TTiz's year marks the fortieth anniversary of the United Nations Monetary and Financial Conference that was held at Bretton Woods, New Hampshire (United States). This conference, held July 1-22, 1944, led to the creation of the International Monetary Fund and the World Bank. The Final Act embodying the Articles of Agreement of the two institutions was signed on July 22, 1944, and the two institutions came into existence on December 27, 1945. To commemorate the Bretton Woods conference, the Editor has invited a series of special articles from individuals who were involved with Bretton Woods itself or with the institutions in their early days. This article presents the personal impressions of Sir Joseph Gold, former General Counsel and Director of the Legal Department of the Fund.

Some impressions of the early Fund Joseph Gold The Fund came into existence on Decem- They must not overlook that Bretton that they were engaged in a novel and ad- ber 27, 1945. I joined the staff on Octo- Woods was preceded by discussions venturous enterprise. The Fund was going ber 21,1946. My remarks will relate largely among political leaders, officials, and to administer, for the first time in history to the period of the magistracy of Camille scholars that began as early as 1941 in a and after a prolonged and destructive war, Gutt, Ivar Rooth, and Per Jacobsson, the world at war, which is yet another cause for a monetary order based on a compact first three Managing Directors. The period wonder. among nations. Members of the staff saw came to an end with the death of Per Ja- A newcomer to the staff of the Fund in its themselves as pioneers and privileged not cobsson on May 5, 1963. first years became aware almost at once of only for that reason but because they were I was not at Bretton Woods. My astonish- two currents in the atmosphere of the or- so few. The sense of partnership was ment that the delegates had been able to ganization. One was the influence of those strengthened because it was possible for so draft the Articles of Agreement in three Executive Directors and members of the small a staff to know almost every col- weeks has never diminished. This feat was staff who had participated in the Confer- league. Anyone in the elevator who was without precedent, nor has it been emu- ence or in the preparations for it. The intel- not recognizable was assumed to be on the lated since, in the negotiation of a major lectual vitality of these people enhanced staff of the World Bank. multilateral treaty. The Articles gave no their influence. It would be ungenerous not The spirit of the time attracted outstand- evidence of the pressure under which they to mention the Americans in particular, ing talents to the staff. By early 1948, for had been written. On the contrary, Keynes and Edward M. Bernstein among them. example, the Research Department, under was able to report to the Chancellor of the The lucidity of his explanations and the the direction of Bernstein, included—with- Exchequer, not without an undertone of eagerness with which he embarked on out limitation, as lawyers say when de- surprise, that the final product was "clear them were as remarkable as the foresight fending themselves against the charge of a and even aesthetic in presentation." What with which he seemed always to be on the truncated list—Jorge Del Canto, A.G.B. was accomplished at Bretton Woods can be point of producing from his typewriter the Fisher, Irving Friedman, Walter Gardner, compared with the 8 months of drafting the first draft of the very memorandum that Earl Hicks, Keith Horsefield, Javier First Amendment of the Articles and the 20 was needed at that moment. We nonpar- Marquez, Felipe Pazos, J.J. Polak, Ernest months of the Second Amendment. "Bret- ticipants were awed by the insiders and Sturc, and Robert Triffin. ton Woods" has entered the language of happy to accept their tutorship. I have Maintenance of a relatively small staff be- finance, as is evident from the tribute paid recorded my special indebtedness to one of came a tradition that persisted even when to the success of the Conference by minis- them in the first volume of The Fund Agree- recruitment began to increase in response ters who express their dissatisfaction with ment in the Courts. to the growing number of member coun- current monetary relations by calling from The other force that charged the air was tries and the expanding activities of the or- time to time for "a new Bretton Woods." the exhilaration shared by all in the Fund ganization. The passage of time, new con-

Finance & Development / March 1984 23 ©International Monetary Fund. Not for Redistribution ditíons, and the difficulty of knowing all faced by the Executive Board. Uncertainty tive Board and that Pierre-Paul Schweitzer colleagues in a larger staff made it inevita- about the conditions that a member had to was an active Alternate Executive Director ble that the zeal of earlier years would be meet under this doctrine was one of the at a time of great strain between France and replaced by a more sober dedication. The deterrents that led to a decline in requests the Fund. reputation of the staff as an elite corps did for use of the Fund's resources and, after a Another consequence of the Fund's early not diminish, and has not disappeared to time, a total halt in financial activity. inactivity in providing financial assistance this day, even if for some the adjective elite The gloom that this lethargy produced to its members was constant dispute about now has an odious resonance. within the Fund was deepened by the the jurisdiction of the Fund. The staff, look- The desire to preserve the cohesion of speed with which the World Bank's activ- ing to the day when the Fund might realize earlier years was a motive for the creation ities began to flourish. In the negotiation of its potential, often, although not invari- of a Staff Association. When, during the joint activities with the Bank, which usu- ably, found authority in the Articles for in- days of Camille Gutt, a few delegates of the ally were no more than administrative in terpretations that sustained the jurisdiction staff approached him with trepidation to character, the Fund had to accept the role of the Fund. All the resources of interpreta- announce the formation of an association, of junior partner. It was painful also that tion were employed; text, context, intent, the tacticians decided that he should be as- the Fund tended to disappear from the purposes, and drafting history. Not infre- sured early in the interview that the func- public consciousness. A traveler by taxi had quently, even the techniques of interpreta- tions of the association would be largely little hope of reaching his destination in tion were the subject of debate by the Exec- social. The plenipotentiaries were non- Washington if the driver was instructed to utive Board. plussed by his immediate reaction, deliv- proceed to the International Monetary The preparation of most memoranda that ered with warmth in his typically husky Fund. He had to be directed to the World went to the Executive Board was under- tone: "Good! I have always favored trade Bank. Propinquity, at least, was a benefit taken by groups of members of the staff unions." Nevertheless, there seemed to be that the Fund could enjoy. who served in various divisions of the or- no occasion for activism by the staff in The absence of financial activity by the ganization and who were trained in various those days: salaries were considered com- Fund may have contributed to the con- disciplines. The superiority of collaborative petitive; other terms of service comfortable; tinuing appointment of part-time Executive studies was recognized at an early stage. and the Fund a kindly employer, with no Directors by some members. The differ- The custom spread to all aspects of the campaign conducted to make it less so. ences of opinion about the character of the practice of the Fund and did not decline as Fund that were expressed at Bretton Woods the structure of the organization became Early disappointment and at the Inaugural Meeting of the Board more complex. The effort to reach a joint Nevertheless, the early years were not of Governors at Savannah, Georgia, on view provoked much dispute but little ran- without disappointment, even grave disap- March 8-18, 1946, may have been a more cor among those engaged on an assign- pointment. It was not produced by a de- important reason. Some members had ment, notwithstanding the confidence that clining sense of mission. On the contrary, wanted the Fund's financing to be auto- each participant had in his own compe- unhappiness spread because the mission matic and they foresaw no need for resi- tence. The names of the collaborators had could not be fulfilled. The United States dent Executive Directors to supervise the to appear on the masthead of the memo- held the view that reconstruction was the Fund's financial activities. Furthermore, randa they produced for the Executive fundamental problem of the time. If indus- nonresident Executive Directors would be Board, but later only the names of those try and agriculture could be restored in more effective in communicating the views who approved the documents were cited. devastated countries, there would be no of their governments to the Fund on the The Managing Director, as head of the difficulty about exporting the products, policies it should follow. The discordant at- staff, decided that no memoranda went for- and balances of payments would be titudes among members to the service of ward without his consent and support. A strengthened. The United States, following Executive Directors were only one example clear chain of command was established the logic of its analysis and dwelling on the of the differences of prenatal days that con- and much virtue was attributed to a short financial assistance it was giving through tinued to exist during the formative years chain. the European Recovery Program, insisted of the Fund. on decisions that impeded the financial ac- The eventual growth in the Fund's activ- An international monetary system tivity of the Fund. ities led to the disappearance of the non- A teleological approach in the examina- Differences about the use of the Fund's resident Executive Director. The roster of tion of the Fund's authority was inspired resources bred the strongest divisions Executive Directors at all times, however, not only by the principle that the Fund among members. Notwithstanding the included men—it was not remarked in must be effective in the pursuit of its pur- clarity that Keynes thought was a charac- those days that there were no women— poses but also by the belief that the Arti- teristic of the Articles, the provisions deal- who had already achieved prominence in cles, and especially the provisions on the ing with the Fund's financial transactions international monetary matters or were par value system, constituted an interna- were not clear enough to prevent contro- clearly destined for it. The presence on the tional monetary system. The Articles were versy about such questions as the choice Executive Board of these men was a fillip to thought to resemble a constitution that between those unlovely polysyllables, con- morale within the Fund. If such names as governed the area of the Fund's responsi- ditionality and automaticity. Whether or J.W. Beyen, Guido Carli, Otmar Emmin- bility. Such an instrument provided an- not the Bretton Woods Conference in- ger, Pieter Lieftinck, Wilfried Guth, and swers, expressly or implicitly, for all prob- tended to leave these questions for settle- Louis Rasminsky come to mind immedi- lems, and even as conditions changed. In ment by the Fund itself, or whether each ately, it is with the realization that the ros- the early days, there was little mention of side thought it had succeeded in writing its ter could be extended beyond the space so grandiloquent a term as the interna- preference into the Articles, has never been available here. It may be of interest to recall tional monetary system. It became com- answered authoritatively. The United that Camille Gutt was elected as an Execu- monplace only in the 1960s when anxiety States succeeded in its advocacy of condi- tive Director but was selected as Managing began to grow that the improvements for tionality when the problems had to be Director at the first meeting of the Execu- which the Fund could claim at least some

24 Finance & Development I March 1984 ©International Monetary Fund. Not for Redistribution credit, such as the convertibility of curren- economic programs. I was surprised to re- peared in the Executive Board. The Execu- cies, the growth of exchange markets, and ceive a letter from Ivar Rooth in April 1971, tive Directors were fewer, and it was not freedom for capital movements, might be almost 20 years after the decision, in which difficult for one or more members of the imperiled. The General Arrangements to he asked me who was responsible for first staff to make the rounds and report to the Borrow, for example, originated in the view calling it the "Rooth Plan." Managing Director on the possibilities for within the staff that the position of the Many in the Fund were perturbed as they negotiating agreement that were open to United States in the world might be chang- observed over the years a growing plural- him. This practice developed after the Exec- ing. The Arrangements, which entered into ism in the organization of the international utive Board took decisions on January 12, force in 1962, referred explicitly to defense monetary system. They feared that this de- 1948 to demarcate the responsibilities of the of the international monetary system. velopment would produce a factionalism Executive Board, the Managing Director, In the early decades of the Fund, the idea that could lessen the authority of the Fund and the staff. These early decisions on the of amendment of the Articles was not en- as the central organization of the system. division and interrelation of their functions tertained, and even a casual mention of it Per Jacobsson once said that the Fund need had become necessary to dispel the unease produced shudders. If amendments were never fear that its opportunities would be created by uncertainty about the way the undertaken too frequently or too light- limited if it remained aware of its special Fund would be operated. heartedly, the effect would be a loss of re- character. The Fund was not simply the ad- The experience of the early years has left spect for the Articles as a constitution. It ministrator of a code of conduct in matters an ineradicable mark on the Fund. Many of was feared also that a proposal for the that had been reserved to the sovereignty the decisions that were taken remain in ef- amendment of a provision would open the of nations in the past. It was also uniquely fect, either as decisions or as amendments floodgates to a cataract of proposed endowed with substantial resources that it of the Articles. Operating procedures amendments. could deploy to encourage observance of worked out at that time continue to be fol- Many members resisted the assertion of the code. The Fund could gain acceptance lowed. The principle that all members of the Fund's authority, particularly in mat- and cultivate assurance only if it performed the Fund are involved in the affairs of the ters involving the Fund's regulatory juris- effectively as both a regulatory and a finan- organization through their Executive Direc- diction when the Articles were being clari- cial organization. tors is still fundamental for success. Con- fied or the practice of the Fund developed. tinuity and response to change have com- Decision by consensus This resistance was a reaction to the Fund's bined to ensure the vitality of the Fund. parsimony. The decisions on the use of the The patient approach to important deci- The phenomenon is all the more note- Fund's resources were adopted at an early sions in early days became a characteristic, worthy in international organization when 'stage, although not without strife, largely even an ethic, of the Fund. Perhaps the it is recalled that the purposes of the Fund because there was a special sense of defer- record is held by the decision authorizing as stated in Article I have never been ence to the views of the United States as the the Fund to invest some of its resources, changed. member whose currency was likely to be in which took nine years of negotiation. Every These recollections began by referring to almost exclusive use in transactions of the attempt was made to reach a consensus a period in the history of the Fund that Fund. Decisions that would emphasize the among Executive Directors on important ended with the death of Per Jacobsson. The obligations of members under the regula- questions, or at least to reach a situation in period is distinguishable because, by the tory jurisdiction of the Fund were the sub- which those who could not concur were time it ended, the Fund, to a considerable ject of more prolonged controversy. Often, content to record their objections and forgo degree as the result of his efforts, had these decisions, when reached, would af- further resistance. Voting was avoided. achieved maturity and acceptance. But firm the authority of the Fund, but they Decisions adopted with the strong arm of with his passing there departed one of the would purport to be guidance rather than a those who commanded a majority of the most colorful persons who have been asso- final judicial pronouncement or they would total voting power were considered inde- ciated with the Fund. He was impressive in contain language that assured members corous and possibly futile. This conviction physique and equally powerful in person- that they would have the benefit of the did not spring into existence full grown, ality, but the beaming eye and the limitless doubt in the Fund's exercise of its author- because early delays provoked exasper- stream of anecdotes put one at ease. His ity. Decisions on par values and restrictions ation and reminders that weighted voting zest for life and labor were prodigious. I were prominent examples of this tendency. power had been accepted at the recent Bret- remember an occasion when President Sometimes, a decision could not be reached ton Woods Conference and should be exer- Kennedy had invited the Ministers and at all, as in the case of the Fund's authority cised if consensus could not be achieved. Governors of the Group of Ten to a recep- over multiple currency practices that are The practice of working toward consen- tion at the White House. Jacobsson, who confined to capital transfers. sus or widespread agreement recognized never shrank from visibility, was distressed Deadlock on the use of the Fund's re- and promoted the interest of all members because he thought that his invitation had sources was not accepted as the permanent in the international monetary system and been an afterthought. He summoned me to condition of the Fund. Efforts to infuse vi- in the Fund as its central organization. his room and asked my advice on whether tality into the Fund culminated in the deci- Lewis Namier once formulated a law that he should attend, and I said that of course sion of February 13,1952, which was nego- dictated the failure of the League of Na- he must. When he returned, I was again tiated by Ivar Rooth with the patient and tions: the impartial were not interested and summoned. He sat in his chair, still discon- courtly insistence that was characteristic of the interested were not impartial. The Fund tented, and finally he said, "Do you realize him. The decision is to this day one of the has prevailed because all members have that I was the oldest man there." Another most remarkable ever adopted by the been interested. pause, and then he added, "If I am offered Fund. The decision clarified the meaning of Perhaps it was easier in those days to a reappointment, I may refuse." I ex- the temporary use of the Fund's resources involve all members through their Execu- pressed doubt. He waited again, and then by establishing the basic period for use, tive Directors. The Managing Director and he said, "Well, if I accept, they will have to created the gold tranche, and adumbrated senior staff were active in the engineering give me two weeks' leave." Laborare est the ideas of the stand-by arrangement and of consent when serious disagreements ap- orare. ED

Finance & Development I March 1984 25 ©International Monetary Fund. Not for Redistribution