel more into human resources, the education of women, health and worker retraining, as well as to poverty-stricken South Asia and Sub-Saharan Africa, the World Bank hopes to stave off vehement criticism from an ad hoc coalition called "Fifty Years is Enough." Its belated effort will probably fail. Today, the construction of a quarter-billion-dollar new headquarters in downtown Washington attests to the aloofness of a huge, secretive 11,000-member bureaucracy accustomed to large, tax-free salaries.
The IMF, under the aggressive leadership of Michel Camdessus, is seeking to justify its existence by spearheading efforts to help the former Soviet states create market economies and scramble back from financial free-fall. A more fundamental challenge to the IMF is to re-establish its relevance in a world where the private financial markets are taking over as the main source of capital for middle-income nations in Latin America and East Asia.
If the World Bank and the IMF are to play a positive role in the post-Cold War era, they would be well advised not only to acknowledge but to act on criticism of their past insensitivity to the needs of the poor and the destruction of the environment. If governments -- principally the United States -- lose faith in these institutions, their second half-century will not be a happy one.