The International Monetary Fund, or IMF, was born out of the need to have a more open and better regulated financial world after the end of the Second World War. It was widely acknowledged that the economic rivalries and protectionism resulting from the Great Depression had not helped matters in the run-up to the outbreak of war.
With the Allies driving their way through Europe in the summer of 1944, 730 delegates from 44 countries gathered in Bretton Woods, New Hampshire, to discuss how best to go about achieving their aims. The follwoing December, the IMF was born when 29 countries ratified its charter.
The IMF had three main goals: to be a forum for international economic cooperation; to promote sound economic policies among its members; and to provide financial support to members experiencing cash-flow problems, so that regular international trade could function. On 1 March 1947, the IMF got down to work.
The first shock to the Bretton Woods system came in the early 1970s when US president Richard Nixon ended the gold standard in America. Dollars could no longer be converted to gold, and that played havoc with the system of fixed international exchange rates. Countries were now at liberty to choose their own.
The Fund has also had to adapt to the flood of poorer members that wished to join its ranks, starting with the newly independent African nations in the 1950s, right up to former Soviet republics in the wake of the Cold War in the 1990s. That’s not to say ‘old members’ haven’t come knocking. In 1976, Britain embarrassingly applied for a $3.9bn loan in return for deep cuts in spending.
Ironically, for an organisation that was founded to foster global harmony, restructuring and sound economic policy, the IMF appeared to stoke the currency wars by its admission last October that, as The Daily Telegraph reported, “weaker currencies are still an effective tool for economies to grow their way out of trouble”. It rather raises the question: is the IMF still relevant?