Institutional Drift: Multipolarity, Bretton Woods, and Parallel Multilateral Development Banks

The IMF and the World Bank constitute key components of the global governance architecture developed after the Second World War. As the world has become multipolar, however, the Bretton Woods Institutions (BWI) have largely failed to adapt their policies and organisational structures. The lack of influence in established governance institutions by non-Western economies has contributed to a sense of marginalisation and driven the increasing focus on developing parallel multilateral development banks (MDBs) that diffuse alternative norms and present alternatives to the BWI. While parallel MDBs can produce net benefits, their relative novelty and potential competition with the BWI also creates regulatory and operational challenges. This Policy Brief argues that the G20 must follow a two-track approach that pursues both reform of the BWI and coordination between the BWI and parallel MDBs to maximise positive development outcomes and reduce potential tensions.