Evening star., 1947-03-09
Starts TO Function
At a Propitious.
Moment.
By Lothrob Sfoddard

II H . hopeful augury tnat, 1uSt
when the. gravity Of the worlds post
war economic crisis is becoming
fully svident, two international In
stitutions IN the field Of finance be-
gin fully To function. One of these
is the international Bank for Re
construction and Development. gen.
orally known as the World Bank.
The ather is the international Mon
etary Fund, similarly known as the
World Fund.
Neither institution Is q hasty I'M
provisation. They are organic and
Complementary parts Of the program
initiated at the Inter-Allied Eco
n0taic Conference at Breton Woods
three years ago. Foreseeing the
wogld-wide economic dislocations
which would follow the terrible war
then still raging, the Breton Woods
Conference envisaged the Bank and
the Fund to meet both immediate
postwar and longer-term monetary
and financial needs. Each was to
have e capital structure Of approxi-
mately $500. 900 900. contributed by
the member nations proportionately
to their economic standing and abil-
ity. though only a fraction of ;the
total amounts pledged were to be
actually paid in, the balance being
callable only in specific eventualities,
thus furnishing ample credit back
ing for actual operations. In both
cases, the United States was the
largest contributor.
Purposes Not the Same.
The purposes Of the two institu-
tions, though Complementary, were
dissimilar. The World Fund was
designed to restore and stabilize the
currencies of members, thereby
averting the breakdowns in inter-
national exchange and consequent
hamstringing of international trade
which followed World War I and
occurred again in the crest depres-
sion after 1929. The hope was that
the Funds activities would be so
successful and its stabilizing influ-
ence so great that its maximum con.
tribution to world reconstruction
would occur in the immediate post
war period.
The World Pank was designed
with longer-term aims in view. As
its full title indicates, Its major
function was to be the making and
underwriting of loans for the re-
construction and development OF
member nations, which in practice
means nearly all members of the
present United Nations. A notable
exception Is Soviet Russia, which
has failed to join either the Fund or
the Bank, though some countries
under Soviet influence, such as
Czechoslovakia, Poland and Yugo-
slavia, have done so.
The most difficult phase of the
project was the formulation Of
proper lending policy. Obvi-
ously, in order to fulfill its pur-
pose, the World Bank could not
be just another bank, guided
by its own seh-interest and intent
on making prof1ts. On the other
hand, it had to proceed according
to sound economic principles If it
was not to squander its capital in
speculative undertakings.
Maxim Is Calculated Risk.
The formula put into the articles
OF agreement defined the banks 6
lending field as that wherein "the
bank Is satisfied that in the pre-
vailing market conditions the bor-
rover would be unable otherwise
to obtain the loan under conditions
which in the opinion of the banl,
are reasonable for the borrower
Furthermore: Loans made or guar
anteed by the bank shall, except in
special circumstances, be for the
purpose of special projects of re-
construction or development .
after a careful study of the merits
OF the proposal" In short, the
maxim was to be that of Calculated
risk"
Nevertheless, arguments perhaps
inevitably arose as to the precise
Interpretation OF this formula, espe