HE establishment of the Inter-
national Monetary Fund, as a result of the negotiations at Bretton Woods and Savannah, was essentially a victory for the international monetary policies of the United States. Any comparison of the original two main plans presented at the two conferences indicates quite clearly that the LM.F. was “a U.S. masterminded project.” The competition between the Keynes plan for an International Clearing Union and the proposal associated with Henry White (of the U.S. Treasury) for a Stabilisation Fund was, of course, one-sided. Considering the war-time circumstances of the first negotiations it is hardly surprising that the U.S. approach to international monetary problems prevailed. In addition, Keynes was not supported by British colleagues who feared that both London and the Bank of England would be adversely affected by the Clearing Union. At the Savannah negotiations in 1946 Keynes was defeated on the issues of the location of the Fund and the relationship to exist between the member countries’ governments and the Fund. Bitter in defeat Keynes commented ‘“‘You two brats will grow up politicians; your every thought and act shall have an arriere-pensee.” The two brats being the I.M.F. and the World Bank. Some of the Chinese arguments are quite inaccurate. Part of their argument is that the establishment of the Fund raised the status of the dollar and created or extended the gold exchange standard system, with the dollar as a key reserve currency. That the status of the dollar after 1945 was raised cannot be doubted. But to assign the responsibility for this to the LM.F. is to grossly overestimate the significance of the institution in the immediate post-war period. The real cause of the enhanced status of the dollar was not the Fund but the devastation of the European economics in the war and the reconstruction attempts afterwards. In other words the “dollar problem” or “dollar scarcity” gave the dollar a higher status; not the establishment of the LM.F. The increased use of dollars as reserves again was due to the dollar scarcity, Published by THE WEEK, 54 Park Road
and in as much as the I.M.F. sup-
plied dollar credits, it alleviated the
dollar problem.
Another argument used by the
Chinese alleges that the Fund fixed
the official price of gold at $35 an
ounce. The Fund did not fix the
gold price, this was done in 1934,
more than ten years before the Fund
was created. During 1946 and 1947
the Fund did conduct a survey of
current exchange rates and con-
sidered the economic position of all
member countries. It was decided,
however, to leave the existing struc-
ture of exchange rates alone and not
to advise or compel any member to
adjust its exchange rate. The ad-
justment of exchange rates came later,
in some cases without the Fund’s or
U.S. approval, particularly in 1949.
It is factually inaccurate for the
Chinese to suggest that Fund mem-
bers must repay credits with dollars.
In fact they can repurchase their cur-
rencies from the Fund with gold,
dollars or any other convertible cur-
rency. In practice gold and dollars
have normally been used in repurchase
transactions. Since the Fund’s com-
mencement of operations, to April
1964, something like 55 per cent. of