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Show Bretton Woods Conference Laid Groundwork For a Stable International Monetary System U. S. Postwar Exports Depend on Soundness Of Foreign Finances By WALTER A. SHEAD WNU Staff Correspondent. Stripped of all technical verbiage, ver-biage, the proposals agreed upon by 44 United Nations at the Bretton Woods conference and whiclvare considered an essential part of the world peace plan to be approved at San Francisco April 25, are designed to 1. Set up an international monetary mone-tary fund with a working capital subscribed sub-scribed by 44 nations in gold and member currencies totaling 8.8 billion bil-lion dollars of which the United States is to subscribe 2.75 billions. This fund is expected to stabilize and safeguard the value of foreign currencies In terms of gold, remove trade barriers in favor of open or reciprocal trade agreements to provide pro-vide free and open trade among member nations. 2. Organize an International bank for reconstruction and development with a subscribed capital of 9.1 billions bil-lions of dollars of which the United States is to furnish 3.175 billions. Purpose of the bank is primarily to facilitate flotation of foreign loans In private capital markets by providing International guarantees and to make long-term capital loans direct to member nations for specific projects proj-ects of reconstruction and development. develop-ment. Why the need for these safeguards? safe-guards? Following World War I American investors took a beating, and in the late 1920s were caught in an epidemic of defaults by foreign debtors. Under the Bretton Woods proposals, these foreign loans would be investigated by the bank and then guaranteed as to principal and interest in-terest by the foreign government and the bank. Risks then, of international inter-national loans, would not fall on investors in-vestors themselves, nor even on any one country, but upon all of the 44 member countries. Obviously Obvious-ly the objective of this guarantee of loans is to encourage a substantial volume of private international investment in-vestment which is essential to our own economic well being. Great Need for Rebuilding. France, Italy, Norway, Poland, Finland, Czechoslovakia, a large area of Russia, the Balkan nations, large sections of England, China, much of India and Burma, plus the Axis nations of Germany and Japan, Ja-pan, have been laid waste by the war, their productive facilities prostrate, pros-trate, their currencies depreciated, and many years will be required for them to rebuild their export industries. indus-tries. They will require foreign capital cap-ital to get under way. In our own country we have a tremendously tre-mendously enlarged productive, industrial in-dustrial plant. Our agricultural production pro-duction has reached a new high of efficiency. After the war our economic eco-nomic policy will be aimed at full employment and full utilization of our. agricultural and industrial facilities. facil-ities. To realize these aims new outlets for the products, of farm and factory must be found and these prostrate foreign countries provide a ready market providing that American exports take the form of American investments abroad good American dollars for if these nations na-tions are to buy a large volume of our productive machinery, our industrial in-dustrial and agricultural products in the immediate postwar period, American investors will have to lend part of the purchase money. Under the functions of the international bank, these investors will have the assurance that these investments are sound and remunerative. Under the operation of the monetary mone-tary fund, as distinguished from the bank, for the protection of our Investors, In-vestors, currencies in all these countries coun-tries must be stabilized in terms of gold and at equitable rates of exchange. ex-change. The United States holds 60 per cent of the world's gold supply. Economists point out there must be elimination of exchange fluctuations, of discriminatory exchange practices, prac-tices, of competitive currency depreciations, depre-ciations, if the American dollar is to be protected. 'For instance, how can the American Amer-ican farmer be protected in the world market if a sizable wheat producing pro-ducing country such as Russia and Argentina can resort to monetary action which places the wheat producers pro-ducers of those countries in a preferred pre-ferred position with respect to American Amer-ican wheat exporters? If the American Amer-ican farmer is to continue to export wheat or any other commodity, and to receive a fair price in good American Amer-ican dollars for the product he sells at home, he must know that the 4 A N .xv H it" " I i ' s. J S J ' J f x' ft-' - J r; s A , t f. j3t N ; s i ' i . r - y . - K - , , X-" v : During a lull in the proceedings of the Bretton Woods conference, U. S. Secretary of the Treasury Henry Morgenthau (center) got into informal conversation with the Hon. J. L. Ilsey, minister of finance for Canada and chairman of that nation's delegation (left), and M. S. Stepa-nov, Stepa-nov, chairman of the Russian delegation. These chats helped to iron out many of the smaller problems. ' world price of wheat or other commodity com-modity in terms of our own dollars, will not be seriously disturbed by large fluctuations in the principal exporting ex-porting and importing countries. Stabilized Currencies. So the purpose of the international monetary fund is to stabilize and promote a balanced growth of international inter-national trade by stabilizing the value of all currencies in terms of each other; progressively remove barriers against making payments across boundary lines, such as high tariffs or other trade restrictions; and to provide a supplementary source of foreign exchange to which a member country may apply for the assistance necessary to enable it to maintain stable and unrestricted unrestrict-ed exchange relationships with other oth-er member countries. For instance, in some countries Importers are not permitted to purchase pur-chase dollars required to buy goods In the United States. In other countries, coun-tries, of which Germany was an example ex-ample before the war, foreign trade was disrupted by use of so-called multiple currencies, or barter arrangements, ar-rangements, and during the ' war many new restrictions have been devised because of military necessity. neces-sity. The operation of the monetary fund is intended to remove all these restrictions re-strictions and set up a standard and uniform practice, currency value and exchange rates so that American Amer-ican business may have the greatest possible freedom in international trade in the postwar era. The same freedom is intended to be provided for business in the other countries, for freedom of business would be meaningless unless these other countries coun-tries accorded an equal measure of freedom to their own people. There has been criticism aimed at these proposals from some bankers bank-ers on the grounds that they are contrary to sound and established banking practices. There has been praise and approval from other bankers. As a matter of record, criticism from bankers, at least some banking bank-ing groups, has been directed at any departure from established custom, that is, custom and practice established estab-lished by the bankers themselves. For instance, some banking groups criticized bank deposit insurance. Criticism was aimed at government guaranteed loans on homes and farms; at 20-year loans on homes when the custom had been 3 to 5 years; at 4 and 5 per cent interest rates, when the practice had been 6 to 8 per cent and higher. These practices today, however, are an accepted ac-cepted part of our domestic economy. econ-omy. Criticism from the larger international interna-tional bankers has been directed at the Bretton Woods proposals, no doubt because governments will control con-trol fiscal and monetary policies on an international scale, and also because be-cause interest rates under these proposals pro-posals will be lower. U. S. Benefits Most. Another criticism has been directed direct-ed at the bank and the fund because the United States is the largest subscriber. sub-scriber. It is argued here, however, that from any fair standard, this country should be the largest subscriber sub-scriber because we have more to gain than any other country. We have the money to lend, we have a large part of the world's gold and we have the facilities no other nation na-tion has to provide export goods in the immediate postwar period. Lastly, Last-ly, we have been untouched by the ravages of war insofar as our material ma-terial wealth is concerned. One of the most important groups to give approval to Bretton Woods proposals is the Committee for Economic Eco-nomic Development, headed by Paul G. Hoffman, president of the Stude-baker Stude-baker corporation. This group, made up of bankers, economists and business busi-ness leaders would even give the international in-ternational bank further power to make loans for long-term and short-term short-term stabilization purposes, claiming claim-ing that under the present regulations, regula-tions, the bank does not have that clear-cut power. There have been some suggestions favoring the establishment ef the bank, but suggesting that setting up and operation of the monetary fund be delayed until conditions abroad settle down to normality. It is pointed point-ed out, however, that the bank and the fund are closely related, both in concept and organization and that membership in the bank is open only to those who are members of the fund. It is also pointed out that the bank is, to a considerable extent, dependent upon the fund for the reason rea-son that the fund must first establish estab-lish values of the moneys to be loaned by the bank if there is to be a smooth long-range planning and investment program. While most sound economists agree there must be some system of international control or agreement after the war, the only alternative offered has been a system of bloc agreements. These are regarded by many as dangerous, since such bloc agreements likely would lead to a world divided politically and economically. eco-nomically. Eventual conflict between be-tween these groups would be likely. Chance for Leadership. Pointing to the leadership the United States has maintained during the war, fiscal experts here declare that never before has this nation occupied oc-cupied such a key position or had such an opportunity to take over world leadership in the economic field. Governmental leaders, including includ-ing Secretary of the Treasury Henry Morgenthau, look upon the Bretton Woods agreements as just as essential essen-tial to world peace and security as the Dumbarton Oaks agreements. Secretary Morgenthau maintains they are inseparable. Hence his urgent ur-gent appeal to the congress for legislation legis-lation which will insure this nation's participation prior to the world parley par-ley at San Francisco April 25. Acceptance by the congress of these agreements before convening of the delegates of United Nations at San Francisco, these leaders say, would be taken as a happy augury of this nation's sincerity. It would give notice to all that the United States, instead of choosing economic isolation, isola-tion, which would inevitably lead to politiea isolation, is already on record rec-ord with a determination to do our part toward the attainment of world peace and security. In a special message to the congress con-gress February 20, President Roosevelt, Roose-velt, referring to the Bretton Woods proposals, said: "It is time for the United States to take the lead in establishing the principle of economic econom-ic cooperation as the foundation for expanded world trade. We propose to do this, not by setting up a supergovernment, but by international interna-tional negotiation and agreement, directed di-rected to the improvement of the monetary institutions of the world and the laws that govern trade . . . the international fund and bank together to-gether represent one of the most sound and useful proposals for international in-ternational collaboration now before us." And that is what the Bretton Woods proposals are designed to do ... a product of the best minds of the 44 United Nations of the world. |