Keynes’s Battle
over International Monetary System
―Between “Internationalist” System
Designer and Political Pragmatist
Toshiaki
Hirai*
Abstract
The
present paper forms part of a project which aims at examining the proposals
Keynes put forward in regard to a postwar world economic order, and how they
came to be transformed through actual political negotiations. The project
covers, mainly, three targets – commodity problem, relief and reconstruction
problem, and international monetary system. Some work for the former two has been done. The present paper now turns
to the last one.
In the former two, the two facets are clearly recognizable in Keynes.
On the one hand, Keynes as a system designer worked out proposals, which showed
excellence of “internationalism”. On the other, he revealed himself, in the
process of negotiations ― either domestic or international －, as a sort of political pragmatist who would
defend or give clear priorities on the interests of the British Empire.
How about the sphere of international monetary system? To what degree
did these two facets appear? This should be a main concern in this paper.
Thus the present paper has two
objectives. One is to analyze the negotiations over how the postwar
international monetary system should be built between the US and the UK in the
first half of the 1940s. The other is to follow how Keynes’s two faces appeared
in this process.
The
paper runs as follows. Firstly we would see the Keynes’s plan. Secondly,
we would
examine the negotiation process over international monetary system
between the US and the UK in chronological
order which can be effectively
divided into three phases. Thirdly, we would
examine Keynes’s stance. Finally,
we would refer to the significance which these
studies might have in relation to
the current world monetary system ― sometimes referred to as a
“non-system”
―, for the argument developed there is, par excellence, of present
significance.
Key Words: International Clearing Union,
International Stabilization Fund, Keynes, White, Bancor, Unitas
1. Introduction
The
present paper forms part of a project which aims at examining the proposals
Keynes put forward in regard to a postwar world economic order, and how they
came to be transformed through actual political negotiations. The project covers,
mainly, three targets – commodity problem, relief and reconstruction problem,
and international monetary system1.
Some work for the former two has been done. The present paper now turns to the
last one.
In the former two, the two facets are clearly recognizable in Keynes. On
the one hand, Keynes as a system designer worked out proposals, which showed
excellence of “internationalism”. On the other, he revealed himself, in the process
of negotiations ―
either domestic or international －,
as a sort of political pragmatist who would defend or give clear priorities on the
interests of the British Empire.
How about the sphere of international monetary system? To what degree
did these two facets appear? This should be a main concern in this paper.
Thus the present paper has two objectives. One is to analyze the
negotiations over how the postwar international monetary system should be built
between the US and the UK in the first half of the 1940s. The other is to
follow how Keynes’s two faces appeared in this process.
The paper runs as follows. Firstly we would
see the Keynes’s plan. Secondly, we would examine the negotiation process over
international monetary system between the US and the UK in chronological order
which can be effectively divided into three phases. Thirdly, we would examine
Keynes’s stance. Finally, we would refer to the significance which these
studies might have in relation to the current world monetary system – sometimes
referred to as a “non-system” -, for the argument developed there is, par
excellence, of present significance.
2．Keynes Plan
－ September
1941 - August 1942
The International Clearing Union Plan (the ICU or the
Keynes Plan) was firstly presented on September 8 in 1941, earlier than the
International Stabilization Plan (the White Plan). As Table 1 shows, it reached
the version dated August 28 in 1942 after three revisions. As far as the Keynes
Plan is concerned, this is the most fundamental one, so that it should be called
the “genuine” Keynes Plan.
Table
1. Several ICU Plans
- September 1941 to August
1942
|
Sep.8, 1941
|
Post-War Currency Policy
|
|
Sep.8, 1941
|
Proposals for an International
Currency Union
(First Version)
|
|
Sep.16, 1941
|
R.H.Brand sent Keynes E.F.
Schumacher’s
memorandum, “Some Aspects of
Post-war Economic Planning” which advocates international clearing
arrangements.
|
|
Nov. 18, 1941
|
Proposals for an International
Currency Union
(Second Version)
|
|
Dec.15, 1941
|
Proposals for an International
Currency Union
(Third Version)
|
|
Jan.,1942
|
Plan for an International
Currency (or Clearing) Union (Fourth Version)
|
|
April 15, 1942
|
Harrod wrote to Keynes a
proposal to set up an Anglo-American economic service for the postwar world
economic order, which deals with the ICU, a buffer stock plan, a relief and
reconstruction plan, and an international capital flow control plan.
|
|
August 28, 1942
|
Proposals for an International
Clearing Union (“genuine” ICU Plan)
|
2.1 The Proposal
for an ICU dated August 28 1942
The “genuine” ICU proposal basically
runs as follows.
(i)
The “parity” of a member nation defined as the exchange rate between its
currency and “bancor” (to be explained later) is set up on agreement among the
member nations. Thereafter, when fundamental disequilibrium occurs, the nation
concerned is allowed to change the parity subject to consultation. Therefore,
the ICU adopts a kind of fixed exchange rate system.
Bancor is an international currency only
used between central banks. It has a fixed exchange rate with gold. Each
central bank of a member state has its own account in terms of bancor, through
which international settlement is to be made. All the international
transactions are carried to a bancor account of a central bank concerned. A
firm, which exports (imports) goods, receives (pays) currency required at a fixed rate in exchange for an
export (import) bill from (to) a central bank concerned. Though a foreign
exchange market exists and firms or individuals are free to exchange foreign
currencies there, the rate is set up, in advance, at a fixed rate by agreement.
Even if the rate departs from the parity, it will reach the parity soon.
It should be noted that an
adjustment is not made by the intervention of a government but through a deal
between a central bank and firms or individuals which would compare the parity
with the exchange rate. In that sense, the ICU system is closer to the Gold
Standard than the IMF system which operated up to the 1960s, albeit all the
three are fixed exchange rate systems. In the former two a government does not
interfere with a foreign exchange market and directly transacts with firms or
individuals, while in the latter a government interferes with the foreign
exchange market but not directly transacts with them.
(ii)
The ICU proposal stipulates that, in order to prevent a persistent increase in
the balance of payments of a member nation in both surplus and deficit
direction, penalty should be imposed on it if the sum exceeds a prescribed value.
(iii)
The ICU proposal stipulates that, in order to contribute to the growth in the
world economy, overdraft facilities should be provided.
(iv)
The ICU proposal advocates that, in order to provide funds for the primary commodity
problem and the relief problem which the postwar world economy should be faced
with, international institutions concerned should open their own bancor
accounts.
Let
us see how the basic mechanism of the ICU works, in which all the transactions
are cleared through the bancor accounts of central banks of member states, by
means of a simple example.
Suppose that 1 bancor = 1 dollar = 2 pounds (at parity), and the London
Automobile Co. exports a car for 1 dollar to the Washington Co.
The Smith
Automobile Co. receives an export bill from the Washington Co., and hand it over
to the Bank of England for 2 pounds. The BOE, in turn, hands the bill to the
FRB. On this occasion, on the BOE’s account 1 bancor is credited while on the
FRB’s account 1 bancor is debited. The FRB hands over the bill to the
Washington Co. in exchange for 1 dollar. Thus the transaction is cleared.
The ICU plan is
consciously presented as correcting the shortcoming of the Gold Standard. In
the Gold Standard, the parity is fixed by the agreement among the member states
while the foreign exchange market freely operates through the operations of
firms and individuals. As a result the exchange rate fluctuates. And yet is
supposed to remain within the range of the exporting point of gold, at which a
central bank sells and buys gold. In the Gold Standard, however, each country
has no discretionary room for economic policy and is racked by the waves of an
international movement of gold.2
2.2 A Sketch of a
Transition of International Monetary System up to the Present Day
Before examining the two plans – the
Keynes Plan and the White Plan, it might be better to describe the path briefly
along which international monetary system has came to follow from the summer of
1942 to the present day.
It
was in the summer of 1942 when the White Plan (Stabilization Fund) appeared as
a rival of the ICU plan. According to this plan, the parity of each member
state is to be determined on the agreement among the member states, and an
obligation of its maintenance is to be imposed on a member state. Therefore, if
the exchange rate is deviated from the parity, a member state should be
responsible for maintaining the parity through the operation in the foreign exchange
market. If the fundamental disequilibrium should occur, a change in the parity
is to be permitted upon agreement.
As
will be explained later, it was the IMF system based on the White plan rather
than the ICU plan that came to be adopted as the postwar international monetary
system. Although both plans adopt a fixed exchange rate system, there is a fundamental
difference. The ICU plan has a “bancor” as an international money, and is
equipped with a facility to create credit, through which it could conquer an
obstacle to economic growth due to shortage of international liquidity.
The White plan, on the other
hand, retained the feature of the Gold Standard, and was the de facto Dollar
Standard, in which the movement of dollars was to have great influences on the
world economy. Based on the subscriptions from the member states, the IMF was
set up for this international system. Each member state subscribed the agreed quota
either in gold or its own currency. The fundamental role of the IMF was, while
overseeing the economic situation of the member states, to make a short-run
loan to a member state which fell into shortage in liquidity. As the IMF system
was not equipped with the facility of credit creation, the liquidity problem of
the world economy was to be determined, after all, by the movement of dollars,
which means that the world economy is to be influenced by the condition of the
US economy and its economic policy. The dollar shortage problem immediately
after the Second World War, the dollar crisis due to the deficit in the US trade
balance, and the creation of the SDR as a solution for liquidity shortage in
the 1960s were the phenomena to epitomize it. This was a system adopted up
until the Nixon Shock in 1971.
As is well known, the world has, thereafter,
adopted a flexible exchange rate system up until now. In this system there
exists no parity, for, because all the international transactions are left to
the foreign exchange markets, it does not need something like a parity. Instead,
however, there is a high possibility that the rates determined there might not
be “appropriate”, subject to violent fluctuations mainly due to speculative
activities. That is why, some sort of appropriate exchange rate (e.g.
purchasing power parity) might be required there.
3. The Two Plans
Compared
― Summer 1942 (starting point) - April 1943
] (announcement)
It was until the summer of 1942
when the two plans were exchanged and started to be examined among the persons
concerned. As a result of these process thereafter, both plans were publicized
in April 1943 (see Table 2). In this section, we would examine the Keynes plan as
publicized and Keynes’s evaluation of the White plan as publicized.
Table 2 The Two
Plans Compared
－ Summer 1942 - April
1943
|
July 22, 1942
|
Keynes received the White Plan
from Phillips. (note: Thereafter it was revised eight times before Keynes received
it around Feb. 1943.)
|
|
|
Phillips’ preliminary discussion
with (US) Berle, Pasvolsky and White over the ICU plan.
|
|
Sep. 23, 1942
|
Keynes’s discussion with (US)
Winant and Riefler
|
|
Oct.23, 1942
|
A long discussion between Keynes
and White over the two plans
|
|
The end of Oct., 1942
|
Keynes explanation of the ICU
to the representatives of the Dominions
|
|
Nov.9,1942
|
Another version of the ICU plan
|
|
Dec.11, 1942
|
Introduction of “Unitas” into
the White plan
|
|
March 1, 1943
April 16, 1943
|
・The
two plans compared by Keynes
・Notes
on I.C.U. and I.S.F. by Keynes
|
|
April 7, 1943
|
・the
White plan publicized
・the
ICU plan published as the White Paper (Cmd 6437）
|
|
April 27, 1943
|
On the White plan by Keynes
|
3.1 International Clearing Union Plan (April 7, 1943)
In April 7, 1943, both the
International Clearing Union Plan (the ICU) was publicized (on the same day the
White Paper (Cmd.6437) was also publicized).
Keynes wrote the preface to it. Here Keynes states that there are four
international spheres to allow for: (1) currency and exchange mechanism; (2)
framework for commercial policy, (3) primary commodities, and (4) aid to
investment. As the conditions which should be emphasized in setting up
international economic systems for these spheres, the following are mentioned:
(1) to minimize the interference with domestic spheres.
(2)
to make a planning technique applicable irrespective of types of the member
states.
(3)
to make administration and management of international organizations concerned
be genuinely international.
(4)
to give the member states a withdrawal option.
(5)
to make a planning concerned be managed for the sake of the overall and
particular benefits of the member states.
That
said, Keynes makes clear that for a state (e.g. the UK) which should face the
relief and reconstruction in the postwar period, a proposal to be
preferentially implemented in the first sphere should be the International
Clearing Union.
Concerning
the ICU, Keynes refers to the following.
(1)
The ICU does not make a long-term loan.
(2)
The ICU should be responsible for preventing an economic growth in the world as
a whole from being spoiled because surplus member states should go on holding a
huge sum of balances. The ICU is aware that it could pave a new path by making
not only deficit member states but also surplus ones accept responsibility for
international persistent disequilibrium.
3.2 The Two Plans Reviewed (April 16, 1943)
Keynes wrote a memorandum, dated
April 16, 1943, on the Clearing Union Plan and the Stabilized Plan (the SF or the
White Plan) as follows.
(1)
Voting Power. Keynes does not stick
to the power of voting. However, he thinks that there is a problem with the SF
rule to the effect that all the decisions should require four fifth majority
and that special matters should require three fourths, while the other matters
should be OK with a simple majority.
(2)
Gold. Keynes thinks that as far as
treatment of gold is concerned, there is less difference between the two than
the media causes a stink. He states, however, that the SF plan has no provision
for changing the gold value of unitas, and that unitas is of no use at all.
Therefore, it is necessary to activate unitas. (Although it was in Dec. 11,
1942 when unitas came to be introduced into the White plan, little or no significance
was attached to it. Cf.
pp.233-448.)
(3)
Multilateral Clearing. Keynes states
that the SF plan has no provision for multilateral clearing, so that it should be
revised. He sees, however, the difficulty of revising it.
(4) The Scale of Quotas. The fundamental
difficulty recognizable in the SF plan is that the desire for debtor countries
to get currencies of some particular creditor countries far exceeds the ability
of the Fund to provide them (Cf. p.247).
(5)
“Abnormal War Balances” problem –
that is, “Sterling Balances” problem. As the war proceeded, the UK, for
example, was to owe huge sum of debts to India. If these debts were replaced
by, say, dollar - scarce currency - by India, the UK would face great financial
difficulties. This is a problem referred to here.
(6) The
Rationing of Scarce Currencies. But for this provision, the logic of the
whole plan would go broke, and yet it would be extremely difficult to work out
a practical plan.
(7)
Subscribed Capital vs. Banking Principle.
This is the most controversial point over which we should be most hesitant to
make compromise. Keynes states that we should observe the banking principle, going
to such an extent that if we could do so, we might make compromise in the rest
of the matters.
4. Integration Process of the Two Plans
－ June 1943 – April 1944
After the public announcement of the two plans, there
naturally followed the task of discussing and negotiating how they should be
integrated. This negotiation process can be divided into two. One is an offense
and defense over the “monetization of unitas”, which was a persuasion process
from the Keynes side to incorporate a flavor of bancor into unitas, while putting
the main basis on the White plan. This indicates that on the negotiation table
between the two states the Keynes plan was treated as a secondary plan from the
beginning which the UK side tacitly acknowledged. The other is the final phase
of the negotiation, which was to be determined overwhelmingly in the form of
the White plan.
Let
us examine each of them in details (Table 3 summarizes the process
concerned).
Table 3 The Integration Process
of the Two Plans
－
June 1943 - April 1944
|
June 29, 1943
|
Integration of the C.U. and the
S.F. by Keynes
(and yet based on the S.F.)
|
|
July 19, 1943
|
Keynes’s comment on the White plan
(July 10
version)
|
|
Sep. 21, 1943
|
Proposal to monetize Unitas
（White
showed opposition to it.）
|
|
Oct. 1943
|
The relation between the two
sides deteriorated.
|
|
Oct. 12, 1943
|
Anglo-American Draft Statement
of Principles
|
|
April 22, 1944
|
Joint Statement by Experts on
the Establishment of an International Monetary Fund (Cmd. 6519)
|
4.1
Offense and Defense over the Monetization of Unitas
– June 1943 to October 1943
In
June 1943 an unofficial conference between the US and the UK was held in
Washington. On this occasion Keynes wrote a memorandum titled “The Synthesis of
C.U. and S.F.” dated June 29. In spite of the title, it was, in fact, based on
the White plan, putting the Keynes plan on the shelf, advocating that the Fund
should adopt unitas.
Reading the White plan (dated July 10)
thereafter, he sent a letter (dated July 19) to Eady, revealing his stern view.
In my judgment we must be prepared to
face a complete breakdown unless
important
changes are made (p.316).
I submit that our delegation should be instructed to break off
negotiations for
the
time being unless satisfactory concessions can be obtained on the three
essentials
… (p.320).
The
“three essentials” run as follows.
(1)
To make a
change in the value of a member’s currency much more elastic,
preserving
sovereignty in this respect.
(2)
The Fund
should monetize unitas and perform multilateral clearing.
(“The
Fund must not deal in a mixed bag of currencies but only in unitas” [p.317]).
(3) Gold subscription for a member should be
12.5% rather than 25%.
In a letter dated September to
White, Keynes put forward, for the first time, “monetization of unitas”
(pp.342-344). The gist of it was an attempt to reform the SF like the ICU –
that is, each member state should be to open an account within the SF, through
which multiple clearing is to be made (pp.342-343). This is stated, however,
given that unitas should be used together with other currencies, so that it
seems to step back as compared with the argument shown in the above letter to
Eady dated July 19.
Concretely speaking, his proposal runs as
follows:
As
it stands, unitas has no function to play, so let us adopt unitas - together
with dollar and pound - as international currency which, however, exists only
on the accounts of the central banks of the member countries.
Suppose, for example, that the UK
sells 100 pounds to the US. Given 1 pound = 1 unitas, the UK can get 100 unitas
from the US and credit it with its unitas account, while the US debits 100
unitas and gets 100 pounds. The two have an obligation to use unitas on the one
side of buying and selling.
That indicates that each member has a “bag”
which contains gold, dollar, and unitas (as an account unit). The Fund also
possesses the same kind of “bag”.
This
is monetization of unitas proposed by Keynes. It should be noted that it is
quite different, in nature, from bancor.
Bancor is a system in which all the international transactions are to be
cleared through transfer between the bancor accounts of central banks, which
means that dollar and pounds do not
appear at this stage. Among other things, there does not exist foreign exchange
markets. In the plan for monetization of unitas, on the other, unitas is used
as money in the same way as dollar and pound are. Although, in form, it might look
like bancor, it is quite different in essence. In this type of unitas, international
transactions are made through the foreign exchange market, so that each central
bank is required to interfere with it in order to maintain its parity.
Let
us see the two provisions which Keynes put forward.
A
member should try to sell its own currency to other members in exchange for the
transfer of unitas at parity on the account of the Fund.
A member should try to buy other member’s currency from other member, so far as it holds unitas balances, in exchange for the transfer of unitas at parity on the account of the Fund.
That is, e.g. when the UK sells pounds to the US, it should get equivalent units of unitas at parity on the account, while when the UK buys dollars from the US, it should pay equivalent units of unitas at parity on the account.
In September 24, 1943 a joint meeting of the U.K. and U.S. was held at the U.S.
Treasury. The U.K. side had, besides
Keynes, a group of brilliant economists such
as Robertson, Robbins and Meade3
while the U.S. side was occupied by civil
servants. White was not there.
On that day, the meeting proceeded with
Keynes as a key player, who made comments on the White plan, suggesting points for
improvement. It was mainly Bernstein at the U.S. Treasury who responded to
Keynes.
Keynes put forward two proposals. One
was an agenda to make access to the Fund certain, while the other was around
the monetization of unitas.
Concerning the
former, Keynes argued that the Fund should make it possible for a member to
borrow up to 120% of the subscription. This was proposed to alleviate a risk
that the room for domestic policy might be small. As to subscription, Keynes
proposed that subscription in gold should be confined up to 12.5% of the whole
amount, and the subscription made in gold and securities should be regarded as “collateral”.
(It is offered as collateral rather than subscription. This is a point of view
of the country which possesses small amount of gold.)
The above was able
to be written in terminology of the S.F. The following
proposals, however, were not so easily dealt with.
(1) Unqualified multilateral clearing (the point which Keynes emphasized most)
(2)
The duty of members to maintain exchange
stability (Different from the Keynes plan, management of foreign exchange
markets remains important in the White plan.)
(3)
The passivity of the Fund (an unitas account represents it. This is true of the
Keynes plan)
The
following is an example of the discussion between Keynes and Bernstein at the
meeting.
Keynes said
that “Britain wanted a system which looked different and was different from the
pre-war system. … the S.F. provision that the amounts of the Fund should be
kept in unitas, contained the germ of agreement on the subject” (p.348).
Bernstein responded that “no magic could disguise the fact that the Fund might
be short of particular currencies even in utitas terms.”
Keynes replied
that “[I do] not dispute this as a matter of logic but [I] prefer the concept
of a monetized unitas to express a generalized currency, or claim on the world
at large.” Bernstein further responded that “the Treasury Group [sees] merit in
all the points put forward by the United Kingdom Group, but would want to
discuss them separately with the State Department. It might be difficult to
persuade the bankers on several of the proposals” (p.349).
In
a letter to Eady dated October 3, 1943 Keynes reported the situation in
Washington. He said that he is
wholeheartedly welcome in Washington, quite different from his last visit
around the Pearl Harbor attack. Among others, he said he felt great comfort
there because of Lippmann and Acheson4.
Then he described his remarks of the persons whom he met there5. Let
us introduce some of them below.
I have seen
quite a lot of Berle, who is a queer attractive, unattractive figure in
disequilibrium with himself and the world. One never knows in what direction he
will rush off. But he has been extremely helpful and generally tending to take
our side in the discussions. (p.354)
Keynes
refers to some officials in the State Department. Among others, a
description
of Laughlin Currie should be worth attention.
Currie is an old friend of mine and I know him well, but there is no one more difficult to handle. He is extremely suspicious and jealous, very anti-British on such issues as India, and always inclined to assume the worst. (p.356)
A
description of White is also interesting.
He is over-bearing, a bad colleague, always
trying to bounce you, with harsh rasping voice, aesthetically oppressive in
mind and manner; he has not the faintest conception of how to behave or observe
the rules of civilised intercourse. At the same time, I have a very great
respect and even liking for him. In many respects he is the best man here. …
Moreover, his over-powering will combined with the fact that he has
constructive ideas mean that he does get things done, which few else here do.
He is not open to flattery in any crude sense. The way to reach him is to respect
his purpose, arouse his intellectual interest … (p.356)
Then follows a report on the
negotiation as the main theme. Firstly Keynes mentions five points from the
British side which are thought to be acceptable to the U.S. side as follows.
(1) elasticity of the exchange rates
(2) the
formula for changing the gold value of unitas
(3) an increase of the quotas to 12 billion
dollars
(4) the amount
of the gold subscription
(5) a system
extremely severe on scarce currency
On
the other, Keynes points out problems which are difficult to agree as follows.
(1) the British claim that gold subscription should be regarded as a pledge
(2) the US claim that the Fund should be
given more discretion in members’ using the Fund (the British side claims
passivity on the activity of the Fund)
(3) the US
opposition to monetization of unitas
Among others, the most point in dispute was the “monetization of unitas”.
(The US) are
adamant against the monetization of unitas and hold out strongly for the mixed
bag of currencies. They admit that our proposals are immeasurably better on
merits, but declare that it is only by putting on this very peculiar fancy
dress (a
bag which contains dollar and pound but no unitas) that they can get the thing
through their own bankers…. (p.359)
Keynes grows distrustful of this
attitude.
… there is nothing more difficult than to continue a controversy with people
who admit that
your proposal is immeasurably better than their own but nevertheless hold out
on the ground that for obscure psychological reasons only theirs is practical
politics. (p.360)
Keynes
turned to Bernstein for his attack.
Both the
currency scheme and the investment scheme are, I think, largely the fruit of
the brain not of Harry [White] but of his little attaché, Bernstein. (p.364)
Keynes
threw him in the roast as follows.
… when we seduce Harry from the true faith, little Bernstein wins him
back again in the course of the night. Bernstein is a regular little rabbi, a
reader out of the Talmud, to Harry’s grand political high rabbidom. He is very
clever and rather sweet, but knows absolutely nothing outside the turns and
twists of his mind. (p.364)
The “investment
scheme” referred to above, in fact, had been simultaneously discussed with the international monetary
plan. Concerning this, Keynes sent three letters to Eady on October 3, 1943, in
the third one of which Keynes sated as follows.
Concerning the
international investment plan, White’s very mysterious action surprised many
people around him. He presented it, out of blue, to the Congress, asking to
make it public at the same time. Keynes, who knew it, reproached him severely.
White apologized Keynes for his misbehavior, promising not to repeat that sort
of behavior.
White’s
proposal was very queer. In Keynes’s judgment, it contained a sincere motive to
save the situation if it would have been described well. But in fact, it was
presented in such a way as would make the people understand it in quite the
contrary way.
Keynes remarks
that it is also true of the “mixed bag of currencies” in the monetary scheme.
He may be
right in thinking the United States is 25 years out of date, and that no
American banker will accept anything unless first of all it look entirely
imbecile, but are people really so silly, or if so silly, so easily deceived as
all that? It is rather a tragedy. For there are some very good ideas and
immensely disinterested, fine international purpose in the scheme. (pp.
363-364)
The atmosphere
of the conference held on October 4 was what could be said to be dismal. A
participant from the UK expressed the situation as follows.
What absolute Bedlam these discussions are! Keynes and White sit next [to]
each other,
each flanked by a long row of his own supporters. Without any agenda or any prepared
idea of what is going to be discussed they go for each other in a strident duet
of discord, which after a crescendo of abuse on either side leads up to a
chaotic adjournment of the meeting in time for us to return to the Willard for
a delegation meeting. (p.364)
Under that atmosphere, limitation to drawing rights, the meaning of rare currency, constraint of an exchange rate within 10-20% around the initial parity and so forth were discussed.
4.2
The Final Phase of the Negotiation
- October 6, 1943 – April 22, 1944
The
meeting on October 6, 1943 saw a significant development. It agreed to set up a
committee for writing a draft in terms of the Stabilization Fund, which was to determine
the details of the Fund. After this meeting was over, Keynes wrote a letter to
White, showing the view of the British Government, which contains the following
three points.
(1) “the preference for a system under
which an alteration in the exchanges requires only consultation and not formal
approval by voting”.
(2) instructions to aim at the monetization
of unitas
Concerning
this point, Keynes states as follows.
Reserving our
position as to the form in which the Fund is set up. London emphasises that
they are not at present prepared to release us from our instructions to aim at
the monetisation of unitas ...
(p.367)
(3) subscription
in gold should be regarded as reserve.
In his
letter to Eady dated October 8, Keynes highly esteemed the discussion at the
House
of Commons while he threw harsh criticism of that in the House of Lords.
What
interest us in this letter is a description of Morgenthau, the Secretary of the
Treasury.
An experienced
American told us the other day that during the ten years of Morgy’s reign the
U.S. Treasury has devoted its whole efforts to appeasing a non-existent public
sentiment, and has invariably failed to be even dimly aware of the public
sentiments which really exist. (p.369)
And Keynes
points out the lack in governability in the US (p.370).
On October 8 and 9, a task of drawing a
draft was carried out. Although eventually this was to go well, there occurred
a great turmoil on the eve of it. It was mainly due to Bernstein who made a
proposal at the last minute such as returning back to the initial stage. This
point is also described in Keynes’s letter to Eady dated October 10. There he
stated in detail that it was Bernstein, White’s subordinate, who became the
largest obstacle in the negotiation.
He
made a last minute effort to win back the ground he had lost, by persuading
White, at the end of our meeting on Saturday morning, to produce a document for
us to sign on which the Directive was to be interpreted, which brought about
half of S.F. right back again [in] the exact words which the Talmudist wrote
many months ago and has never been willing to alter, if he could help it, by an
iota. … I, therefore, at the end of the morning meeting reacted rather
violently, saying that it was really intolerable at the eleventh hour to have
all these matters re-opened in exactly the same terms that we had started with
before the discussion began. The other members of my Group thought I had
overdone it, but after we had left the meeting a telephone message came along
half an hour later that the paper was withdrawn… It was one example, in my
judgment, of how important it is in this country to react strenuously.
(pp.372-373)
Thereafter
the drafting procedure went well and finally reached an important draft titled “Anglo-American Draft Statement of Principles”. As is
evident from his letter to his mother (cf. p.374), Keynes was very much
satisfied with it. Keynes’s appreciation of White is very high notwithstanding
his weird behavior.
Yet all the
same, I hold to the opinion which I have already expressed, that taking
everything into account Harry White is probably just about the best man here,
and the most serviceable to all concerned. (p.373)
“Anglo-American Draft Statement of Principles”, which
should be a very important official document between the two states, was prepared
on October 12. The draft was very weird in that it was, in substance, the White
plan void of unitas, showing the monetization of unitas, which the UK insisted
upon, only as a sort of appendix (As will be later explained, in the Joint
Statement issued on April 22, 1944, unitas was completely to disappear).
As the subtitle of the Anglo-American Draft
Statement – “Joint Statement by Experts of United
and Associated Nations on the Establishment of an International Stabilisation Fund” – shows, this
is put forward completely based on the White plan.
Before the
main text is stated, the following phrase is inserted by the British side.
(The
following draft is intended to set out and illustrate certain principles. It is
expressed in terms of a Fund which holds members’ currencies. This form of
expression has been used to meet the convenience of the United States Treasury
and in no way commits the British representatives to recommend acceptance of
such a form.) (pp.379-380)
This seems to reflect the US side’s treatment to save the face of the UK side. And, moreover, we see the British plan after the Draft Statement of Principles, beginning with the following sentence. However, it could be said to be of no use.
It
states that the proposal without unitas shown in the main text can be expressed
even if unitas is introduced. This is no more than the intention of the British
side to cover up the defeat.
(V) The Draft Statement of Principles in Terms of a Monetised Unitas)
In
order to express the substance of the Draft Statement of Principles in terms of
monetized unitas, the following paragraphs should be substituted for those
carrying the same number in the Draft discussed with the American group:- (p.389)
It should be also noted that Keynes’s stance concerning the monetization of unitas was transformed (or receded) from the initial stance that the Fund should use only unitas as international money to the later stance that unitas should be considered to be one element in the basket which contains dollar and pound as well. The above change belongs to the latter one.
Due
to the above-mentioned difficult situation of the negotiation in October as
shown above – the dismal atmosphere in the committee, White’s mysterious
behavior, Bernstein’s obstructionist operation at the last minute and so forth ―
this international negotiation almost went bust. Give this
situation, the two states managed to reach an agreement by a hair’s breadth, so
that we can understandably see how glad Keynes was to get the draft. And yet
this was no more than Keynes’s stance as a policy maker. When he stood as a
designer of an international system, he must have had a poor opinion of Keynes
as a policy maker.
In his letter to Opie dated December 7, 1943,
Keynes’s stance, moreover, toned down, stating that we needed not adhere to the
monetization of unitas. Here he pointed out the following two problems.
(1)The importance of adhering to the monetized
unitas version
(2)The need of being clearer about what
happens during the transitional period
Having said that, he argues that
it is (2) that is now important (p.393), which means
his adherence to (1) attenuated.
This is also recognizable in the following.
I
have every natural reason for vastly preferring this set-up. [But] I cannot
persuade myself that the difference between the two versions is really such as
to make it a justifiable reason for an ultimate breach. (p.394)
In short, Keynes came to approve the Anglo-American Draft Statement.
Eady
wrote a very useful document (dated January 19, 1944) which describes the
situation around this period well. From this one could hear the discordance in the
UK with the plan which Keynes brought back.
It
was Keynes and Robertson who whole-heartedly approved the Draft. In the case of
Keynes, he judged that the Draft was too insufficient for the UK to procure
necessary funds, so a loan negotiation with the US should be indispensable (In
fact, Keynes was to succeed in making the UK get a huge loan from the US
through the Anglo-American Financial Agreement of December 1945.).
It was
the Bank of England which strongly opposed the Draft for the following reasons:
The power of discretion which it had enjoyed might be greatly reduced; the
existence of the sterling balance problem6; doubt of “passiveness”
of the Fund; a fear that management of the Fund might be governed by the US.
There were persons such as Waley and Henderson who were not earnest in
supporting the Draft, and rather saw it critically.
The
following passage which Eady revealed in the document is very impressive.
General framing of the scheme.
Although
very substantial modifications have been made general structure of scheme is
the same original American scheme. Attitude and technique is derived from
Equalisation Fund technique … (p.397)
In
February 7, 1944 Keynes almost approved the US plan.
Under the Stabilisation Fund proposals the institution was to bank with
the member countries, holding accounts with their central banks on which it
would be free to operate in terms of each member’s currency, so that no new
international unit would be necessary. An international money of account,
unitas, was mentioned in the Stabilisation Fund proposals but was only
mentioned to be forgotten and played no effective part. Now this difference
[between the S.F. and the C.U.], however important, is nevertheless only a
matter of technical form. A given set of proposals can be drafted in terms of
either set-up so as to be identical in substance and legal effect. (p.405)
Here Keynes states that the
difference between the ICU and SF is no more than a problem of technical form,
and that unitas itself is unnecessary.
…
we cannot enter into this scheme [IMF system] unless there is an assurance of
our not being expected to use its facilities prematurely, and … we cannot have
any such assurance until they have given us some indication of the financial
regime succeeding the lend lease phase which should, in their opinion, assist a
steady progress by ourselves and others into the period when equilibrium can be
secured without large-scale assistance from outside. (p.407)
Keynes states that it might be
wise to get an early opportunity to candidly tell it to the US Administration
We knew from
Eady’s document written on January 19 how divided the UK was over the
Anglo-American Draft Statement. The same is recognizable in the comment which
Lord Cherwell made to the Prime Minister on February 9. According to it, there
was an antagonism between the two factions. One was the Keynes faction which
was supported by most of the Treasury, the Economic Section and the Board of
Trade. The other was the Bank of England faction which was supported by
Henderson and Eady.
On February
11, the War Cabinet agreed to set up a “Committee on External Economic Policy”
to determine how it should issue an instruction. Keynes described the
discussion in the committee as “a complete bedlam” (A letter to Waley dated
February 17. See p.409).
The committee issued a report on February 18,
which almost reflected Keynes’s view (cf. p.409). Against it Beaverbrook
submitted a dissent document. He argued that an alternative plan should be
worked out through consultation with the BOE (p.410). The War Cabinet allowed
deliberations to proceed along the lines by the majority report.
Keynes’s
stance declared on February 7 was also clearly expressed in the memorandum to
the Chancellor dated February 23. This was a pragmatic stance to try to
establish an “Anglo-American Bloc Offered as an International Scheme”. This
expression vividly reflects his state of mind. He felt much practical
attraction in it, for there the UK can maintain the dignity of the British
Empire as a central player together with the US, and yet it is proposed as an
international scheme.
Contrastingly,
The “Sterling Currency Bloc” was an idea of currency zone excluding the US. Given
the present powers of the US, this would be completely broken down, and lead to
the dissolution of the British Empire itself (Remember the Anglo-American
Reciprocal Aid Agreement in February of 1942, in which the biggest point in
dispute was the abolition of the imperial preference tariff. See vol.23,
pp.194-228). If it comes to “Dollar Diplomacy”, the US only would rule the
roost, and there would be no room for the British Empire to play. Thinking that
way, Keynes endorsed an “Anglo-American Bloc Offered as an International Scheme”.
Here
Keynes repeated the importance of getting a loan from the US.
We are in no position, therefore,
to set up as international bankers, undertaking large and not closely defined
liabilities, unless we can secure a general settlement on the basis of
temporary American assistance followed by an international scheme. (p.412)
Now
that the effort to reform the Stabilization Fund plan through monetization of
unitas failed, the Keynes plan as the International Clearing Union came to be
completely defeated.
On
March 8 Keynes sent a letter to Beaverbrook, who supported the BOE’s view.
It was a harsh criticism of the
BOE
(p.417), to which Beaverbrook responded, defending the stance of the BOE.
In a letter to White dated March 18, Keynes
sent a message to the effect that he
would
not make the unitas problem a condition for concluding an agreement.
The result of this was that you and Opie were able to arrive at a text, which was complete in respect of the discussions up to that point, except the question of the unitas version. Personally, I think it most unlikely that we shall make unitas a condition of acceptance, but we are not yet in a position to tell you so officially. (pp.427- 428)
On March 21
the discussion of the UK with the British Dominion in which
Keynes
played a leading role, ended. It was agreed there that although the
monetization of unitas would be desirable, we should not adhere to it (p.429).
In a letter to
Eady dated March 29, Keynes states the following.
One is his
argument that the relationship of a monetary scheme with other schemes is
important (p.430). This could be said to be remnants of his idea which grasped
the postwar order in total perspectives. The other is the necessity of Opie’s
informing White on whether we should approve the unitas point. The sooner the
better (p.431).
What was now
going to be decided was to be finally decided in the international conference
(in fact, in the Breton Woods Conference). To Keynes, however, all these
matters seemed to be terribly confused and were not worthy of serious
consideration (p.432).
On April 14
the British Cabinet agreed to the public announcement of the “Joint Statement”.
On April 16 Keynes issued the following warning: If it should be regarded as a
behavior which betray the promise with the US, we would take quid pro quo from
the US, which would seriously worsen our situation.
If our attitude can be construed, not perhaps legitimately but
plausibly, as a departure from, or repudiation of, our obligation under Article
VII of the Mutual Aid Agreement. I have not a doubt that the Americans will retaliate
by withdrawing from the rest of this Agreement. This could mean our losing the
sheet-anchor of our post-war settlement of lend lease, namely the undertaking
that the ultimate aggrangement shall not be “such as to burden commerce”. (p.435)
In April 1944 Keynes made a comment on
an important deliberation in the House
of Commons – the one over the Empire
unity, especially Preferential Customs
(Article 7 of the Reciprocal Aid
Agreement). He said that the anti-America and the
pro-British Empire sentiment was
prevalent there. Although this should be a
transitory problem and not be a problem
in the long term, we need to be careful of
it for the moment.
Keynes
was sure that the Anglo-American cooperation should definitely make progress in
the long term.
The
Americans are also, I suppose, both in their relations with us and with others,
suffering from the usual prejudice against a benefactor. That does not alter
the fact that, one way or another, the point is being reached when the average
man finds it very difficult to keep his temper or conceal his feelings. (p.447)
On April 22
Keynes wrote “Explanatory Notes
by UK Experts on the Proposal for an IMF” (Cmd 6519) for the Joint Statement,
in which he definitely said that we need neither bancor neither unitas (p.438).
In
his letter to Opie dated April 23, Keynes vividly described his feeling at the
time and the whole atmosphere. He stated that he got a permission from the
British Government to the effect that he can say to White that he would not
adhere to the unitas version any longer. It was sent Opie immediately after he
left the UK.
But it reached Opie later than
expected, which not only was to put the negotiation on a disadvantageous
position but also was to be used by the White side as a sort of ultimatum..
Keynes
said that he was not individually complain of White’s adoption of ultimatum,
for it was mainly due to the delay and confusion in the British response.
Keynes
was at that time preoccupied with how he could persuasively present the
document to the public. He said that he could do well to the mass media, and
was to meet a group of MPs for the same purpose.
We
can also see the reference to the situation of the US side. Cordell Hull
earnestly supported the IMF, behind which there is a backing, naturally, from
the Roosevelt Administration. Roosevelt would emphasize the international
cooperation in the economic field as the pledge in the Presidential election. He
continuously built up international cooperation in the economic field such as POFA,
UNRRA, ILO and so forth. Then would come the IMF and the IBRD. Keynes applauded
these activities.
All these projects taken together can be represented as a formidable
first step towards international collaboration over the economic field. (p.445)
The above is what is desirable to
us, and it is important not to obstruct the President’s action. Keynes stressed
that we must never make quarrels with the US.
And yet, he added, we had better
not act in such a way that we should support him in earnest, for the President
himself does not want his move to show the Anglo-American outlook.
Keynes’s stance was clear-cut. The UK has no strength
to take an independent line, resisting the US. Even if it would do that way, it
would doom to fail in front of the strength of the US, and would be driven into
the collapse of the British Empire. What matters now is to build a cooperative
relation with the US, avoiding conflicts. In this way the British Empire and
the British banking could stand on barely an equal standing as the US in the
center of the world in the same way as before. There would be no way for the
British Empire to survive other than this.
During the period from Keynes’s return from
the US to April next year, the above draft was revised seven times. Moggridge
sums up the negotiation process between the UK and the US during this period,
which can be shown as Table 4. As is clearly seen at first sight, almost all
the points of revision came from the US side and were accepted by the British
side.7
Table 4 The Final Phase
of the Negotiation
－ October 6, 1943
- April 22, 1944
|
Problem of contribution by gold
|
Acceptance of the American view
in December plan.
|
|
Problem of sterilization
of
contribution
|
Acceptance of the American view
in December (The Fund can use gold for transaction). The UK regarded it as
collateral.
|
|
Payment of withdrawal in gold
|
Acceptance of the American view
(when a member country buys other member country’s money by gold from the
Fund.)
|
|
Withdrawal of money for capital
|
Acceptance of the American view
in January
|
|
Monetization of unitas
|
The UK side gave it up in April
version.
|
5. Keynes’s
Stance
Keynes had two aspects – an
advocate of internationalism as a planner and a defender of the interests of
the British Empire, and had a tendency to change his stance according as the
situation developed.
In the initial period, Keynes designed and put forward plans filled with
the spirit of internationalism for commodity problem, relief and reconstruction
problem, and international monetary system, which were considered to be
important in constructing the postwar international order. These clearly showed
Keynes’s excellence in internationalism as a system planner, albeit they would
ensure the interests of the British Empire.
As the
practical political and economic situations proceeded, Keynes came to show an
aspect of the pragmatist, among others making it a priority to protecting the
interest of the British Empire.
In the
case of commodity problem, he came to advocate the Sixth version (May 1942),
giving up the Fifth version [of International Buffer Plan] (April 1942) which
was much more advanced in internationalism. Then he put forward proposals which
were more retrograde in principle (the Eighth Version, February 1943). Although
in September 1943 the plan was discussed with the US, it was rather negatively
treated. Moreover, a commodity plan itself failed within the UK due to harsh
opposition from the Ministry of Agriculture.
In
the case of relief and reconstruction problem, it was in October 1941 when he put
forward the Central Relief and Reconstruction Fund Plan. However, as early as
February 1942 he came to adopt a pragmatic line mainly dependent on the
existing Lend-Lease, giving up the CRRF plan based on internationalism because
of an abrupt deterioration of the economic situation of the British Empire.
Then
came an international monetary system. Around June 1943 Keynes, in substance,
came to put his own International Clearing Union plan aside, and tried
to make some sort of compromise
by reforming the White plan through the monetization of unitas. This effort
failed because it was not accepted by the US. Then, in the end, Keynes even came
to justify the White plan on the ground that it was much more crucial to secure
a financial aid from the US – justification difficult to understand from the
point of view of the ICU plan.
As to both commodity plan and relief and reconstruction plan, what
Keynes initially aimed at came to be completely foiled at an early stage
(February 1942 – February 1943). Under these situations, Keynes might have
hoped somehow to establish an international monetary system by accepting the US
plan, albeit incomplete.
Keynes had been much concerned that without the help from the US the
British Empire might collapse. It should be noted, in this respect, that he had
not a slightest idea of emancipating the colonies (for example, as a strategy
which the UK should adopt after the Far East area was liberated, Keynes argued
that the problem should be coped with, without resort to Roosevelt for help,
through cooperation within the British Empire.
How could we interpret the changed stance which Keynes showed through
these negotiations? This is quite interesting and very difficult to answer.
Initially he put forward a plan which is, in nature, based on internationalism.
If he had been a pure scholar and put forward his own idea from the university
or the media, he would have critically argued the process developed in the
sphere of international political economy from a point of view of
internationalism.
However, Keynes was not that sort of man. He put himself in the
forefront of the reconstruction of international order. He also represented the
British Empire, and was situated in the position in which he needed to adjust
the whole, looking for some sort of compromise with the US in negotiation. Thus
his political stance – of course, much influenced by his own political thought –
greatly governed his action, making much sacrifice of his aspect as a scholar
and a system designer.
Therefore, when considering these problems, we need to think of the fact
that we encounter two Keynes – Keynes as an advocate of internationalism and Keynes
as a representative of actual political negotiation. When considering the latter
aspect, we need to examine in concrete terms how he came to make compromise.
Any researcher who are interested in this field is required a cool eye, for
Keynes had neither shown nor spoken some sort of compromise through these
negotiations.
6．Conclusion
－ In Reference to Present Significance
The result of the above
examination runs as follows.
(1) The negotiation between the UK and
the US over an international monetary system started with a face-off of the ICU
plan and the SF plan. (Oct.23, 1942. A long discussion between Keynes and
White). However, we can say that at an early stage, the initiative was gripped
by the US side, as was seen in June 1943 Keynes tried to integrate the two
plans based on the White plan. Although the British side made an effort
partially to incorporate the feature of the ICU into the White plan by
monetizing unitas since September 1943, it finally gave it up in April 1944.
(2) Through these negotiations Keynes
played an outstanding role representing the British side. And yet he gave up
his own ideal ICU proposal at an early stage, and then tried to monetize unitas
but in vain. After that he came to show an aspect of pragmatist who stressed
the importance of getting financial aid from the US. What he aimed at was to
maintain the position of the British Empire in the postwar world through financial
aid from the US, by cooperating with it rather than holding out against it.
The
postwar period was to have the IMF system (based on the White plan) as an
international monetary system up until 1970. The system sometimes referred to
as the Dollar Standard was managed as the fixed exchange system. However,
around 1970, there often occurred the Dollar Crisis, which led to the
announcement of the Nixon Doctrine. Then around 1973 the world monetary system
saw a great transformation into the flexible exchange rate system.
In 1999 the
Euro System was set up in Europe, and a wide area of the advanced region was
incorporated into a single monetary zone. At the same time, however, we saw a
remarkable economic growth in the emerging nations as represented by the BRICS.
Thus in recent years the voices for looking for a new appropriate monetary
system to replace the Dollar Standard has become bigger and bigger.
The
financial globalization which rapidly proceeded in the 1990s has made foreign
exchange markets a target for speculative activities (e.g. G. Solos’
activities). Simutaneously securitized products together with indexed
speculation rapidly increased, to say nothing of the activities of the hedge
funds. Against these tendencies no government has been able to implement an effective
measure up to the present, notwithstanding the devastating financial collapse
since the Lehman shock. Markets are still worshipped, whatever type of markets
they are, by governments, and the financial circles.
Given
these present globalization (characterized by the rule of the SBS, and the
laissez-faire activities of the speculators), how effective the Keynes’s ICU
plan would be --- this is a present serious point for consideration.
It is, truly, a historical problem to investigate how the IMF system was
to be set out through a series of negotiations in the 1940s. And yet the
original ICU plan has, par excellence, great significance for considering a
possible international monetary system. In this respect, we need to pay
attention to the EUP which had had some success in the development of European
monetary system (in the 1960s). Explicitly based on the Keynes Plan, it was a
clearing system among the member nations and had used an equivalent to bancor.)
Appendix:
EURO and ICU Compared
－ How Would Keynes Have Seen?
The EURO system considerably constraints
a degree of freedom for the member countries. They abolished their own
currencies (so the foreign exchange markets disappeared), leaving monetary and
foreign exchange policy to the ECB. Moreover, for the maintenance of fiscal
discipline, the Stability and Growth Pact (SGP) is ruled. This involves that
each member has no means to control and manage its own economy. This is
seriously divergent from what Keynes contemplated in the ICU plan.
However,
because Euro is a local currency, when viewed from the world as a whole, there
exists the foreign exchange market and the flexible exchange system is adopted.
At present the EURO system sees extreme imbalance among the member
nations in terms of the balance of payments, and as a method of tackling this
problem, “structural reform” only such as liberalization of labor markets and
cuts in wage are implemented.
The EURO leaders have met the ongoing crises by resorting to a mixed
policy of bail out and austerity measures. What they have aimed at was to
stabilize the EURO system (the relief of the financial institutions as well),
while imposing increased tax and cut in spending on the countries concerned. As
a result of this, the system has barely survived, while the economies of the
countries concerned have been worsened up until the present day.
If the ICU system rather than the EURO system had been implemented,
there might not have occurred this kind of problem. Using one example, a big surplus
in Germany occurs because of a big deficit in Greece. Because Greece spent much
money (which was lent by the German banks), Germany could sell many Benz cars
there. Erroneously, however, the ruling view in Germany ascribed Greek crisis
to immoral spending.
Above
the EURO system, there stands the EU, for there are several members who would
hesitate to enter it (the most important country should be the UK). The EU has
continued to take a course of expanding its influence with the idea of real
politik. Different from the communitarian spirit of the former European
Community, it has been moving in the spirit of big powers, which is typically
seen
in the move to incorporate the ex
Eastern European countries into the NATO. The EU which shows this type of action
and the EURO system as a monetary union --- it is a very difficult task to
maintain some harmony between the two.
Even
if confined to EURO, it has increased in number on a rather ambiguous standard.
No one could now say that the system meets Mundel’s Optimum Currency Zone.
It
would be an illusion to think that the EURO system can conquer the present
crisis through early implementation of the Fiscal Union or Political Union as
advocated by Merkel. Europe has many divergent cultures, so even if one tried
to make divergence unified, there would appear some crack somewhere. Apart from
this, the social fatigue and tension would not allow that sort of unification.
There exists a risk of explosion or implosion at any moment.
EURO system is urgently required to be greatly reformed.
*Emeritus
Professor, Sophia University, Tokyo
Provisional
version not to be quoted.
1)
In working out the construction of the postwar world, it should be a fact worth
of paying attention that these fields were conceived in a closely linked way in
Keynes’s mind. On this point we should not neglect the role which Harrod and
Mead played.
2) Moreover, the Gold Standard had
become, in substance, the de-facto Dollar Standard after the First World War.
3) In passing, the postwar Cambridge had
an atmosphere in which Robertson and Meade would be driven to a corner by J.
Robinson. And it also had Sraffa. When we consider the postwar Cambridge, it is
very important to understand these circumstances. We cannot say that there
continued to exist a unified school called the Cambridge School (Robbins
continued to be the boss of the LSE.).
4)
This is quite understandable.
5) Keynes was well known, together with
Lytton Strachey, for an excellent description of characters, as is shown in “Isaac
Newton” and The Economic Consequence of
the Peace.
6)
This was a problem in which if India and others which came to possess a huge
sum of the UK national debts would sell them after the war is over, the UK
would fall into a serious financial crisis. In fact, in 1949 this problem
occurred and saw a great fall in pound. India began to sell a huge sum of the
British debts, and changed the pounds thus obtained into dollars, which caused
the fall in pound. The UK government intervened in the foreign exchange market
to support pound by selling dollars. But soon the dollars run out … This was
the sterling problem.
7)
For what proceeded from the Queen Mary (May 1944) to Bretton Woods (March
1946), see Hirai (2014). His activities during this period are characterized by
his flexibility, that is, Keynes as a political pragmatist. The principal task
of international negotiations, among others, between the US and the UK during
this period was to breed the “hybrid” dog – which was born from the SF plan and
the ICU plan and agreed in the Joint Statement – in more concrete figure.
References
Amato, M. and Fantacci, L. (2012), The End of
Finance. Cambridge: Polity Press.
Bateman, B., Hirai, T., and Marcuzzo, M.C.
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Related
Documents Held by the National Archives, UK
International
Clearing Union:
International
Stabilising Fund:
Bretton Woods:
John Maynard
Keynes:
