Has the time come for a World Bank President from India?

To the victor, the spoils, as the saying goes. At the end of World War II, there was some confusion about the identity of the winners and losers. Therefore, in the United Nations, defeated Germany and Japan have no place in the P5, the permanent five members of the Security Council with veto powers. The Bretton Woods Agreement of 1944, reached by the Monetary and Financial Committee of the United Nations, established the International Monetary Fund and the International Bank for Reconstruction and Development, later dubbed the World Bank, in addition to creating a system of fixed exchange rates that Rejected competitor. Devaluation of their currencies by countries that wanted to increase their exports. The two agencies also observed similar dominance of the transatlantic alliance in the allocation of shareholding and associated voting rights. Furthermore, it was informally agreed that the United States would nominate the head of the World Bank, while the French would nominate the head of the IMF, although the US has the largest block of votes in both the IMF and the World Bank.

The US is the largest, major shareholder in both institutions. Shareholding has grown in both institutions (the IMF has overhauled 14 quotas), but a US veto could prevent either proposal from passing. The world economy has grown significantly with the rise of China as the second largest economy and India as the fifth largest. Voting rights and shareholding in the Bretton Woods Twins reflect the balance of power of the past rather than the present, although World War I losers Japan and Germany have been allowed out of the doghouse and have greatly expanded their voting rights, and China Third largest quota after US and Japan. India comes 8th with 2.75% quota and voting rights, leaving behind Germany, UK, France and Italy. In the World Bank, Italy is not among the 8 largest shareholders, and India is placed at the 7th position.

The system of fixed exchange rates established at Bretton Woods – gold exchangeable for gold at $35 an ounce, and other currencies pegged to the dollar – collapsed in the early 1970s, when the Nixon administration saw That could lead to a race on US gold reserves, as the world amassed US dollars, which were used to fund the Marshall Plan aid for European recovery, and dollars to buy companies, natural resources and other assets. The general was taken advantage of by American economic agents of global acceptance. Nixon was suspended and then ended the conversion of dollars to gold. Currencies ceased to be tied to the dollar, some floated freely, and others pegged themselves to a basket of currencies, ultimately allowing the demand for and supply of currencies in the market for foreign exchange to lead to determine the value of the currencies. The IMF became important as a lender of last resort when countries ran out of foreign exchange reserves and made their loans conditional on sound policy changes. We must note that the idea of ​​constituting a concrete policy of the Fund also evolved. The World Bank worked with adjustment programs for the real economy to complement macroeconomic policy advice from the IMF.

As the world’s capital markets developed, and cross-border flows became relatively easy since the collapse of the Soviet Union, developing countries could tap global bond markets on their own – in theory. But the World Bank can raise and lend money at cheap rates, and return the money with sound policy advice for their sensible use. Over the seven decades of its existence and operations, the Bank has accumulated, revised and refined diverse development lessons and is a useful repository of development tools and policies that have worked and failed.

It has expanded its operations to create five support systems: it gives zero-cost loans or grants to the poorest countries, it lends money at market-efficient rates to middle-income countries like India, it It co-invests in U.S. companies, guarantees loans for viable projects in poor countries, lowers the cost of capital, and provides arbitration and dispute resolution services for investment disputes. All these actions are aimed at alleviating poverty and enhancing human potential by drawing on and taking forward the right lessons from the development experience of countries around the world.

It is a very useful body especially for the developing countries. The insistence on having a rich world nominee as its chief, instead of allowing a representative from the developing world to take up its leadership, smacks of patriarchy. For an American to retain that role reflects a desire to maintain an age-old balance of global economic power.

It is time for the IMF and the World Bank to come out of the past and boldly embrace the reality of the present. New groupings such as the G20 have emerged to better reflect the current distribution of global economic power and their recommendation to reform voting rights in the Bretton Woods twins should be respected.