International Monetary Cooperation

...If England would abandon it* pledge to maintain full employment so a* to keep its money "sound," the New York Time* believe* that the fund would become super-fluout...

...Has the experts' plan corrected the defects of the national plans ? (1) Why put the emrt before the hoi it...

...Nevertheless, several countries will be in urgent need of the fund during this per iod...

...if it showld be n*l***»ry far maintaining employment For the Tim**, which is still haunted by th* old prejudice that did *0 much harm to the world, unbalanced budget* would make the British money "unsound...

...Thia is not implied in the plan...

...The improvement has been hailed in all progressive circles...

...2) The plan involve...

...4) Without an International Bank for long-term loant which would provide export market* not only to the lending countriet but alto to countrit* irith tenden-eiet to deficit* in their balance of payment*, tha International Monetary Fund could not work tatitfartoi ily...

...International Monetary Cooperation The Stabilization Conference at Bretton Woods By Albeit Halcui JtriMr^ Associate of tht Ameriemn Labor Conference en Intirmtmtml Af airs REPRESENTATIVES of the Unite* Nations' governments ere conferring at Bretton Woods, New Hampshire, to discuss the plan for international monetary cooperation which the United Nations' technical experts have submitted to the conference...

...Moreover, unemployment policies, in the opinion of the Tim**, would exhaust the mean* of the fund very soon, however well-furnished it might be...

...The New York Timet "crusade" against the fund avails itself of arguments like those of the miaer, but gives them another and easy specious twist...

...However, the arguments spooking favor of strengthening the fund and preventing eeea> {fern named from page 4) trie* from aa abusive mm of It, art too strong to boy Ignored...

...Otktr Maxim* ttomU than be nnabl* to eery enough dollar, to pay for...

...The American Labor Conference on International Affairs, in complete agreement with the AFL and the CIO, haa also been instrumental in bringing about this important modification of the national plana...

...9) Witkdawal of a member country, dtttatitfiti with the working of the fund, hat bten made unduly difficult in tht national plant...

...It makes no nse of the simple and brilliant technique of the Keynes plan, since this was bssed on a new international money, and appeared to go too far in "internationalism...

...One of the objections, that the plan means a return to the gold standard, has already been characterised as a misinterpretation...

...The plan, therefore, must be properly implemented...

...When the dollar* * aetiiem ef the fund run tut, there will be an mam...

...the UNRRA has been created for relief and rehabilitation and further measure* of international economic cooperation are in preparation...

...it should also give them breathing space to make economic adjustments...

...The Fund's ksKistance, which must be kept within agreed limits, should help deficit countries to bridge over temporary difficulties...

...The experts' plan provides, however, for an 18,000,000,000 fund (or $10,000,000,000 for the world as a whole) plus the proceeds of possible loans...

...It it th* claim that in order to keep itt budget balanced, England and other countiet thoiild tubmit to devattating unemployment...

...aa»mptey» meat in th* United States sad la Eaglaad, spreading with grwt speed to other coaatrie...

...It would be deplorable to deprive them of this help...

...At long a* tht* framework te unknown, monetary a>rang*mtnt* are prematura...

...Like all the preceding plans, it pursues the aim of bringing some order into international monetary relationships...

...Although gold will continue te have a fixed price in terms of national currencies, t»i» price can be changed whenever necessary...

...The experts' plan discards the French proposal as too narrow in scope...

...a Survey of the) Objection...

...l*i* run out and tha fund is compelled to ration ka scarce dollar reeervea among it* members, tha latter will be allowed to take measure* for restricting the demand of it* nationajs for dollars...

...Binding statements have been made recently in the British parliament to the effect that the plan does net include such implications...

...Such a fund, although much smaller than that provided for in the Keynes plan, seems to be quite adequate...

...The experts' plan took the edge off this objection by declaring that the fund—so that its means might not be encumbered—would not be intended to piovide facilities for relief and reconstruction or to deal with international indebtedness arising from the war...

...11) Objection* have been raited against tk* rok gold is expected to play in the monetary plan...

...I nesspksy-m**t i* Baglaad rneaae the Wee of a great export market f»r the United Stat...

...I'M Mirtiitu *f tMa win ia thai th* exports' pteahss* ii II I aaaat mi Oast emf***, mi who smites...

...Their urge for self-preser-vatioa would drive them into aggressive economic policies...

...can be substituted for it...

...Since then, international cooperation on a broader scale baa been eoviaaged...

...ntltonal dollar thartage...

...7) Tht voting power in tht management of tht fund it inequitably dittributed...

...The experts' plan adopted the simple majority rale for the decisions of the monetary authority...

...I THINK the beat way of clarifying the most important issues which are in the background of the monetary plan, is to examine, however cursorily, the arguments which have been put forward in criticism of the different national plans...

...This fnf.uoi.tia) paper makes itself the Mtaatpion of * sound* msaey When the British Government, recently, pledged itself to maintain fall employment after the war, the N»w 'York Times was greatly upset Anti-deprecate* policies involve budgetary deficit...

...Bat it provides safeguards for preventing devaluations that might be made (a) saperf noeely—theee that could be easily avoided withoat prejudice to the domestic economy...

...X omo, *Mki accept the roospre-»te* ml leaving H m H aaw ia...

...If the m*"*" tary plan were not to come into existence, gold woahl etill continue to have this traditional function...

...In the old gold-standard system, the members of the international gold-standard community were expected to maintain their exchange rates (that is to say, the price of a country's currency in terms of other countries' currencies) permanently unchanged...

...It must be executed with great wisdom and, since no absolute reliance can be put on the wisdom of its managers, it must give clear instructions to the managers on how they 'should act in certain important situations and from what measures they should abstain...

...The positive safeguard consists in the help the International Monetary Fund, administered by the monetary authority, is prepared to give member countries which, temporarily, lack foreign means of payment...

...The group of Republican Congressman who have endorsed the New York Timet' attitude, want to make American )oan» (outside the fund, since they don't want to have a fund) depend **% the preparedness et saw korrewiag country t* ha Isms its budget...

...Great aaemptey-meat in th* United States weald deprive th* world •f its meet important market...

...Because the fund's assets are not meant for these purposes, member countries, during the transition period, will be allowed to maintain the exchange controls which have been in operation during the war...

...Tha British presented their Keynes plen (named after it* author, Ix>rd John Maynard Keynes) There were also a Canadian and a French proposal...

...The consequences of economic isolation, or even of a refusal of the United States to participate in the International monetary scheme of the fund and th* Internal Bank should be made clear...

...Thia danger Is serious, since it is true that in ties country the prospect* of fighting unemployment whoa it occurs, are at present very unfavorable...

...Tht new memtttu v ukems wili teotk with* •*> mUrmttUnml economic framework...

...Tha experts' plan will not prevent changes ia the exchange rate* initially chosen...

...This argument waa reasonable at the time when the discussions began...

...This is an obvious error, since a country may have a balanced budget and still have a temporary deficit in its balance of payment, which the fund is created to bridge over...

...But, otherwise, the plan includes the best of what the nationnl plans contained and embodies improvements of its own...

...Which of these objections are justified, which are unreasonable...

...a) in anaaighborly ways, that ia to say, only for the pur-poaa of gaining competitive advantage* aver the marketa of ether nation...

...In this survey the exceptions from this rule, which have been made in order to smooth the working of the system, are skipped...

...3) Tht tize of tht International Monetary Fund it inefficient to cope with the expected need: This waa completely true with regard to the first White plan...

...This danger is, indeed, a serious one...

...If tueh polieiet air punued in en* country but net in elhert, the increated imports and reduced expertt ef the country which care* far damettic welfare more than the othett, may easily In my itt balance of pmymente into deficit...

...Instead of frooeWm frees wast...

...The British declared that tbey would aa* hesitate to unbalance their badge...

...Yet the value of a plan cannot he judged simply by the soundness of its aims...

...A way to eliminate it would be to accept the Philadelphia suggestion and oblige all member countries to pursue adequate business-cycle policies simultaneously with the object of preventing deflations and inflations everywhere...

...Why, then, should this country make the fund a Urge contribution...

...Members may ¦ withdraw whenever they desire, and the reciprocal obligations are to be liquidated "within a reasonable time...

...The United States Treasury brought forward the first and second White plana (named after their author, Harry D. White...

...At present, its usefulness is considerable, even apart from the peculiar interest* of gold-producing countries and of countries with Ml gold reserves...

...The London Kconomitt, for instance, which was strongly opposed to the national plans, has been converted to sn approval of the experts' plan, mainly, if not exclusively, because of this improvement...

...If the fund's del...

...If the recommendations of tha International Labor Conference in Philadelphia were adopted and duly executed, the future international framework would be still more definitely discernable...

...It should be noticed that the New York Time* completely distorted the mesa, ing of this expedient It insinuated that member countries would not allot dollars to their nationals for the our pose of paying current debto to the United States...

...Besides, some member countries posses* very considerable foreign assets in gold and foreign exchange which they will use for financing excess imports during the transition period, while others will be helped by the UNRRA...

...Th* Timet believe* that help by the fund would only help Great Britain to pursue "unsound" practices...

...It will probably be one of the main objects of discussion at Bretton Woods...

...dangers for domtttic full («• ployment and toctal tecurity policies...

...It will lie admitted that it would constitute a great pi ogress in international relationships if these aims could be achieved...

...Resentment due to poverty and privation in these old centers of political trouble would not fail to increase the ever-menacing danger of future wars...

...But it is not this error which maket tht rejection of tht fund by the New York Timet to appalling...

...Once a country had chosen a certain price for a given quantity of gold in its own currency, it had the duty of sticking to this price, whatever happened to its domestic economy...

...The obligation of member countries to deliver par* of their gold reserves to the fund oa pertiruler e#e»-sions, hss been criticised aa giving too much gold to » fund and leaving too little to countries with ¦»*¦* gold reserves...

...In the meantime, a proposal has been elaborated for the establishment of such a .bank...

...The plan obliges member countries not to change their exchange rates, or to introduce rigid exchange controls, without the consent of the new international monetary authority...

...During the period of transition, member countriet might draw to heavily on the attett ef the fund as to txhautt it before normal condition* were restored...

...The "miser," even if he is not an isolationist, takes the view that the United State* ia on the giving end of the (fund and most other countries on the receiving end...

...If, then-, the international monetary authority forbidt tuck a country to devaluate currency or to ettablith trehange control, the country may be forced to abandon itt policiet of domestic welfare and to embark on deflation with devastating retultt for pro*-perity and employment...

...port* /rem tUfa United State...

...It clearly instruct* the international monetary authority "not to reject a requetted change (devaluation or exchange control) necetoary to restore equilibrium becautt ef the domettur tocial or political poltriet of tht country applying for a change...

...Tht wholt trheme would thut bt compromited...

...It mesas...

...This question has been settled in the experts' plan in a way to aatisfy the British Commonwealth and probably the other countries aa welL (8) The fact that decitiont of the management in til important quetlion* mutt bt madt by a three fourth or twe-thirdt majority may make unduly difficult acceptance of propotition* which member countrit* tub-mil to the monetary authority...

...10) Howtver detirablt international monetary to-operation is, it thould not begin to work until tht tranti-lion from war to peace economy hat been completed...

...Proposals for the establishment of an International Bank for long-term loans have been elaborated...

...The use of gold ft»r this purpose can hardly be objected to under present conditions...

...Yet, a balas*«d badge* m Mriod* of aeprssataa meant an*mpl*ya*ont...

...WhiLE maay peraoa* have raised objeetioM te en* hart of th* plan or another, others have objected-to it wholesale and in principle...

...It now seems to be a very food instrument for international cooperation—the best, indeed, that could be expected under the circumstances...

...In order to aernre foreign markets, they would be compelled to exploit ell the possibilities of monopolistic exploitation, of discrimination, of currency manipulations, for the par pose ef obtaining markets in competition with the United Statea...

...The safeguards provided by the experts' plan against . such practices consist negatively, in prohibitions, and positively, in help...

...It aw ha hrW WP*a U • goad pis*, ft assy itill he isa peered hi maay reap—to at Brett** Weed...

...On the other hend, the international economic framework can be shaped more easily if reasonable monetary arrangement* have been established...

...Gold will continue to serve as an international niee** of payment...

...But the experts' plan itself, improving on all national plans, offers guarantees against this danger...

...Countries can restrict the demand for dollars through refusing allotment of dollars for financing additional imports from the United States or for financing new capital exports to this country...

...If all countries followed this principle, exchange rate* could be kept internationally stable...

...5) After the war the United State*, tooner or later, will probably have great unemployment, tine* it teem* to be reluctant to accept proper • method* to banith uaimaWaymmt The* mould entail « attbetemttol — titm an United State* import...

...Since the United States is not expected to become a deficit country needing the help of the fund, other countries will benefit from it...

...Deprived of American support and cooperative, roanlries in economic difficulties would not endure their poverty passively...

...The economic development of the European countries would be (lowed down very considerably...

...6) Tht international monetary tcheme rethiett tht member countriet' freedom to purine commercial ptlicitt to their liking...

...la taseud legk, the New Y*rk Timet and Ma Cam, gr••sternal **sl*f»sra weald apply th* m*m prto-ctaaaa to th* United States...

...Still, the question is set completely clear...

...The plan has been distilled from several notional plans...

...It a*r ha iaijalfrt...

...This would mean disorganizslion of world trade, and, still worse, economic war which might lead to military eonlict...

...It might prevent member countritt from fighting their dtpreiitoni or from improving their tonal security tehtmet...

...The** vVfc* lUtee » the f»la...

...There is no intention of reverting to the gold-' standard principle after thia war...

...The experts' plan meet* this objection...

...It permita the devalaation of a enrrency if thia la required for correcting a fundamental disequilibrium In the balance of paymenta of a member country...

...It has be** recently expressed by Senator Wheeler, who want* the United States to withdraw economically from Europe, b* "self-sufficient " maintain high tariffs and not "squander" money for the benefit of other countries...

...For instance, reduction of trade barriers can hardly he .agreed upon until some order is established in international monetary questions...

...Still, the ex parts' plan has found an expedient to ceps with each an unfortunate situation...

...The adversaries are: the isolationist*, the "misers," the New York Times and its Confr*a*t*n*l endorsers The isolationist point of view needs no explanation...

...It is a misinterpretation to qualify it as an attempt at returning to the old gold standard...

...Wise aims must not be pursued with wrong means, lest they should do more harm than good...

...But this principle of the gold standard waa abandoned, foit-ilily or voluntarily, in the emergencies of the First World War and the Great Depression...

...It also offers aafeguarda agaiast substituting for devaluation* such kiad of exchange control* as would amount to the establishment, by a member country, of a multiple currency system, for the benefit of one country at the expense of others, or wbald block claims owned by foreigner* in a member country...

...Tht time for discarding gold may come when better mean...

...It will be discussed at Bretton Woods and will take account, at least partially, of the needs of deficit countries...

...We can therefore be almost certain that the fund will not be exhausted during the transition period...

...pi***, m th* mi texe*rteut es*s...