(ESHET, Kingston
University, May 2013)
Keynes and the Case for Europe
Keynes
entered the world stage at Versailles; and once the fateful Treaty had been
signed and sealed, the nations endeavoured to restore the ‘Pax Britannica’ order which had collapsed with the First World War. But this endeavour
came to grief. Instead, as confusion and conflict deepened, the world was
engulfed by the Second World War. It was during the closing days of that war
that Keynes emerged as a figure exerting great influence as an economist,
economic policymaker, and, most of all, international system planner.
From Versailles to
Bretton Woods, Keynes worked both for the rescue and relief of a Europe ruined
by war, and for the reconstruction of a new and more solid Europe. In this
respect, Keynes can be seen as a visionary precursor of the present European Union, a project that today is
facing its greatest challenge since inception. Were Keynes alive today, there
is no question he would be at the very centre of things, once again urging
proposals both for rescue from the errors of the past and for reconstruction,
looking to the future potential.
But Keynes is no
longer with us. All we have left is the record of his response to previous
crises. The central purpose of this paper is to bring new light to bear on that
record, and in the same light to examine the current crisis in Europe. Keynes’s ideas and his way of approaching problems are still alive. We can therefore legitimately
ask, What would Keynes have said?
First, Keynes’s activities as a system planner for ruined Europe are extensively examined. Second, we focus on Keynes’s relief
and reconstruction plan for Europe after the Second World War. Third, we come to Keynes’s response to the UNRRA advocated by the US
for ruined Europe. Fourth, we deal with the subsequent developments for Europe. Finally we discuss the Euro crisis and Keynes’s likely response.
Keynes's Relief Plans for Ruined Europe
Immediately
after resigning as Treasury representative for the Versailles Peace Conference,
disappointed by the proceedings conducted
there, in 1919 Keynes published The
Economic Consequences of the Peace. It is famous, among other things, for
the acid description of the ‘Big Three’ (Wilson, Lloyd-George and Clemenceau)
and his calculation of reasonable reparations as paid by Germany. What concerns
us here, however, is Chapter 7, ‘Remedies’, where he shows his bold and
creative flair as a planner.
After proposing to
cancel out all the war debts (including abandonment of 2 billion pounds for the
USA and 0.9 billion pounds for the UK), Keynes put forward the following grand
design for ruined Europe, proposing: (i) to reorganize the Coal Commission into a sort
of cooperative system for supplying and allocating coal and iron ore throughout
Europe; (ii) to set up a ‘Free Trade Union’ for Europe, including the UK; (iii) to
make an ‘international loan’ for the rebirth of Europe, consisting of loans to
be used to obtain food and materials from the USA, plus a ‘Guarantee Fund’. The
latter was to be set up with the contributions (in either cash or kind) of the
member countries of the League of Nations. Keynes considered
the Guarantee Fund to be the foundation for the general
reorganization of currency.[i]
The ‘cooperative system’ for coal is a prototype of the European Coal and
Steel Community (ECSC, 1952); the Free Trade Union is a prototype of the
European Community (EC, 1967) and the Guarantee Fund is a sort of international
monetary organization—a project which
could be even said to belong to the same sphere as the Euro system.
But Keynes was too much ahead of his times. Instead, the attention of
statesmen was distracted by problems of reparations and war debts - legacies of the War. The result was the Second World War, which Keynes
seized as a second chance to do what should have been done after the First
World War.
In July 1940 Keynes
was appointed member of the Chancellor of the Exchequer’s Consultative Council
which was set up ‘to help and advise the Chancellor on special problems arising
from war conditions’ (Moggridge 1992, p. 636). Thereafter he was to be engaged
on a range of important assignments. Two fields are relevant here.
The first field
concerns external war finance and the balance of payments crisis. Keynes played a key role in the negotiations with
the United States over the Lend-Lease arrangements, and in the Anglo–American
Financial Agreement[ii] (1945) for support in the
UK’s balance of payments crisis.
The second field
concerns the shaping of the post-war world economic order. Here Keynes’s
unexcelled ability in designing international systems emerged in all evidence.
Viewing a problem in the worldwide context, he was able to devise excellent
plans for dealing with it. Three plans in particular are worth considering
here—(i) an international buffer stock plan, (ii) an international relief and
reconstruction plan named Central Relief and Reconstruction Fund (CRRF), and
(iii) an international monetary system. Keynes himself negotiated with the
United States as chief British representative for these issues, which were closely connected in his mind.
Let us take the
three cases in order.
i) The Commodity Problem.[iii]
Keynes designed international organizations named ‘Commod Control’ and ‘General
Council for Commod Controls’ for buffer stock operations, with the purpose of
stabilizing the short-term prices, while allowing for gradual changes in the
long-term prices, of various primary commodities, and of ensuring due income to
the producers concerned. The fundamental principle on which the buffer stock
plan is based is his view of the market economy as emerges clearly in The End of Laissez-Faire (Keynes, 1926a)—if left to the law of supply and demand, the market economy cannot
attain an optimum allocation of resources. Because a competitive market system
abhors buffer stock, violent fluctuations in prices are caused, so in order to
avoid them some sort of international organization for buffer stocks is
required. This idea can be traced back to ‘The Control of Raw Materials by
Governments’ (Keynes, 1926b).
ii) The Relief and Reconstruction Problem.
Keynes designed the Central Relief and Reconstruction Fund (CRRF) for the management of
a joint fund consisting of money donations or contributions in kind from
various countries. The basic principle here was to create an ideal
international organization for the efficient distribution of goods with
humanitarian criteria among countries in need of relief. It was predominantly
Europe which preoccupied Keynes here, for he believed that without the rebirth
and reconstruction of Europe there would be no hope for the future of the
world.
We will examine
the CRRF in more detail below, but it is worth
noting here that the CRRF could be taken in relation to
the Organization for European Economic Cooperation (OEEC) in the Marshall Plan, which aimed at
relieving and reconstructing Europe in crisis through central institutions.
iii) International Monetary System. Keynes
proposed an ‘International Clearing Union’—a multilateral clearing system among
the central banks to which all the foreign exchange transactions were to be
transferred. For this purpose an international organization under the name of
Clearing Union would be set up with each central bank opening its account. Every international transaction was to be recorded in
the account of the nation concerned in terms of ‘bancor’ as an international
currency used only among the central banks. The Clearing Union would be endowed
with credit creation facility (each nation was to fix its exchange rate in
terms of bancor). The bancor was to stand as international currency, gold
giving way to it while the existing currencies such as the dollar and pound
sterling remained as local currencies. The function of the foreign exchange markets would dwindle and
credit could be created in accordance with the growth of the world economy. International financial transactions would be concentrated on the
Clearing Union, while international transactions of goods and services were to
be left to the free activities of firms and individuals. Keynes stated that the
Clearing Union plan could be said to be an international version of a domestic
banking system. The basic principle upon which the Clearing Union plan is
founded is an international monetary system which, if needed, could increase or
decrease the amount of bancors so that either deflationary or inflationary
trends in the world economy could be adjusted, and world trade could grow
accordingly. He expressed the view that each government should pursue
prosperity and stability for its own economy by means of economic policy,
criticizing the Gold Standard because it could deprive governments of scope for
economic policy, as is clearly seen in A
Tract on Monetary Reform (1923) and The
General Theory (1936).
Having explained how
Keynes contrived international institutions in the context of the world order,
we will now concentrate on the relief and reconstruction phase for Europe, for
the main purpose of this paper is to examine Keynes’s role in Europe in crisis, both past and present. (Table 1 shows the relation
between Keynes’s vision and Europe in reconstruction and crisis. Readers should
find it useful to refer to the table
throughout the paper.)
Table
1: Keynes’s vision and Europe in reconstruction and crisis
|
Europe toward European Community
|
Coal Corporation*
|
|
|
EuropeanCoal and Steel Community
(1952)
|
→European Economic Community
(1957)
European
Community
(1967)
|
→EU
(1993
Maastricht Treaty)
|
|
Free Trade
Union*
|
|
|
|
|||
|
International Loan*
|
|
Central Relief and
Reconstruction Fund *
→United Nations Relief and Rehabilitation
Administration
|
Marshall Plan
(1948 OEEC)
|
|||
|
Europe and Monetary System
|
|
Criticism of the Gold
Standard*
|
International Clearing Union*
vs.
White Plan
|
EuropeanPayments Union (1950–58)
EuropeanMonetary Agreement (1958–72)
|
European
Monetary
System
(1979–98)
|
→EURO
(ECB)
|
|
Time
|
After WWI
|
Reparation
and war debt problems in the 1920s
|
During WWII
|
1950s
|
1960s–1990s
|
1990s
|
* Keynes’s proposal or involvement.
Keynes's Relief and Reconstruction Plan for Europe after the Second
World
War
At
the outbreak of the Second World War, Britain made a desperate effort to
prevent strategic commodities from falling into the enemy’s hands. To this end
the UK needed to buy up large quantities of primary commodities, as a result of
which the UK later found itself in possession of excessive stockpiles. Thus the
Prime Minister stated in August 1940 that Britain should be committed to ‘a
policy of building up stocks of food and raw materials for post-war relief
purposes’ (Keynes 1980, p.3). In
November Frederick Leith-Ross[iv]
was appointed to represent Britain in the necessary negotiations. As we have
seen, Keynes also became the Treasury representative on the official committee
set up to advise him. Keynes insisted that any plan should be drawn up in
complete collaboration with the US and that it should be based on the principle
of internationalism.
On a visit to
Washington in May 1941, Keynes discussed the problem of surpluses with Dean
Acheson, Assistant Secretary of State. Keynes took this opportunity to set out
his ideas on the problems that could be anticipated to arise after the war. The
solutions Keynes worked out, and on which Acheson concurred to a
degree well beyond his expectations, included an outline of a
post-war relief and reconstruction programme for Europe (this could be a blueprint for the CRRF[v]) and of an
‘ever-normal granary’ as a comprehensive plan for the unification of primary
commodity prices throughout the world.
Keynes believed that
the accumulation of commodity surpluses which was developing throughout the
world could be turned to advantage in the task of putting Europe back on its
feet once the war was over. In other words, the solution to the commodity
problem could help solve the relief problem. Evidently, then, in mid-1941 there
was acknowledged agreement between Keynes and the US Government on the issues
of post-war relief and surplus commodities.
The plan for relief and reconstruction for Europe that Keynes
had sketched out to Acheson was succeeded by a proposal to carry out the task with the establishment of a Central Relief
and Reconstruction Fund[vi]
(CRRF). This was set out in the ‘Treasury Memorandum on Financial Framework of
Post-War European Relief’ (24 October 1941: Keynes 1980, pp.46–51; hereafter the CRRF Plan or the ‘Keynes Plan’, for Keynes was
its chief author).
The central idea of
the Keynes Plan was that the CRRF should operate a joint fund consisting of money donations or
contributions in kind from many countries. The basic principles of the CRRF
were that: it should be
responsible for collecting and distributing all the relief materials required
(it should be authorized to buy the commodities required at fair prices from
any country); moreover it should determine, on the basis of some appropriate
principle yet to be established, the proportion of the relief materials which a
country should receive gratis or should be liable to pay. All the transactions
were to be booked in the joint fund. To allow the CRRF to estimate the scale of
transactions, the CRRF should, firstly,
request the allied governments to produce lists of their requirements, while at
the same time taking the requirements of the enemy countries, as well as France and China, into account. Secondly, the CRRF should make estimates of the
quantities of commodities available to it. It should also investigate
the financial position of each of the countries concerned, knowledge of which
would be prerequisite for equitable determination of the proportions in which
assistance should be granted free of charge or made payable.
Keynes considered
the CRRF, conceived as above, greatly superior to the idea of having various countries
giving relief in kind separately, and was eager to see it set up. He argued
that establishing the CRRF would obviate the need to make separate financial
arrangements for each commodity, whilst the alternative idea would result in the
distribution of commodities becoming a messy affair, due to the absence of any
necessary correspondence between the commodity quantities available and an appropriate financial
burden.
Keynes put forward
the buffer stock plan and the
CRRF plan together with the International Clearing Union plan as representing his vision for the
post–world war system. However, none of them were adopted, partly because of
the changed circumstances of the British economy and partly because of the
predominance of the US in both military and economic situations.
UNRRA
and Keynes's Response
After
the CRRF plan, in fact, the relief problem went through a long and zigzag process (Hirai 2011). We will not go
into the details here, but move on to the problem of the UNRRA, which shifted initiative in the relief problem to the US
with Harry White,[vii] Assistant
Secretary of the Treasury, as a leader.
The UNRRA was
established in November 1943 at a 44-nation conference at the White House. The
task was to provide economic relief to Europe after the War, and to rescue the
refugees. More than 70 per cent of the UNRRA’s fund was provided by the US
Government.
Keynes’s response to
the UNRRA changed over time, tracing a convoluted contour. Although he went on
calling it a ‘chimera’, around September 1943 he began to approach the idea
more favourably. He commented on the ‘White Plan’ in a memorandum of 17
September to Ronald Campbell and R. Law entitled ‘Finance of European Relief’ (Keynes 1980, pp. 90–2), referring to several tenets
of the plan.
(1) Irrespective of whether free or payable, all supplies should be
given to recipient countries along with invoices expressed in value, and should
be dealt with on a commercial basis as soon as possible. In the case of gifts,
supplying countries should withdraw the amount involved from the contributions
to relief finance.—Keynes agreed to this.
(2) Prices should be
inclusive of freight charges, which supplying countries should pay.—Keynes
judged that, financially speaking, this would be advantageous to Britain.
(3) The plan aims at
establishing the principle that loans made by a certain country should be used by the recipient country only for the
commodities of the lending
country (i.e., all loans should be tied).—Keynes remarked that the US
Administration would, in this way, be able to use their funds to provide for
cash purchases outside the United States.
(4) The standard of
contributing 1 per cent of national income to UNRRA should be
established.—Keynes commented that if
this were agreed to, the US Administration would obtain a stronghold in negotiations
with Congress.
Here we see Keynes
displaying a positive attitude towards the White Plan which laid the groundwork
for the UNRRA. At the beginning of 1945, however, he became highly critical of it. He thought the best option for the UK would now be:
To carry on
with the present military basis in the very small number of non-paying, non-enemy
countries and persuade the U.S.A. to revise the terms of this to UNRRA
proportions, which, if UNRRA appropriation was to be released would be very easy
for them. Through the disappointment with UNRRA we have been led along a path
of nonsense. The sooner we take any opportunity to retrace our steps...the
better (Keynes 1980, p.95).
The
words ‘present military basis...non-enemy countries’ appear to indicate the
Lend-Lease.[viii]
Keynes suggests that Britain should seek to return to the status quo ante through dissolution of the UNRRA, try to have the
Lend-Lease continued in certain countries, and make efforts to get the US to
improve the terms of the Lend-Lease by making use of contributions which had so
far gone to the UNRRA.
Liquidation of UNRRA
was determined in August 1946, and was,
in fact, accomplished in 1949.
What
Moved Ahead after the Second World War for Europe
Keynes
died in 1946 before seeing the developments in the relief and reconstruction
problem for Europe. However, as emerges in all evidence from the above, Keynes
would surely have been involved and interested in it if he could have seen it.
It was, in the end,
under the Marshall Plan (the ‘European Recovery Program’), which took effect in
1948, that relief and reconstruction were implemented for Europe. Loans were
systematically allocated, by the Economic Cooperation Administration (ECA) of
the US, through the Organization of European Economic Cooperation (OEEC).[ix]
Roused from complacency by the onset of the Cold War, the US, which even in the
immediate post-war period had been extremely reluctant to get involved in
European affairs, became—by now well-aware of the role it was taking on—the
leader of the West in the new international order from 1949 on. The world in
which Britain, now suffering from a hugely adverse balance of payments and
massive war debts, could have
assumed leadership had gone. It was, in
fact, Britain that was to receive the largest share of the Marshall Plan.
The ECA and the OEEC
could be said to correspond to the CRRF as a central organization allocating
resources among the countries in Europe in order to relieve them, as first
stage, and then go on to reconstruct them. The main difference lies in the fact
that in the former it was the US that was willing to make the whole loan. The
OEEC started its
activities by setting up the European Coal and Steel Community (ECSC, 1952), which was to lay the foundation of the European Economic Community (EEC 1958; this derives from the customs union plan by P. Henri Spaak), followed by the European Community (1967), constituted by integrating the EEC, the European Atomic Energy Community (EURATOM) and the ECSC.
How would Keynes
have acted if he had lived long enough to see the development of the Marshall
Plan? In a word, the Marshall Plan, which made a great contribution to the
process leading up to the EU,[x]
could be seen to have some points in common with Keynes’s three ideas expressed
in his Economic Consequences of the Peace
and the CRRF plan.[xi]
He would probably have endorsed the Marshall Plan (the principal architects of
which were Clayton and Acheson, who were on good terms with Keynes), and might
even have led the planning and management of the OEEC (let us recall that it
was E. Bevin, Secretary of State for Foreign Affairs of the Attlee Cabinet, UK, who led the initiative on the European side). This seems
clear-cut.[xii]
Subsequent to the
Marshall Plan Europe had successfully worked on the integration project over the years (despite some differences in the details, in
effect the European integration project can be said to have followed the broad lines anticipated by Keynes).
The movement for
European integration, which initially aimed at the formation of an economic
community as typified by the EEC (1958), proceeded towards setting up a more
comprehensive community inclusive of monetary integration, common foreign
security and so forth, as represented by the Maastricht Treaty (1993). As for
monetary integration, although some concern arose over the hazards it might
entail, misgivings soon gave way in the face of the economic growth achieved in
the area subsequent to adoption of the Euro in January 1999 (complete changeover
was concluded in 2002).
Soon the Euro was to be highly evaluated as an international currency, practically the equal of the Dollar, and the EU
was rightly proud of it. Then the EU moved forward in the direction of boosting
its influence on the world economy as well as world politics by admitting a series of nations to membership. It was to be highly evaluated as a gigantic
economic zone which could equal the US in power and prestige—up until the
spring of 2009.
The Euro Crisis
It
was with the Lehman Shock (2008) that the danger and fragility embedded in the
Euro system came to light. Through the shockwave of the Lehman bankruptcy, one
year later, in the fall of 2009, the Euro crisis was ignited with the fiscal
crisis in Greece. Critical situations then spread rapidly
through the Euro zone from May 2009 to March 2012 (as of the drafting
of this paper).[xiii]
The bailouts to Greece (twice, May 2010 and July 2011), Ireland (November 2010) and Portugal (May 2011) were agreed by the EU (European Commission), the ECB, and the IMF—the
Troika—with the condition that the countries concerned should pledge to
implement austerity measures. In the Euro System a member country concedes monetary policy as well
as foreign exchange policy to the ECB, relinquishing its own currency, which
means that the only economic policy tool should be fiscal policy. In order to
prevent a member country from implementing fiscal policy impulsively, the Euro
system ruled the so-called ‘Stability and Growth Pact’ (SGP). However, it turned out to be no more than a
gentlemen’s agreement, for it entails no sanctions for any country breaching the pact. This turned out to be a fatal drawback for the
system when the Lehman shockwave Shock hit Europe.
When it found its
way to Europe, the member countries experienced a sharp economic downturn. In
order to tackle this state of affairs each member country resorted to stimulus
measures—the only economic policy tool at their disposal. However, the bubble
burst and the budgetary situations grew progressively worse and worse.
Investors who were
worried about the bond markets of the countries concerned (Greece, Ireland,
Portugal and so on), demanded prohibitively high interest rates. The countries
coming up against huge difficulties in raising funds on the bond markets were forced to appeal for
bailout, which resulted in the above-mentioned rescue packages by the Troika.
In return these countries were called upon to implement austerity measures,
entailing drastically deflationary policies. These economies are now plunging
into a deflationary spiral.
The measures
implemented by the Troika to quell the Euro crisis are, in a nutshell, mere
stopgaps, far from offering a fundamental solution to the crisis. The Troika
provided the ailing members with bailout money on condition that they pledge
the austerity measures, which, the Troika believes, is the only way to get over
the crisis. The proposal for EFSF enlargement is also a stopgap in preparation
for similar emergencies.
The main objective
of these bailouts is, of course, to prevent contagion from spreading throughout
Europe and to defend the Euro system. The German and French banks, among
others, have been deeply involved in these financial matters as the big holders
of the sovereign debts of the ailing member countries as well as lenders to the
private sectors there. Thus once a contagion spread there would be catastrophic
consequences not only on the Euro system but also on the world economy—a second
Lehman Shock. This type of contagion is all too reminiscent of the contagion
that swept through Europe in the 1930s, eventually leading to blocked economy
throughout the world.
Keynes’s Likely Response to the
Euro Crisis
Now
we come to the last question. How would Keynes have evaluated the Euro system
and responded to the Euro Crisis? Here are our some considerations.
Keynes would have
supported the EPU (the European Payments Union, 1950–58), which had been in
operation in the 1950s and drew great inspiration from Keynes’s ICU plan.[xiv]
In the case of the EPU, Keynes would
have said that inasmuch as each central bank’s independence
is maintained, it can
implement its own monetary policy and foreign exchange rate policy. The EPU is,
moreover, a kind of clearing union so that it can prevent chronic imbalance. To
be correct, the EPU, created by OEEC, was a clearing system with credit
facilities, but lacked something like the bancor. The EPU was succeeded by the European Monetary Agreement (EMA. 1958–72).
Keynes would have
endorsed the EC as a free trade zone (or customs union) and would have believed
it could contribute to economic growth there.
It is likely that
Keynes would have been against the Euro System and its inflexibility.[xv] He would have
questioned the shift from the EPU to the Euro system and would not have
regarded it as a move in the right direction. The reason is, as we now know all too well, that the Euro system
is burdened with a fatal
drawback—a member country cedes monetary
policy and foreign exchange policy to the ECB. Although
the only policy at its disposal is fiscal policy, this cannot be implemented in
defence of the Euro system, but rather the country concerned is forced to adopt austerity measures
which constitute, by their very nature, a deflationary policy. This could lead
to collapse of the Euro system per se.[xvi]
Keynes would have
opposed austerity measures. They are not so much a proposition dictated by
economics as a kind of ‘belief’. The system should be constructed in such a way
that any member country could achieve economic growth without running into liquidity shortage.
The Euro system, which makes any such state of affairs impossible, incorporates fundamental
defects.
Keynes would have
opposed the phenomenon that sees the financial markets and commodity markets
turning into a great casino. That is, he would have been against the financial
globalization backed by Neo-Liberalism over the last two decades, if not
against milder financial liberalization. Keynes propounded the ICU plan, which is so structured
that, by means of the international clearing system rather than a single
currency system, the liquidity required for the growth of each economy is
secured, while international imbalance (and in particular the case of a certain
country keeping constant hold of a surplus) could be prevented. (En passant, Keynes would have been critical of the
present dollar system, of course).
In this paper I have
tried to clarify what
kind of planning Keynes proposed and would eventually have proposed for Europe
in crisis. In regard to the latter this is, of course, no more than conjecture, and yet no mere fruit of
the imagination, for we could with a
fair degree of certainty affirm that the remarks are such as would have emerged
through his own vision and planning for Europe in crisis in the interwar period
and during the Second World War.
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NOTES
* This paper is a slightly revised version for my paper
in Hirai, Marcuzzo and Mehrling ed. (2013). The author
would like to express his deep gratitude for invaluable suggestions and
comments by Professors M.C. Marcuzzo, P. Mehrling, F. Ranchetti (University of
Pisa, Italy), S. Nisticò (University of Cassino, Italy), and J. Obata (Rissho
University, Japan).
[i]. Earlier Keynes had
advocated an international monetary system at the Amsterdam conference (and
around the same time at Cambridge), for which see Markwell (2006, pp. 92–3, 106).
[ii]. President Truman
announced the immediate termination of Lend-Lease on 17 August 1945. The
principal negotiator leading up to the Anglo–American Financial Agreement was William
Clayton, on which see Keynes (1979: Chapter 4). Clayton
was to be the 'intellectual architect of
the [Marshall] Plan'. In March 1946,
Clayton insisted that '[we] must go all out in
this world game…. Assistance should take the form not only of financial aid, but of
technical and administrative assistance' (from Behrman 2007, p. 54).
[iii]. This idea was often to
be referred to, as seen in the case of the Common Fund (1989). At present,
however, the prices of commodities have been violently fluctuated by Index
Speculation enabled by The Commodities Futures Modernization Act (2000).
[iv]. Leith-Ross visited Japan
in 1935 seeking to bring the Japanese government round to an aid program for
China, but in vain. See Imamura (1948, pp. 237–8).
[v]. It should be noted that
Acheson together with Clayton was to be a major architect of the Marshall Plan,
as can be seen in his famous address of 1947 insisting that 'a coordinated European economy…was a fundamental objective' (from Behrman, 2007, p. 58).
[vi]. The term 'relief' is used to cover a period of
six months to one year immediately after the end of the war, while 'reconstruction' refers to a longer
period of three to five years.
[vii]. White is also famous as
the main architect of the IMF. On his activities in the 1930s, see Laidler and
Sandilands (2002).
[viii]. According to the
Lend-Lease Act, the US would supply munitions to the Allies with payment to be
discussed later. Keynes played a central role in the negotiations, one result
of which was the Anglo–American Mutual Aid Agreement. In the negotiations, it was Acheson
who represented the American side. Article VII of the Agreement which includes 'discrimination' became a hot issue.
[ix]. The law concerned is the
Foreign Assistance Act of 1948. The total sum of aid to the OEEC composed of 15
countries amounted to $13 billion, 89 per cent of which was gratis (see 'Marshall Plan' on Wikipedia). Although the Marshall Plan ended in 1951, it was the
starting point of the long road toward the European Union.
[x]. It seems unfair to
regard the Marshall Plan as the victory of capitalism over communism, for the
Marshall Plan itself was based on elaborate planning.
[xi]. For an interesting
reference to the relation between the Marshall Plan and Keynes, see Markwell
(2006, pp. 266–7).
[xii]. What remains uncertain is
how he would have dealt with the position of the UK in the power politics of
the world. To what degree would he have reacted to a certain element
recognizable in the Marshall Plan― lack of consideration for the
UK in terms of the British Empire? Taking the subsequent developments— the deteriorating situation of the UK, the emergence of the two
hegemons (the USA and the USSR) and the Suez Crisis — into account, he could not have done anything to prevent the British
Empire from disintegrating, as it eventually did with the Macmillan Cabinet.
[xiii]. A rough outline for this
runs as follows. May 2009: spread to the PIGS (Portugal, Ireland, Greece and
Spain), leading up to the Euro crisis; November 2010:
the bailout plan
to Ireland; May 2011: the bailout plan to Portugal;
July 2011: the second-round bailout plan to Greece, and enlargement of the EFSF (European Financial Stability
Facility); 26 October 2011: the EU
summit; 11 December 2011: the EU summits the main theme of which was to
establish the 'Fiscal Union'. Standard
& Poor's (S&P) arguably remarked
that the EU summit determined only a long term matter (Fiscal Union), without
considering the short term one; 21 December 2011: the ECB announced a
drastically easy monetary policy ('Long Term Refinancing Operation') which contributed to keep the financial market calm; at the
beginning of 2012: there emerged the Euro crisis in various countries; 25 January 2012: Merkel
clearly referred to 'Political Union'; 30 January and 2 March 2012: the EU summit the
main theme of which was, again, the 'fiscal compact'; 9 March
2012: Greek 'haircut' negotiation (debt swap deal) was finally agreed. However, this does
not mean that Greece and the Euro zone escaped from the Euro crisis, for these
measures aim at quelling the financial sector without any consideration for the
difficulties of the PIIGS (Italy added) economies.
[xiv]. On this, see Amato and
Fantacci (2011).
[xv]. Concerning the relation
between the EMU (the Economic and Monetary Union of the European Union) and
Keynes's ICU plan, see Trautwein (2010). For a critical
view of the Euro system from Keynes's ICU point of view, see Paus and Troost (2011).
[xvi]. Merkel and the Troika
believe that collapse of the system can be prevented by going further with 'Fiscal Union' or 'Economic Government'. But this would end up being a pie in the sky. Above all, the political divide is so acute, not
only among the Euro member countries but also within each member country, that
there is no room for such a view.
