The Bretton Woods Institutions were two institutions created after the meeting of delegates from 43 countries in New Hampshire, U.S.A. The delegates agreed to the formation of the World Bank and the International Monetary Fund (IMF) to help rebuild the post war shattered world economy (Gartner, 2013). The delegates saw the need to promote international cooperation in dealing with the global financial systems. Furthermore, the delegates saw the need to create an international financial order based on consensual decision making and mutual cooperation between the member countries. In order to avoid the aftermath of the global recession and the trade disagreements, there was a need for the allied states to establish a multilateral framework of trade agreements (Mikesell, 2000). Due to the important role played by the financial systems, the global economic interaction was needed to help secure peace and stability. This would allow people from various places to realize their potential in peace due to the stable business environment created by the IMF and the World Bank. The mandate of these two institutions would be to harmonize divergent monetary policies and maintain exchange rate stability (Eun & Resnick, 2014). Furthermore, these two institutions were also tasked with the responsibility of providing temporal financial assistance to the needy countries and lending money to improve the capacity of individual countries to trade.
Despite their impressive performance in the past, the functionality of the Bretton Woods institutions is currently threatened. Bretton Woods institutions began feeling the challenges during the cold war as countries began differing on the rules governing international trade. Currently, the functionality of Breton Woods institutions is also being challenged by the power struggle over the ownership structure of the institutions (Mikesell, 2000). Particularly, the United States and China seem to differ on the direction to be taken by the two institutions in dealing with international trade. On the same note, countries such as Russia, Brazil, and India, and South Africa seems to be more concerned with solving their own economic problems as opposed to supporting vibrant international policy. Therefore, the ability of the Bretton Woods to continue serving their purpose is highly threatened.
Eun, C.S., & Resnick, B.G. (2014). International financial management (7th ed.). New York, NY: McGraw-Hill ISBN-13: 9780077861605
Gartner, D. (2013). Uncovering Bretton Woods: Conditional Transparency, The World Bank, and The International Monetary Fund. The George Washington International Law Review, 45(1), 121-148.
Mikesell, R. F. (2000). Bretton woods–original intentions and current problems. Contemporary Economic Policy, 18(4), 404-414.