Defining Development and its Relationship with the Bretton Woods System: a Critical Analysis

The term ‘development’ refers to the self-sustained economic growth of a country or an institution. This process is usually determined by observing improvements in the living standards of a population as a whole. Ideally, economic development should influence peace, lead towards security and facilitate international co-existence. Broadly defined and according to several developmental theorists, economic development can lead to poverty eradication and prosperity for societies.

Today, most of the world’s impoverished nations are identified in an area defined as the Global South where a large percentage of extreme poverty trends are displayed. To overcome these poverty trends, several international governance agencies and financial institutions have been set up in order to facilitate development schemes. These organizations work closely with the United Nations system to promote poverty reduction and contribute towards creating the mechanisms for global financial institutions and financial growth. With the adoption of the Sustainable Development Goals (SDG’s) in 2015 by all member states, eliminating poverty has become a top priority within the United Nations system.

Although poverty trends are more widespread in the Global South, its important to acknowledge the ongoing debate between the Global North/South poverty identifiers: there’s the example of the state of Mississippi in the United States, which enjoys the privilege of being associated with the Global North, but also happens to be one of the poorest states in the country along with West Virginia and Arkansas. All three Southern states are characterized by extreme socioeconomic disparities in income distribution, educational attainment and high unemployment rates which are comparable to poverty indicators in lesser developed economies. Similarly, there are a significant number of people in the Global South who don’t live in poverty and share lifestyles of the populations living in major developed economies.

The Bretton Woods System and the United Nations

The Bretton Woods conference of 1944, in New Hampshire was led by the United States in alliance with the United Nations. The World Bank (WB) and the International Monetary Fund (IMF) were created during this time to combat instability, agree on monetary exchange rates and provide an international monetary alliance in advancing development across the world. Together, these institutions came to be known as the Bretton Woods System. Although the Bretton Woods system became a part of the United Nations system in 1945, it has always remained entirely independent from making its decisions either from the UN General Assembly, or ECOSOC (Economic and Social Council of the UN). The system’s ability to shape agenda, generate revenue to fund its own operations and the specialized knowledge held by its experts has helped considerably in shaping its approach. This approach, critics have argued, has geared it towards creating the intellectual differences between the Global South and the Global North.

Globalization and the Bretton Woods System

Prof. Richard Peet, a critic of neo-liberal development theory argues that globalization has created power for a few prodigious institutions that operate under undemocratic principles which in turn drastically affect the livelihoods of many peoples. With the collapse of the fixed exchange rate system in the 1970’s, the IMF’s role has changed from financial assistance to requiring states to perform structural changes in their economies. Changes include implementing market reforms, privatizing government owned industries and propelling conditions on loans. Critics have argued that these structural loans instead of alleviating poverty, increase poverty and “decrease the ability of individuals and societies to decide their own destinies.” They also claim that the Bretton Woods institutions have become involved in members’ economies in ways that were specifically rejected by their founders, that they have involved themselves and intervene in their member’s income, labor, industrial and environmental policies.

Globalization and Development Systems

Different schools of international development systems have focused on emphasizing different solutions for various problems. Most of these theories, institutions and policies, specifically channeled through the Bretton Woods system have risen from the Global North and have been criticized over the years by several analysts from the Global South for favoring neo-colonialist attitudes. Besides the Bretton Woods system the main systems which have largely defined global economies are:

  • Mercantilism: is subordinate to state power and state management protectionist policies are given priority over protecting the economy. It restricts imports and subsidies and gives preference towards earning more from exports. Mercantilism also prevents international institutes from gaining power over the national economy.
  • Liberalism: the ideology is based on notions of the free movement of goods, free trade, capital and labor. Individuals and households are given priority instead of the state. Liberalism also advocates the least amount of regulation in treaties involving free trade. This system does not lay emphasis on social issues that can rise due to the results of deregulation and free trade policies.
  • Marxism: emphasizes redistribution and concentrates on class struggles and the rights of the proletariat and their roles in production. Marxism also focuses on revolutions to achieve equality amongst the classes which are produced due to acute economic gaps within the labor markets.
  • Western Capitalism: class, markets and states and the role of culture is recognized.

The North-South Gap and the Concept of Sustainable Development

The North-South gap in economic development comprises of the Global North, a region comprising of all the highly industrialized nations while the Global South refers to the countries which are lacking in terms of development and technology. The Global South is much larger in terms of area and population and seeks to improve inequality and poverty which it attributes to centuries of colonialism by the Global North.

Many governments in the Global South have resented the ideology of “developmentalism” and this is especially visible with the recognition of sustainable development goals by the United Nations. Sustainable development recognizes that economic growth has caused much harm to the ecology of our planet. In 1972 the landmark UN Conference on Human Environment (UNCHE) took place. According to the Secretary General for the conference Maurice Strong, it constituted the most comprehensive review of man’s present conditions and future prospects that has ever been assembled.

The conference led to the formation of the United Nations Environment Program, another initiative led by developed countries which sought to focus on the solely on the environment. The backlash from the developing world was severe as they saw this strategy as curtailing their particular process of progress. Leaders from China and India lead the opposition by voicing that the developed world had already caused much damage to the environment due to the industrialization of their cities and colonization of other countries. They no longer wanted to be dictated terms by global governance institutions like the World Bank, the International Monetary Fund and their principles of neoliberalism.


Critics have pointed out that the development ideology has had a dismal record in any country or continent in which it has been applied. Although the rapid advent of industrialization, the consolidation of markets and the spread of international trade has certainly created more wealth, it has also widened the gap between the rich and poor in terms of extreme income inequalities.

In the past few decades, with the large investment of Chinese banks making inroads in almost every part of the African continent, there is mounting evidence that the World Bank’s monopoly as a preferred financier of ‘development’ is slowing down. There are also other newcomers such as India and Brazil joining the race and obviously the World Bank cannot afford to continue doing business as usual. There is growing frustration within the World Bank, which has been running the show for so many decades and now is being hard-pressed to share influence and power, particularly in Africa.

Attempts to examine or make general statements about “China and Africa” is obviously challenging, “one is a country, the other, a continent made up of over 50 different countries.” Yoon Jung Park, a leading researcher in the subfield of China/Africa studies has argued that in most of these Western media-driven narratives, the “West” plays the role of the responsible, caring, and senior partner to the junior Africa. “This is not only disingenuous, patronizing with a paternalistic outlook but also extremely racist.”

To conclude, instead of the “ideology of development” and the process of Westernization which we are witnessing on a global scale, a mentality shift is required. Responsible consumption and production cycles are necessary, where progress is monitored at all levels, and where the real difference should be made by all the stakeholders. Structural changes in policies, laws and financial systems need to focus on people and partnerships. Empowerment instead of “development strategies” that create contention should be acknowledged as a necessary mechanism to influence change.


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