Council on Foreign Relations Senior Fellow and Director of international economics Benn Steil discusses the concept of international financial institutions for CFR Model Diplomacy’s “Economic Crisis in Europe” case study. Model Diplomacy. Steil first discusses the creation in 1944 of the two major international financial institutions, the International Monetary Fund (IMF) and the World Bank. U.S. Treasury Department officials, Steil explains, hoped the institutions would help prevent economic aggression of the kind they believed had caused the Great Depression to spread and paved the path to World War II. He then discusses the original purpose and current role of each institution. Recently, Steil continues, the BRICS countries-Brazil, Russia, India, China, and South Africa-launched two financial institutions of their own: the Contingent Reserve Arrangement, meant to mimic the IMF, and the New Development Bank, meant to mimic the World Bank. Steil also discusses the Asian Infrastructure Investment Bank, spearheaded by China. He explains that the new institutions reflect emerging countries’ frustration at their lack of influence in international financial diplomacy. Steil urges U.S. policymakers to ensure that those countries have a voice commensurate with their economic power.
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