Free-Floating Anxiety

THE fiftieth anniversary of the Bretton Woods conference, which created the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (the World Bank), has been the occasion for a triumph of nostalgia over reality. Nostalgia has converted the twin institutions into major pillars of postwar expansion, transformed the 1971 termination of the system of pegged exchange rates established by Bretton Woods into a major policy mistake, and produced expressions of support for the re-establishment of such a system.

Reality is very different. The IMF and the World Bank have been major failures; they have done far more harm than good and have imposed heavy costs on their members. The world would be far better off today if neither had been established. Both are excellent examples of one of my favorite generalizations: If a private enterprise is a failure, it will close down unless it can get the government to bail it out; if a government enterprise is a failure, it will be expanded.

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Milton Friedman

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THE fiftieth anniversary of the Bretton Woods conference, which created the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (the World Bank), has been the occasion for a triumph of nostalgia over reality. Nostalgia has converted the twin institutions into major pillars of postwar expansion, transformed the 1971 termination of the system of pegged exchange rates established by Bretton Woods into a major policy mistake, and produced expressions of support for the re-establishment of such a system.

Reality is very different. The IMF and the World Bank have been major failures; they have done far more harm than good and have imposed heavy costs on their members. The world would be far better off today if neither had been established. Both are excellent examples of one of my favorite generalizations: If a private enterprise is a failure, it will close down unless it can get the government to bail it out; if a government enterprise is a failure, it will be expanded.