The World Bank, stabilization loans, and balance of payments financing: "lost" pieces of the Bretton Woods liquidity architecture

Abstract

There has been much written about the historical origins and evolution of the liquidity architecture in the Bretton Woods system. Yet surprisingly little of the conventional narrative examines the vision that Keynes and White had for the Bank in the liquidity architecture and the key role it came to play, particularly in the context of the dollar shortage. This paper is in part an effort to rediscover these " lost" aspects of the history of the Bretton Wood system. This paper also explores an interesting puzzle: Why did the World Bank eventually abandon its clear authority in liquidity provision? The likely reason, this paper demonstrates, is the emergence of a project-oriented culture within the Bank that delegitimized the provision of stabilization and balance of payments loans. The emergence and impact of this project-oriented culture is also shown to have had important consequences for subsequent liquidity debates in the 1960s