the World Bank fulfill their mission. Generally, it will be argued that both the IMF and the World Bank have relatively poor records with respect to ameliorating poverty, fostering development, and promoting equilibrium. Consequently, as any number of critics, including Charles Calomiris (2000) have suggested, reform is long overdue.
Understanding the IMF and the World Bank
The World Bank and the IMF were established at Bretton Woods as part of the post-war international financial architecture. The system was designed to avoid future world wars by ensuring an open international trading system and global financial stability (Einhorn, 2001). At the founding, economist John Maynard Keynes called for an institution that would first focus on post-war reconstruction and, second, on development in poor countries. The Bank was established as what Einhorn (2001) characterizes as the initial impetus for the great post-war experiment of using public loans for economic development.
The IMF was created as the central institution of the international monetary system, or the system of international payments and exchange rates among national currencies that enables business to take place between countries (What is the IMF, 2001). The IMF and the World Bank have been empowered by the governments that control it to impose economic austerity policies in the countries of the Third World or the Global South. Controlling the IMF are the so-called Group of 7, which includes the United States, the United Kingdom, Japan, Germany, France, Canada, and Italy. These seven countries hold over 40 percent of the votes on the boards of both the IMF and the World Bank (World Bank/IMF Fact Sheet, 2001).
In theory, the IMF and the World Bank exist not only to facilitate trade and assist poorer countries in meeting their debt service burden, but also to foster economic development and the creation of infrastructure mechanisms that will ultimately elim...