The World Bank and the International Monetary Fund (IMF) were created at Breton Woods, New Hampshire (USA), in 1944, at a conference of what later became the United Nations. The broad goals of the financial institutions were to promote global trade and, initially the reconstruction of post-war Europe, through simulation of the international flow of ht capital. In the aftermath of Great Depression, as the end of the World War ll approached the main architects of the Breton Woods Agencies, John Maynard Keynes. Harry Dexter White argued that international trade and development could not flourish without themed Aton of multilateral institutions.

Since their funding, the World Bank and IMF have grown in size and influence as independent members of the UN system. Although the Word Bank played a marginal role in the rebuilding o Europe, it soon stated providing verity poor countries and has made more than $ 370 billion in loans to nations around the globe. The IMF for its part has given billions of dollars of aid and advice to many such countries.

Five decades of transferring massive amounts of wealth countries have not however, led to a corresponding transfer of prosperity. As the United Nations reported in 1996: “ Growth has been failing over much of the past 15years in about 100 countries, with 70 of those experiencing difficulty of lower average incomes in 1980 and 43 countries seeing incomes fall below 1970 levels. During the post-World War ll period, economic stagnation, debt accumulation, and decline in production, have afflicted much of the Third World; judged by those measures, the multilateral institutions do not appear to have achieve great success, much less lived up to their single ideal-that happiness be distributed throughout the face so the earth, as one overly enthusiastic founder put it in 1944.”

The World Bank stated as a relatively conservative institution lending under a strict set of criteria intended to support viable investment projects in a world where international capital market was undeveloped. One stipulation for access to credit, for example, was that bank-backed industrial projects be transferred to the private sectored. Unlike the IMF, the bank would lend money specifically to support development projects, particularly infrastructure.

The IMF, on the other hand, was created to ensure exchange rate stability in a world of fixed exchange rates. Thus its main function was to provide sourly-term loans to the World Band’s the IMF aid was aimed at correcting a country’s macro economic policies. Since their inception, the agencies have been financed by government , and have lent only to governments, primatily in the developing world, Government-to-Government transfer s of wealth were inspired by the belief than the private sector could no trine economic progress to developing countries sand the  poor countries were poor because they lacked capital. Developed planning, often modeled father Soviet-style five year plans, was actively encouraged by western advocates of aid. In 1950, the World Bank itself stated, “The Bank would prefer to base its financing on a national development programmed, provided the tit is properly worked out in terms of project by with the objective so the programmed are to be attuned.”

In 1960s, the World Bank began significantly expanding its activities. In 1960, for example, it created the International Development Association, a branch than provided highly confessional credits to the rose’s poorest countries. In 1968, Robert McNamara becomes President of the Bank. His Zeal to increase aid flows led to a 13-fold rise in bank lending by the time he left office in 1981.

During the 1970s,when the international system of fixed exchanges collapsed, and the official mission of the IMF came to an end, instead of closing down, it doubled its lending form 1970 to 1975 , and has been funding new missions for itself ever since. Since the 1970s the Fund has created a series of lending facilities designed to provide credit on terms even more lenient than those of previous programmers.

A serious problem plagues the Would Bank and the IMF. They provide financing to countries whose economic policies are inimical to growth. The regimes that impose an extensive range of harmful measures-price controls, capital controls, trade protectionism, state-run agricultural marketing boards. Byzantine licensing schemes and nationalization of industries-receive generous subsidies form the multilaterals. Under such condition s no amount of aid can lead to self-sustaining economic growth. The IMF has sometimes discontinued credit to courtiers than blatantly disregarded their agreements, and its recipient governments sometimes introduce policy changes sides create the appease rather that the reality of living up to their responsibilities. Cases in which IMF costs the recipient off, it usually resumes lending after receiving feather promise than more credit will product real reforms.

By 1980s, during the height of the Third World debt crisis, it becomes clear that the developing countries needed to reform their economies. The 33 most indebted countries and accumulated a debt of more than half a trillion dollars. Obviously lack of capital was not a problem for poor courts. The World Bank and the IMF moved to “help” countries resolved their crises by providing more credit based on more conditionality. The bank stepped up its structural adjustment lending programs. Initiated in 1980, but were intended to induce macroeconomic policy changes in highly indebted recipient nations. Many observers then noticed that the Bank’s functions now overlapped those of the IMF. That caused some critics to question the need for two multilateral institutions. For many, the Bank’s policy-based lending has been ineffective because of its own institutional incentive. The Bank like the IMF, cannot afford to allow countries to reform without its intervention, numerous studies have found the economic growth is related to other factors than investment. Two economists tracked the level of economic freedom in 102 countries form 1975 to 1995. The authors examined 17 variables ranging from inflation variability to onenesses of the economy in each country as an empirical measure of economic freedom. They found that “increases uneconomic freedom and the maintained of a high-level of freedom will positively influence growth” and that countries “that achieve and sustain high levels of economic freedom over a long period o time will tend to be high income counties. “

According to the two economists, “the World Bank and the IMF nevertheless continue to view themselves as essential to international development. From a bureaucratic perspective, such an attitude of self-importance is to be expected.” Both institutions have been successful t greeting changes in international conditions as opportuilitis to expand the roles I the world economy. Thecolapse of the Soviet communism, in the world economy. The collapse of he Soviet communism, for example, provided the agencies with a numbed new clients. This was used to justify increasing the IMF resource by 50 percept in 1992. In recent years, the Bank and the IMF have received record lending rates. This pattern has occurred despite the fact at official aid flows to ht redeveloping world are now dwarfed by private capital flows. About $ 240 billion went to poor countries in 1996-more than four times the amount disbursed by all officials and agencies. Most of the have done the most to reform their economies.