Minority Report on Monetary Stabilization

...The Conference was a scene of dashing interests arising from the different economic and political structures of ths participating countries...

...Such a policy would* decrease the accumulated purchasing power of this country which is the main hope of postwar prosperity...

...Whlla the provisions of the Fund require a declaration of gold holdings, there is no way Of checking the future Russian declaration...

...In view of the existing public debt and the necessity of servicing it, postwar taxes will remain heavy...

...ThE United States Government can get money through taxation and through loans...

...Indeed, the most recent information we have show* that she wants long-term credits reaching the absolutely unpredictable length of SS years...

...It is obvious then thst the may easily una the undeclared amount of her gold for operations by-passing the Fund...

...Every member country was apportioned a quota in the fund...

...If Americans are themselves to pay for their exports, the situation Would be analogous with Lend-Lease extended far into the postwar period...

...Let us examine the second possibility...

...It will rightly clamor for the establishment of international labor standards, but nonetheless it is physically impossible for other countries to achieve the American standards within a foreseeable future...

...The quotas as finally fixed kg ike Conference correspond much more to pa...

...It is true that proposals were drafted which provide for decreasing the quotas* of the member countries in proportion to their future insbility to repay their limited overdrafts in the Fund snd vice versa, although the second possibility is most unlikely...

...Moreover, a more detailed examination of the quotas proves beyond doubt that all tke evils of our present international political set-up have found their way into postwar economics...

...In addition, some of the factors now increasing prices would continue to operate, thus further decreasing the accumulated purchasing power of the people...

...The ugly facts of life appeared in full light when several of the countries which had insisted on big quotas in the Fund, notably Russia, insisted afterwards on smsll quotas in the Bank...

...The rate of exchange simply expresses the degree to which a given currency is in demand abroad, as well as its internal monetary snd price policies...

...While America should take its place in international economic life and should contribute to postwar world prosperity, sn set of Americsn generosity should not be misconstrued ss a favor received from the beneficiaries...

...litieat mud military pressure Meet to economic factors...

...The mechanism of the Fund is relstivsly • simple...

...The drafting of the propossls for sn International Reconstruction and Development Bank encountered significant difficulties...

...Since, however, it waa the general desire to represent the Conference as a triumph for international cooperation, a draft agreement was drawn, bat one full of reservations and contradictions...

...If the United States Government wishes to provide other countries with dollars, it will have to further increase the tax burden on its own citizens and/or borrow more...

...The proclaimed aim of the Conference waa to aid postwar international trade through international currency stabilisation (the International Stabilisation Fund) and by providing long-term credits for purposes of reconstruction and development (the Bank of International Reconstruction and Development...

...Although voting power is proportionate to the quotas assigned, the United States could easily find itself outvoted...

...It can also derive the needed foreign exchange from the returns on its foreign Investments, and through its services, such ss shipping, banking, insurance, tourists, emigrants' remittances, etc...

...Therefore, mechanisms must be devised which can facilitate international trade and the multilateral flow of goods...

...Yet a thoughtful and politically unprejudiced analysis of the results of the Conference leads to conclusions which, while not denying the need for international consultation and action, throw a shadow on the agreements reached at Bretton Woods...

...Currency stabilisation, while desirsble, does not solve any of the real problems of international trade...

...Will the farmers agree to the import of agricultural .commodities...

...Thus the Vital issue of tsriffs was by-passed by the Conference...

...Yet ' some of the countries like-Great Britain, for instance, sharply defined their monetary domestic policies ss being outside the Fund's competence...

...The power over the fixing of exchange rates Is virtually divided between the United States, Russis, Great Britain, China and France...

...Moreover, the proceeds from invisible exports mentioned above will not be sufficient to pay for the imports of most countries...

...In order to finance its Imports, a country can provide itself with the necesssry amount of foreign exchange through its exports...

...Actually, the conference solved nothing, and the bright hopes of the liberals will, I fear, be rudely disappointed...

...The value of a currency depends on domestic policies ss well as on the amount of payments which a given country has to make abroad...

...The initisl Americsn ides was that the contributions of members to the Bank would be proportionate to quotas apportioned to the members in the Fund...

...There is also a provision for borrowing from the Fund in special circumstances by putting up gold, silver, or securities recognised ss s sufficient collateral by the authorities of the Fund...

...Yet while a greater quota in the Fund meant a greater share in receiving U. S. dollsrs, in the case of the Bsnk it meant a greater contribution to international prosperity...

...The Russian quota, for instance, la far above her prewar ae wall as future predictable role in the world economy...

...Since the United States will be celled epon to snpply machinery, equipment, raw materials, etc., other members ef the Fang will seek primarily American dollars...

...It means that with the exception of the United States and a few others, for example, China, the ides of "getting something for nothing" wss the real aspect of the much-publicised international economic collaboration...

...And even assuming that all these questions could be answered in the affirmative, what exactly are the commodities which this country needs ? see ThE Monetary Conference chose to remain silent on sll of these problems which represent vital American interests...

...It was only through this apparent "elasticity*' that a formal agreement could bo reached...

...Consequently, through its member ship in the Fund the power Over tariffs, for ihstsnce, will pass into hands other than those of the American people...

...Moreover, while Indis demanded to have part of her assets fro sen in London exchanged against dollars so thst she could buy Americsn goods, her request fell on deaf ears...

...The alternative ia clear and simple...

...This can be taken as additional proof of the permanency of the Anglo-Indian set-up...

...Will American labor expose itself to the competition of the Chinese, Malayan, Eastern European or other low-paid workers...

...Instead, it suggested the establishment of a fixed ratio between sll ether currencies end the dollar - as defined in Its present gold content...

...Since they will hsve little or nothing to export, the United States will have to provide dollars with which other countries will be sble to psy for the goods they hsve par-chased here...

...The foreign investments of all of the belligerent countries have been substantially reduced...

...Moreover, Russia did not conceal the fact that she does net envisage expert for a long time to come...

...If other countries can supply the United States with goods equivalent to the ones received, will American industrialists allow the abolition or lowering of tariffs...

...Part of it will be paid in gold and/or dollars, part in paper currency...

...In the case of insufficiency of any of these sources, a country which lacks foreign exchange can borrow, if and when foreign loans are obtainable...

...No one doubts that international trade should be fostered, that devastated as well as backward countries should bo reconstructed and developed...

...If the United States desires to export goods, Americans will have either to pay for them themselves or to secept foreign goods in some distent future...

...The apportionment of quotas ae initially envisaged by the experts wss to bo bssed on the member countries' prewsr foreign trade, on their holdings of gold and on thir nroductive capacity...

...Since the dollar will be the currency in most demand after the Fund is set up, the Americsn quota of dollars will disappear snd the Fund will be stuck with paper currencies and foreign government securities...

...Specifically, this could mean a decision by the Fund's Directorate forcing th* United States te cut down her exports and to receive imports...

...Finally, if, a* seems probable, America doe* not import on a large seals, the whole operation unit tarn out to have been an act of American generosity, not a transaction which could be considered as profitable international trade...

...Such sn approach is bound to produce s reaction dangerous to American democracy and in the long run can Only contribute to the revival of a more hermetic isolationism which thrives on such disappointments...

...Inspired by wishful thinking, they hope that its decisions will solve the problems of full employment and trad...

...The proclaimed aim of the Conference was to help postwar international trade through international currency stabilisation and through the creation of an apparatus whereby certain countries will be celled upon to finance their own and other countries' long-term credit operations...

...A MORE detailed analysis could show more loopholes and prove thst the Conference did not contribute either to the ides of a freer international trade or to the idea of freeing.the exchanges...