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BRETTON WOODS REVISITED Bretton Woods Revisited BRETTON WOODS REVISITED Bretton Woods Revisited EVALUATIONS OF THE INTERNATIONAL MONETARY FUND AND THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Papers delivered at a conference at Queen's University, Kingston, Canada and edited by A. L. KEITH ACHESON JOHN F. CHANT MARTIN F. J. PRACHOWNY Palgrave Macmillan ISBN 978-1-349-01523-8 ISBN 978-1-349-01521-4 (eBook) DOI 10.1007/978-1-349-01521-4 © University of Toronto Press 1972 Softcover reprint of the hardcover 1st edition 1972 All rights reserved. No part of this publication may be reproduced or transmitted, in any form or by any means, without permission. First published in Canada 1972 First published in the United Kingdom 1972 Published by THE MACMILLAN PRESS LTD London and Basingstoke Associated companies in New York Toronto Dublin Melbourne Johannesburg and Madras SBN 333 13586 5 To our wives Mary, Bev, and Marguerite Contents Preface ix Introduction xi Memories and Histories 3 SIR ROY HARROD Problems perceived in the International Financial System 5 RICHARD N. GARDNER The Political Setting 20 LOUIS RASMINSKY Canadian Views 34 WILLIAM A. MACKINTOSH A.F.W. PLUMPTRE JOHN J. DEUTSCH What has been done? 49 EDWARD M. BERNSTEIN The Evolution of the International Monetary Fund 51 DAVID W. SLATER Commentary 66 RAYMOND F. MIKESELL The Emergence of th~ World Bank as a Development Institution 70 GRANT L. REUBER Commentary 85 viii Bretton Woods Revisited Speculations and Futures 89 ROBERT A. MUNDELL The Future of the International Financial System 91 ROBERT M. STERN Commentary 104 RAUL PREBISCH A View from the Developing World 107 GERALD K. HELLEINER Commentary 112 Assessments 119 PIERRE-PAUL SCHWEITZER A Report on the Fund 121 HARRY G. JOHNSON A General Commentary 129 Abbreviations 139 Contributors 141 Preface On 2nd and 3rd June 1969 a conference was held at Queen's University to commemorate the twenty-fifth anniversary of the Bretton Woods Agree­ ments. The purpose of the conference was to assemble a number of scholars who share an interest in the workings of the present international monetary arrangements, their antecedents, and their development in the future. The purpose of publishing the proceedings of the conference is to share these thoughts with a wider audience. In arranging the conference and preparing the manuscript for publication, the editors received valuable assistance from a number of sources. Financial support for the conference, which was provided by the Canada Council, the Canadian Bankers Association, and the Institute for Economic Research of Queen's University, is gratefully acknowledged. In addition, this book has been published with the help of a grant from the Social Science Research Council of Canada using funds provided by the Canada Council. These insti­ tutions are not necessarily in accord with the views expressed at the confer­ ence. Our colleagues, particularly David Smith, were constant sources of en­ couragement. Mrs Heather Werry performed housekeeping functions with cheer and competence. Finally, and most importantly, the editors would like to thank the authors, discussants, and other contributors for their efforts in making the conference a success. Kingston, Ontario A.L.K. Acheson J.F. Chant M.F.J. Prachowny Introduction On 1 July 1944 the United Nations Monetary and Financial Conference be­ gan its deliberations at the Mount Washington Hotel in Bretton Woods, New Hampshire. It was to be the most important conference on international fi­ nancial arrangements since the London Conference of 1933. The meetings at Atlantic City which just preceded Bretton Woods were preliminary discus­ sions; the Savannah Conference of March 1946, which represented the inaugural meeting of the International Monetary Fund, dealt mostly with minor points of contention. Thus it was at Bretton Woods that in twenty­ two days the delegates of forty-four countries, plus observers and techni­ cians totalling 730 persons, drew up the main documents which they hoped would shape international economic relations in the postwar period. But the problems faced at the Bretton Woods Conference over a quarter of a century ago are not the problems of today. In the intervening years we have witnessed major changes in international adjustment policies and a growing awareness of the need to transfer resources from rich to poor na­ tions. While the main economic problems facing policy-makers in 1944 were reconstruction of the war-ravaged areas of Europe and elimination of the de­ bilitating effects of North American balance-of-payments surpluses and Eu­ ropean deficits, the focus has shifted to providing equitable and efficient aid to underdeveloped countries and to rectifying the weaknesses of the key­ currency system. A question that naturally arises is whether the two institu­ tions founded at Bretton Woods, the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), were designed with sufficient flexibility to accommodate these changing needs or xii Bretton Woods Revisited whether they were rigidly cast in a mould suitable for 1944 but outdated by 1969. It therefore seemed appropriate and desirable to analyse the present and future usefulness and resourcefulness of these institutions. A conference at Queen's University on 2 and 3 June 1969 was held in order to provide a forum for such an analysis, and elaborated versions of the papers presented there provide the material for this volume. In this introduction we hope to set the papers of the volume in perspective and to highlight the important issues. No attempt is made to compete with Professor Harry Johnson's discussion which appears as the final paper. John­ son provides an overview of the varied fare presented at the Queen's confer­ ence. As any reader of his work has come to expect, Johnson brings unusual insight to his task, at times relating apparently diverse points, at others assess­ ing critically speakers' contributions, and often elaborating their implica­ tions. Still, Johnson focuses his attention mainly on selective analytical is­ sues. To supplement his comments we have provided a brief summary of the main issues raised by the participants. In particular this summary emphasizes points where the authors' interpretations are likely to be controversial. Many of them examined the significance of recent changes in the international fi­ nancial system and to assist the reader we have outlined the features of sever­ al of these changes. Since the time of the Queen's conference the international financial sys­ tem has continued in a state of flux, the most dramatic uncertain ties lasting from President Nixon's declaration of the inconvertibility of the dollar in August 1971 to the Smithsonian Agreements of 17-18 December of the same year. This summary describes briefly the issues involved in the crisis and the final agreemeat. In addition, interrelationships are developed where the events of the last half of 1971 bear heavily on themes running through this volume. Two aspects of the Bretton Woods meetings received particular attention at the Queen's conference. First, the views of the participants at Bretton Woods were examined in terms of their expectations of the difficulties facing the international financial system in the postwar world. Second, explicit at­ tention was directed to the political and economic forces that shaped the reconciliation of the British and American plans for the reform of the inter­ national monetary system. For consideration of the present and future, the conference format followed the division of responsibilities between the two Bretton Woods institutions: the International Monetary Fund and the Inter­ national Bank for Reconstruction and Development. The achievements of Introduction xiii each institution were evaluated by considering their successes and failures in relation both to the problems initially expected and the unforeseen problems that subsequently arose. Finally, the institutions were judged in terms of their ability to face the problems of an uncertain future, tentative though such judgment has to be. An awareness of the atmosphere shaping the thinking of the delegates to Bretton Woods is essential to an understanding of the achievements of the meetings. At the time, the participating countries were still engaged in the war, with several represented by governments-in-exile. The memory of the depression with its international financial chaos was also firm in the del­ egates' minds. Bretton Woods was therefore seen as an opportunity to ex­ ploit the co-operative spirit among the allies for the purpose of creating a superior economic order for the postwar years. The Bretton Woods agreements were only part of a broader movement toward international co-operation. The IMF and IBRD were seen by many as an element in a complex of postwar arrangements for international economic co-operation. The IMF was to be responsible for international payments; the IBRD for the transfer of resources to reconstructing and developing econo­ mies. Moreover, there was to have been the International Trade Organization (ITO) concerned with commercial policy. Unlike the others, the ITO failed to gain ratification from its member countries and did not come into existence. In its place remained the more limited General Agreement on Tariffs and Trade (GATT), originally intended as a temporary expedient. To analyse the interplay between the economic and political forces at Bretton Woods, Sir Roy Harrod, biographer of Lord Keynes, was invited to present a paper on the postwar problems of the international financial sys­ tem as perceived by the participants at Bretton Woods. Sir Roy, though not directly involved in the negotiations leading to Bretton Woods, was in an ex­ ceptional position as a confidant, subject to the Official Secrets Act, to ob­ serve the development of Keynes' thought and the forces influencing it. Sir Roy recalls the postwar negotiations as involving a trade-off between Ameri­ can interest in commercial policy and British interest in international mon­ etary arrangements.
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