BRETTON WOODS INSTITUITONS

Evolution:

The Bretton Woods Institutions are the World Bank, and the International Monetary Fund (IMF).
They were set up at a meeting of 43 countries in Bretton Woods, New Hampshire, USA in July
1944. Their aims were to help rebuild the shattered postwar economy and to promote
international economic cooperation. The original Bretton Woods agreement also included plans
for an International Trade Organization (ITO) but these lay dormant until the World Trade
Organization (WTO) was created in the early 1990s.
The creation of the World Bank and the IMF came at the end of the Second World War. They
were based on the ideas of a trio of key experts - US Treasury Secretary Henry Morganthau, his
chief economic advisor Harry Dexter White, and British economist John Maynard Keynes. They
wanted to establish a postwar economic order based on notions of consensual decision-making
and cooperation in the realm of trade and economic relations. It was felt by leaders of the Allied
countries, particularly the US and Britain, that a multilateral framework was needed to overcome
the destabilizing effects of the previous global economic depression and trade battles.

The IMF would create a stable climate for international trade by harmonising its members'
monetary policies, and maintaining exchange stability. It would be able to provide temporary
financial assistance to countries encountering difficulties with their balance of payments. The
World Bank, on the other hand, would serve to improve the capacity of countries to trade by
lending money to war-ravaged and impoverished countries for reconstruction and development
projects.

Four points defined the Bretton Woods system:

 The pegged rate currency regime, a compromise between freely floating and irrevocably
fixed exchange rates.
 A system for ensuring an adequate supply of monetary reserves.
 A ban on most discriminatory currency practices or exchange regulation, to avoid the
kind of economic warfare that had characterized the 1930s.
 A forum for international cooperation on monetary matters.
 IMF

Purposes
At Bretton Woods the international community assigned to the World Bank the aims implied in
its formal name, the International Bank for Reconstruction and Development (IBRD), giving it
primary responsibility for financing economic development. The Bank's first loans were
extended during the late 1940s to finance the reconstruction of the war-ravaged economies of
Western Europe. When these nations recovered some measure of economic self-sufficiency,
the Bank turned its attention to assisting the world's poorer nations, known as developing
countries, to which it has since the 1940s loaned more than $330 billion. The World Bank has
one central purpose: to promote economic and social progress in developing countries by
helping to raise productivity so that their people may live a better and fuller life. The international
community assigned to the IMF a different purpose. In establishing the IMF, the world
community was reacting to the unresolved financial problems instrumental in initiating and
protracting the Great Depression of the 1930s: sudden, unpredictable variations in the
exchange values of national currencies and a widespread disinclination among governments to
allow their national currency to be exchanged for foreign currency. Set up as a voluntary and
cooperative institution, the IMF attracts to its membership nations that are prepared, in a spirit of
enlightened self-interest, to relinquish some measure of national sovereignty by abjuring
practices injurious to the economic well-being of their fellow member nations. The rules of the
institution, contained in the IMF's Articles of Agreement signed by all members, constitute a
code of conduct. The code is simple: it requires members to allow their currency to be
exchanged for foreign currencies freely and without restriction, to keep the IMF informed of
changes they contemplate in financial and monetary policies that will affect fellow members'
economies, and, to the extent possible, to modify these policies on the advice of the IMF to
accommodate the needs of the entire membership. To help nations abide by the code of
conduct, the IMF administers a pool of money from which members can borrow when they are
in trouble. The IMF is not, however, primarily a lending institution as is the Bank. It is first and
foremost an overseer of its members' monetary and exchange rate policies and a guardian of
the code of conduct. Philosophically committed to the orderly and stable growth of the world
economy, the IMF is an enemy of surprise. It receives frequent reports on members' economic
policies and prospects, which it debates, comments on, and communicates to the entire
membership so that other members may respond in full knowledge of the facts and a clear
understanding of how their own domestic policies may affect other countries. The IMF is
convinced that a fundamental condition for international prosperity is an orderly monetary
system that will encourage trade, create jobs, expand economic activity, and raise living
standards throughout the world. By its constitution the IMF is required to oversee and maintain
this system, no more and no less.

Size and Structure

The IMF is small (about 2,300 staff members) and, unlike the World Bank, has no affiliates or
subsidiaries. Most of its staff members work at headquarters in Washington, D.C., although
three small offices are maintained in Paris, Geneva, and at the United Nations in New York. Its
professional staff members are for the most part economists and financial experts.
The structure of the Bank is somewhat more complex. The World Bank itself comprises two
major organizations: the International Bank for Reconstruction and Development and the
International Development Association (IDA). Moreover, associated with, but legally and
financially separate from the World Bank are the International Finance Corporation, which
mobilizes funding for private enterprises in developing countries, the International Center for
Settlement of Investment Disputes, and the Multilateral Guarantee Agency. With over 7,000
staff members, the World Bank Group is about three times as large as the IMF, and maintains
about 40 offices throughout the world, although 95 percent of its staff work at its Washington,
D.C., headquarters. The Bank employs a staff with an astonishing range of expertise:
economists, engineers, urban planners, agronomists, statisticians, lawyers, portfolio managers,
loan officers, project appraisers, as well as experts in telecommunications, water supply and
sewerage, transportation, education, energy, rural development, population and health care,
and other disciplines.

Source of Funding

The World Bank is an investment bank, intermediating between investors and recipients,
borrowing from the one and lending to the other. Its owners are the governments of its 180
member nations with equity shares in the Bank, which were valued at about $176 billion in June
1995. The IBRD obtains most of the funds it lends to finance development by market borrowing
through the issue of bonds (which carry an AAA rating because repayment is guaranteed by
member governments) to individuals and private institutions in more than 100 countries. Its
concessional loan associate, IDA, is largely financed by grants from donor nations. The Bank is
a major borrower in the world's capital markets and the largest nonresident borrower in virtually
all countries where its issues are sold. It also borrows money by selling bonds and notes directly
to governments, their agencies, and central banks. The proceeds of these bond sales are lent in
turn to developing countries at affordable rates of interest to help finance projects and policy
reform programs that give promise of success.
Despite Lord Keynes's profession of confusion, the IMF is not a bank and does not intermediate
between investors and recipients. Nevertheless, it has at its disposal significant resources,
presently valued at over $215 billion. These resources come from quota subscriptions, or
membership fees, paid in by the IMF's 182 member countries. Each member contributes to this
pool of resources a certain amount of money proportionate to its economic size and strength
(richer countries pay more, poorer less). While the Bank borrows and lends, the IMF is more like
a credit union whose members have access to a common pool of resources (the sum total of
their individual contributions) to assist them in times of need. Although under special and highly
restrictive circumstances the IMF borrows from official entities (but not from private markets), it
relies principally on its quota subscriptions to finance its operations. The adequacy of these
resources is reviewed every five years.

IMF Operations

The IMF has gone through two distinct phases in its 50-year history. During the first phase,
ending in 1973, the IMF oversaw the adoption of general convertibility among the major
currencies, supervised a system of fixed exchange rates tied to the value of gold, and provided
short-term financing to countries in need of a quick infusion of foreign exchange to keep their
currencies at par value or to adjust to changing economic circumstances. Difficulties
encountered in maintaining a system of fixed exchange rates gave rise to unstable monetary
and financial conditions throughout the world and led the international community to reconsider
how the IMF could most effectively function in a regime of flexible exchange rates. After five
years of analysis and negotiation (1973-78), the IMF's second phase began with the
amendment of its constitution in 1978, broadening its functions to enable it to grapple with the
challenges that have arisen since the collapse of the par value system. These functions are
three.
First, the IMF continues to urge its members to allow their national currencies to be exchanged
without restriction for the currencies of other member countries. As of May 1996, 115 members
had agreed to full convertibility of their national currencies. Second, in place of monitoring
members' compliance with their obligations in a fixed exchange system, the IMF supervises
economic policies that influence their balance of payments in the presently legalized flexible
exchange rate environment. This supervision provides opportunities for an early warning of any
exchange rate or balance of payments problem. In this, the IMF's role is principally advisory. It
confers at regular intervals (usually once a year) with its members, analyzing their economic
positions and apprising them of actual or potential problems arising from their policies, and
keeps the entire membership informed of these developments. Third, the IMF continues to
provide short- and medium-term financial assistance to member nations that run into temporary
balance of payments difficulties. The financial assistance usually involves the provision by the
IMF of convertible currencies to augment the afflicted member's dwindling foreign exchange
reserves, but only in return for the government's promise to reform the economic policies that
caused the balance of payments problem in the first place. The IMF sees its financial role in
these cases not as subsidizing further deficits but as easing a country's painful transition to
living within its means.

How in practice does the IMF assist its members? The key opening the door to IMF assistance
is the member's balance of payments, the tally of its payments and receipts with other nations.
Foreign payments should be in rough balance: a country ideally should take in just about what it
pays out. When financial problems cause the price of a member's currency and the price of its
goods to fall out of line, balance of payments difficulties are sure to follow. If this happens, the
member country may, by virtue of the Articles of Agreement, apply to the IMF for assistance.
To illustrate, let us take the example of a small country whose economy is based on agriculture.
For convenience in trade, the government of such a country generally pegs the domestic
currency to a convertible currency: so many units of domestic money to a U.S. dollar or French
franc. Unless the exchange rate is adjusted from time to time to take account of changes in
relative prices, the domestic currency will tend to become overvalued, with an exchange rate,
say, of one unit of domestic currency to one U.S. dollar, when relative prices might suggest that
two units to one dollar is more realistic. Governments, however, often succumb to the
temptation to tolerate overvaluation, because an overvalued currency makes imports cheaper
than they would be if the currency were correctly priced.

The other side of the coin, unfortunately, is that overvaluation makes the country's exports more
expensive and hence less attractive to foreign buyers. If the currency is thus overvalued, the
country will eventually experience a fall-off in export earnings (exports are too expensive) and a
rise in import expenditures (imports are apparently cheap and are bought on credit). In effect,
the country is earning less, spending more, and going into debt, a predicament as unsustainable
for a country as it is for any of us. Moreover, this situation is usually attended by a host of other
economic ills for the country. Finding a diminished market for their export crops and receiving
low prices from the government marketing board for produce consumed domestically, farmers
either resort to illegal black market exports or lose the incentive to produce. Many of them
abandon the farm to seek employment in overcrowded cities, where they become part of larger
social and economic problems. Declining domestic agricultural productivity forces the
government to use scarce foreign exchange reserves (scarce because export earnings are
down) to buy food from abroad. The balance of payments becomes dangerously distorted.
As an IMF member, a country finding itself in this bind can turn to the IMF for consultative and
financial assistance.

In a collaborative effort, the country and the IMF can attempt to root out the causes of the
payments imbalance by working out a comprehensive program that, depending on the
particulars of the case, might include raising producer prices paid to farmers so as to encourage
agricultural production and reverse migration to the cities, lowering interest rates to expand the
supply of credit, and adjusting the currency to reflect the level of world prices, thereby
discouraging imports and raising the competitiveness of exports.
Because reorganizing the economy to implement these reforms is disruptive and not without
cost, the IMF will lend money to subsidize policy reforms during the period of transition. To
ensure that this money is put to the most productive uses, the IMF closely monitors the
country's economic progress during this time, providing technical assistance and further
consultative services as needed.

In addition to assisting its members in this way, the IMF also helps by providing technical
assistance in organizing central banks, establishing and reforming tax systems, and setting up
agencies to gather and publish economic statistics. The IMF is also authorized to issue a
special type of money, called the SDR, to provide its members with additional liquidity. Known
technically as a fiduciary asset, the SDR can be retained by members as part of their monetary
reserves or be used in place of national currencies in transactions with other members. To date
the IMF has issued slightly over 21.4 billion SDRs, presently valued at about U.S. $30 billion.
Over the past few years, in response to an emerging interest by the world community to return
to a more stable system of exchange rates that would reduce the present fluctuations in the
values of currencies, the IMF has been strengthening its supervision of members' economic
policies. Provisions exist in its Articles of Agreement that would allow the IMF to adopt a more
active role, should the world community decide on stricter management of flexible exchange
rates or even on a return to some system of stable exchange rates.

Measuring the success of the IMF's operations over the years is not easy, for much of the IMF's
work consists in averting financial crises or in preventing their becoming worse. Most observers
feel that merely to have contained the debt crisis of the 1980s, which posed the risk of collapse
in the world's financial system, must be counted a success for the IMF. The Fund has also
gained some recognition for assisting in setting up market-based economies in the countries of
the former Soviet Union and for responding swiftly to the Mexican peso crisis in 1994, but its
main contribution lies in its unobrusive, day-to-day encouragement of confidence in the
international system. Nowhere will you find a bridge or a hospital built by the IMF, but the next
time you buy a Japanese camera or drive a foreign car, or without difficulty exchange dollars or
pounds for another currency while on holiday, you will be benefiting from the vast increase in
foreign trade over the past 50 years and the widespread currency convertibility that would have
been unimaginable without the world monetary system that the IMF was created to maintain.

Reforms in IMF

 An initial ad hoc increase in quotas for the most underrepresented members: China,
Korea, Mexico, and Turkey;
 A new quota formula to guide the assessment of the adequacy of members' quotas in the
IMF;
 A second round of ad hoc quota increases based on the new formula;
  An increase in the basic votes that each member possesses to ensure adequate voice for
LICs, as well as protection of the share of the basic votes in total voting power going
forward; and
 Allocating additional resources for the two Executive Directors representing African
members, as their constituencies comprise a fairly large number of countries.

World Bank

Purposes

Growing needs and external expectations, rapid changes in its environment and a governance
structure that inhibits a more sharply focused strategic agenda have naturally led to mission
ambiguity and goal congestion.
Officially, poverty reduction is-as constantly emphasized by the Bank's official statements-the
fundamental purpose of the institution. But the very different ways through which this goal was
pursued over the years, the growing diversification of the Bank's more operational priorities, and
the highly political nature of the agenda-setting process, have eroded the usefulness of poverty
alleviation as the anchor providing a solid grounding against the strong pressures for
diversification. AS a result, while knowing that poverty alleviation is the official line, Bank staff
holds as diverse views as those outside the institution of what in reality the Bank's mission is-
and ought to be.
The Bank's charter, drafted in 1944 and called "Articles of Agreement," defines five purposes for
the institution but does little to clarify the goals. Three purposes provide some general strategic
direction and two have a more operational orientation. According to the Articles of Agreement,
the three strategic purposes of the Bank are:
1) To help member states to reconstruct and develop by facilitating capital investment;
2) To promote foreign private investment, and
3) To promote the long-range balanced growth of international trade and the maintenance of
equilibrium in balances of payments.
This should be achieved by encouraging international investment aimed at mobilizing domestic
resources and thus "…raising productivity, the standard of living and conditions of labor." The
other two, more operational, mandates in the Articles emphasize the need to coordinate with
other lending agencies and the need "to conduct its operations with due regard to the effect of
international investments to business conditions…"

Size and Structure

A diverse staff of more than 10,000 employees from over 160 countries works at the World
Bank. Two-thirds of them are based in Washington, DC, while the remaining third are at work in
more than 100 country offices in the developing world. There are economists, educators,
environmental scientists, financial analysts, and managers, as well as foresters, agronomists,
engineers, information technology specialists and social scientists, to name a few. They apply
their skills and the Bank's resources to bridge the economic divide between poor and rich
countries, to turn rich country resources into poor country growth and to achieve sustainable
poverty reduction.

Sources of funding

The World Bank acknowledges the importance of the engagement of civil society in
development. There are several facilities or programs that provide grants to civil society
organizations (CSOs).
There are a wide variety of funding sources that offer support for development projects
managed by civil society organizations (CSOs).  These can come from various donor agencies,
from CSOs and also from the World Bank.
The World Bank manages several types of funding mechanisms geared to providing funding
directly to CSOs.  Most of these funding mechanisms are managed out of World Bank's
Headquarters, although some of these are also administered at many of the Bank's country
offices. 
Many of these mechanisms are funded in partnership with other government donor agencies,
such as the UN and bilateral agencies (e.g. UNPD, DFID, and CIDA).  Some of these funding
mechanisms only support CSOs, but other fund proposals submitted by government agencies
and businesses.  Finally these funds support civil society initiatives at the global, regional, and
country levels in a variety of sectors.
The Bank also provides grants and staff volunteers to civil society organizations in the
Washington area through its Community Outreach Program.
The Bank also funds CSOs indirectly through governments via mechanisms such as social
funds and Community-Driven Development (CDD) projects.  These support a variety of local
development activities such as rural development, community health, water delivery, HIV/AIDS
prevention, and small enterprise development.  The Bank estimates that some 5% of the Bank's
annual portfolio, or $1 billion dollars, is channeled to these country-based funds.

World Bank Operations

The World Bank exists to encourage poor countries to develop by providing them with technical
assistance and funding for projects and policies that will realize the countries' economic
potential. The Bank views development as a long-term, integrated endeavor.
During the first two decades of its existence, two thirds of the assistance provided by the Bank
went to electric power and transportation projects. Although these so-called infrastructure
projects remain important, the Bank has diversified its activities in recent years as it has gained
experience with and acquired new insights into the development process.
The Bank gives particular attention to projects that can directly benefit the poorest people in
developing countries. The direct involvement of the poorest in economic activity is being
promoted through lending for agriculture and rural development, small-scale enterprises, and
urban development. The Bank is helping the poor to be more productive and to gain access to
such necessities as safe water and waste-disposal facilities, health care, family-planning
assistance, nutrition, education, and housing. Within infrastructure projects there have also
been changes. In transportation projects, greater attention is given to constructing farm-to-
market roads. Rather than concentrating exclusively on cities, power projects increasingly
provide lighting and power for villages and small farms. Industrial projects place greater
emphasis on creating jobs in small enterprises. Labor-intensive construction is used where
practical. In addition to electric power, the Bank is supporting development of oil, gas, coal,
fuelwood, and biomass as alternative sources of energy.
The Bank provides most of its financial and technical assistance to developing countries by
supporting specific projects. Although IBRD loans and IDA credits are made on different
financial terms, the two institutions use the same standards in assessing the soundness of
projects. The decision whether a project will receive IBRD or IDA financing depends on the
economic condition of the country and not on the characteristics of the project.
Its borrowing member countries also look to the Bank as a source of technical assistance. By far
the largest element of Bank-financed technical assistance--running over $1 billion a year
recently--is that financed as a component of Bank loans or credits extended for other purposes.
But the amount of Bank-financed technical assistance for free-standing loans and to prepare
projects has also increased. The Bank serves as executing agency for technical assistance
projects financed by the United Nations Development Program in agriculture and rural
development, energy, and economic planning. In response to the economic climate in many of
its member countries, the Bank is now emphasizing technical assistance for institutional
development and macroeconomic policy formulation.
Every project supported by the Bank is designed in close collaboration with national
governments and local agencies, and often in cooperation with other multilateral assistance
organizations. Indeed, about half of all Bank-assisted projects also receive cofinancing from
official sources, that is, governments, multilateral financial institutions, and export-credit
agencies that directly finance the procurement of goods and services, and from private sources,
such as commercial banks.
In making loans to developing countries, the Bank does not compete with other sources of
finance. It assists only those projects for which the required capital is not available from other
sources on reasonable terms. Through its work, the Bank seeks to strengthen the economies of
borrowing nations so that they can graduate from reliance on Bank resources and meet their
financial needs, on terms they can afford directly from conventional sources of capital.
The range of the Bank's activities is far broader than its lending operations. Since the Bank's
lending decisions depend heavily on the economic condition of the borrowing country, the Bank
carefully studies its economy and the needs of the sectors for which lending is contemplated.
These analyses help in formulating an appropriate long-term development assistance strategy
for the economy.
Graduation from the IBRD and IDA has occurred for many years. Of the 34 very poor countries
that borrowed money from IDA during the earliest years, more than two dozen have made
enough progress for them no longer to need IDA money, leaving that money available to other
countries that joined the Bank more recently. Similarly, about 20 countries that formerly
borrowed money from the IBRD no longer have to do so. An outstanding example is Japan. For
a period of 14 years, it borrowed from the IBRD. Now, the IBRD borrows large sums in Japan.

Reforms within the World Bank

 Leadership Selection

 President and Executive Board accountability

 Increased support to developing countries Executive Directors offices

 Cap the size of constituencies

 Staff diversity

 Transparency

 Fit-for-purpose governance structures

 Selective capital increase

 Fit-for-purpose governance structures

 Fit-for-purpose quota formulae

  Giving up European chairs in the Executive Board

The International Monetary Fund and the World Bank at a Glance

International Monetary Fund World Bank

 oversees the international monetary  seeks to promote the economic

system development of the world's poorer
countries
 promotes exchange stability and orderly
exchange relations among its member  assists developing countries through
countries long-term financing of development
projects and programs
 assists all members--both industrial and
developing countries--that find  provides to the poorest developing
themselves in temporary balance of countries whose per capita GNP is less
payments difficulties by providing short- than $865 a year special financial
to medium-term credits assistance through the International
Development Association (IDA)
 supplements the currency reserves of its
members through the allocation of SDRs  encourages private enterprises in
(special drawing rights); to date SDR developing countries through its affiliate,
21.4 billion has been issued to member the International Finance Corporation
countries in proportion to their quotas (IFC)

 draws its financial resources principally  acquires most of its financial resources
from the quota subscriptions of its by borrowing on the international bond
member countries market

 has at its disposal fully paid-in quotas  has an authorized capital of $184 billion,
now totaling SDR 145 billion (about $215 of which members pay in about 10
billion) percent

 has a staff of 2,300 drawn from 182  has a staff of 7,000 drawn from 180
member countries member countries

UNITED NATIONS

Evolution:
The name "United Nations", coined by United States President Franklin D. Roosevelt, was first
used in the "Declaration by United Nations" of 1 January 1942, during the Second World War,
when representatives of 26 nations pledged their Governments to continue fighting together
against the Axis Powers. States first established international organizations to cooperate on
specific matters. The International Telecommunication Union was founded in 1865 as the
International Telegraph Union, and the Universal Postal Union was established in 1874. Both
are now United Nations specialized agencies.

In 1899, the International Peace Conference was held in The Hague to elaborate instruments
for settling crises peacefully, preventing wars and codifying rules of warfare. It adopted the
Convention for the Pacific Settlement of International Disputes and established the Permanent
Court of Arbitration, which began work in 1902.

The forerunner of the United Nations was the League of Nations, an organization conceived in
similar circumstances during the first World War, and established in 1919 under the Treaty of
Versailles "to promote international cooperation and to achieve peace and security." The
International Labour Organization was also created under the Treaty of Versailles as an
affiliated agency of the League. The League of Nations ceased its activities after failing to
prevent the Second World War.

In 1945, representatives of 50 countries met in San Francisco at the United Nations Conference
on International Organization to draw up the United Nations Charter. Those delegates
deliberated on the basis of proposals worked out by the representatives of China, the Soviet
Union, the United Kingdom and the United States at Dumbarton Oaks, United States in August-
October 1944. The Charter was signed on 26 June 1945 by the representatives of the 50
countries. Poland, which was not represented at the Conference, signed it later and became
one of the original 51 Member States.

The United Nations officially came into existence on 24 October 1945, when the Charter had
been ratified by China, France, the Soviet Union, the United Kingdom, the United States and by
a majority of other signatories. United Nations Day is celebrated on 24 October each year.

Structure of the UN System:

The UN system is often referred to as a "family" of organizations. The charter of the UN, signed
in San Francisco on 26 June 1945, defined six main organs of the new world body, each with
specific tasks and functions. However, because it was impossible to foresee all the demands
that might be made on the organization, provision was made for extending its capacities as the
need arose. Thus, three of the main organs are specifically empowered to establish "such
subsidiary organs" as may be considered necessary for the performance of their functions. In
addition, Article 57 of the charter provides that the various specialized agencies established by
intergovernmental agreement and having international responsibilities in economic, social,
cultural, educational, health, and related fields "shall be brought into relationship" with the UN.
Since the signing of the charter, the UN has established numerous subsidiary organs and has
entered into relationship with various independent organizations.

Main organs of the UN

The General Assembly, composed of representatives of all member states, is the UN's central
deliberative body, empowered to discuss and make recommendations on any subject falling
within the scope of the charter itself. It also approves the UN's budget and determines—alone or
with the Security Council—part of the composition of the other main organs, including the
Security Council.
The Security Council, a 15-member body, has primary responsibility for maintaining
international peace and security. In times of crisis, it is empowered to act on behalf of all
member states and to decide on a course of collective action that is mandatory for the entire
membership. The charter names five states as permanent members of the Security Council:
China, France, the United Kingdom, Russian Federation, and the United States (those that were
chiefly responsible for the defeat of the Axis powers in 1945). The remaining Security Council
members are elected by the General Assembly for two-year terms.
· The Economic and Social Council (ECOSOC) is assigned the task of organizing the UN's work
on economic and social matters and the promotion of human rights. It consists of 54 members
elected for overlapping three-year terms by the General Assembly.
· The Trusteeship Council operated the UN trusteeship system established under the charter. It
was originally composed of member nations administering trust territories, the permanent
members of the Security Council, and a sufficient number of other members, elected by the
General Assembly for three-year terms, to ensure an equal division of administering and no
administering powers. After 1975, it was composed of the five permanent members of the
Security Council—the united States, the sole remaining administering power, and the four
permanent nonadministering powers. The last trust territory, the Pacific island of Palau, voted
for affiliation with the United States in late 1993. The Trusteeship Council voted in 1994 to
suspend operation, convening only at the request of its President, a majority of its member
states, the General Assembly, or the Security Council.
· The International Court of Justice is the principal judicial organ of the UN. It consists of 15
judges elected to nine-year terms by the General Assembly and the Security Council voting
independently. It may not include more than one judge of any nationality. The Members of the
Court do not represent their governments but are independent magistrates.
· The Secretariat is the administrative arm of the organization. It is headed by a Secretary-
General appointed by the General Assembly upon the recommendation of the Security Council
for a five-year, renewable term.

The Size and Cost of the UN System:

Since the early 1980s, the United Nations has been criticized for being a "vast, sprawling
bureaucracy," and politicians have not hesitated to call it "bloated" or "swollen." This perception
led to a drive for reform in the mid-1980s during which major contributing countries initiated a 13
percent staff cut. Another round of "rationalization" of the system and its secretariats was
initiated in 1991. Tightening the budget remained a focus throughout the 1990s. The proposed
UN budget for the 2002–03 biennium’s was US $2,519 million. This represented a 0.5% real
resource reduction from the 2000–2001 biennium. During the previous six years, the UN had no
budgetary growth. Even in dollar terms, the UN's total budget was lower in 2002 than it was in
1994-1995. For the 2002–2003 budget, small increases were made in areas such as:
international peace and security; the promotion of sustained economic growth and sustainable
development; the development of Africa; the promotion of human rights; the coordination of
humanitarian assistance efforts; the promotion of justice and international law; disarmament;
drug control; crime prevention; and combating international terrorism.

Reforms in the UN System:

1. Moving forward on developmental challenges

 Addressing the needs of the poorest of the world

 Providing leadership in achieving international development goals

2. Strengthening un efforts to maintain peace and security

 Strengthening capacity to manage and sustain peacekeeping operations

 Strengthening capacity for preventive diplomacy, mediation, peace-making and peace

building

 Countering terrorism globally

 Re-energizing efforts on disarmament and non-proliferation

3 .Bringing human rights to all people of the world

 Expanding the work of the Office of the High Commissioner for Human Rights

 Reinvigorating the Human Rights Council

 Protecting civilians and preventing genocide

4 .Strengthening humanitarian action

 Responding to the changing face of humanitarian crises

5. Reforming management and operations practices

 Improving accountability and oversight

 Setting the highest ethical standards

 Providing an efficient, transparent and service-oriented Secretariat

 Establishing a mobile, multi-skilled and motivated staff with access to internal justice

 Championing a more integrated UN family approach to achieve common goals

Loopholes or Drawback of these institutions and

Suggestions

1. Worlds growing Economies BI (Brazil & India) and many other countries have not been
given permanent membership.
Suggestion:: The WTO has nearly 150 members, accounting for over 97% of world trade.
Around 30 others are negotiating membership. Decisions are made by the entire membership.
This is typically by consensus. A majority vote is also possible but it has never been used in the
WTO. UN ,IMF & WB should work on the lines of WTO for membership rights .
2. UN functioning is biased towards western countries & China.
Suggestion: UN should move towards more democratic functioning they should accommodate
more members and decisions should be taken by consensus & not by VETO power .

3. UNs mandate is not clear and often it is found that UNs functioning is reactive rather than
proactive .
Suggestion: UN should play more proactive role especially in sensitive parts of the world

4. US dominance in UN (Since 1984, China and France have vetoed three resolutions each;
Russia/USSR four; the United Kingdom ten; and the United States 43.)

Suggestion: UN should work for equality of rights.

(SOURCE :WIKIPEDIA)

5. Most of the chunk of the amount of GDP is diverted for the defense /Military purpose.
Suggestion: Following graph shows that most of the growing economies are spending huge
chunk of their GDP on defense expenditure. This increasing trend is due to increasing social
unrest happening all over the world. UN should act proactively with fixed mandate in order to
tame the social unrest so that part of this huge defense spending can be diverted for social
causes and betterment of the world .

(Source: Wikipedia—All figures in USD)

  BRIC countries as well as USA(BRIC Countries & USA accounts for nearly 35-40% of
world’s land and houses 45% of worlds population) do not appear in top ten list of
countries in terms of welfare expenditure

(Source: Wikipedia—All figures in USD)

Suggestion: Welfare states have lesser poverty rate compared to non-welfare states .IMF &
World bank can play active role in promotion of Welfare economics

7.Inaction towards Dollar dominance in the world ( By IMF)

Suggestion: IMF and World Bank should play role for effective play of currencies that is a basket
of currencies all over the world, especially to guard against the dollar dominating the world.

8.No equality in veto rights(in IMF)

Suggestion: For the IMF, there must be both simple majority (50% + 1) and super majority
(66%, 85%, etc.) decisions require majority backing both by economically weighted votes and
number of countries.

9. Most long-term recipients of World Bank loans and grants still do not have significant levels of
economic freedom. (The main reason for a lack of economic growth in these countries is a
corresponding lack of economic freedom. A lack of economic freedom prevents countries from
creating wealth and prosperity, and a recent worldwide survey of economic freedom finds that
many World Bank recipients have economies that are mostly not free or repressed.  The study
considers ten economic factors -- trade, taxation, government consumption, monetary policy,
banking, foreign investment, wage and price controls, private property rights, regulation, and
black markets -- and categorizes each country as having a "free," "mostly free," "mostly not
free," or "repressed" economy. The findings of the study demonstrate that a majority of World
Bank loan and grant recipients do not have significant levels of economic freedom: Economic
prosperity is not forthcoming in these countries because they do not have economic freedom.
Rather, most have high taxes, barriers to trade, restrictions on foreign investment, banking
systems in disarray, onerous government regulations, bad monetary policies, extensive wage
and price controls, and large black markets. )

Suggestion: WB should give considerable freedom to recipients of the long term loans

10. The distribution of IMF quotas is intended to reflect the relative weight and role of its
members in the global economy. But relative quota shares among members have changed only
gradually and have not kept up with changing economic realities.

Suggestion: There is a need to rebalance quotas to reflect the many changes that have
occurred in recent years, especially the increased weight of major emerging countries in the
world economy.

References:
 www.wikipedia.org
 www.un.org
 www.worldbank.org
 www.brettonwoodsproject.org
 www.imf.org
 www.wto.org