At the end of World War II, several international institutions were created to manage the world economy and prevent another Great Depression. These institutions include the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (now called the World Bank), and the General Agreement on Tariffs and Trade (GATT), which was later, expanded and institutionalised in the World Trade Organization (WTO) in 1995. The IMF and the World Bank are the two dominant governance institutions in the world. .
The traditional belief in international and comparative political economy has held that international institutions, like the IMF, World Bank, and WTO, have been largely beneficial for the countries in them. It is claimed that these institutions constrain the behaviour of the most powerful countries and provide information and monitoring capacities that enable states to cooperate (Lamb 2007, p. 31). However, recent evidence has turned out that these institutions may not be as beneficial for developing countries. To examine this issue, this paper will address 2 key research questions: Would developing countries have been better off if the IMF and the World Bank had not existed? And why have the IMF and the World Bank failed to produce as many benefits for the developing world as they imply to do so? This paper will argue that the programs imposed by the two largest financial institutions, the IMF and the World Bank, have only increased negative economic, political, and social outcomes for developing countries. .
Before examining the negative impacts the IMF and the World Bank have had on developing countries, it is important to note the role of both these financial institutions and what differentiates the two. Initially, the role of the IMF was to aid countries that were experiencing difficulties in maintaining their fixed exchange rate by providing them with short-term loans (Griesgraber 2009, p.
