Show Bretton Woods Conference Laid Groundwork For a Stable International Monetary System U. U S. S Postwar tr Exports Depend on Soundness Of Foreign Finances By y WALTER A. A SHEAD snEAD Staff Correspondent Stripped of all technical verI verbiage verbiage ver ver- biage the proposals agreed upon upon upon up up- I on by 44 United Nations at the Bretton Woods conference and which are considered an essential essential essential essen essen- part of the world peace plan to be approved at San Francisco April 25 are designed to to- to 1 Set t.-Set Set up an international monetary monetary monetary mone mone- tary fund with a working capital subscribed subscribed subscribed sub sub- scribed by 44 nations in gold and member currencies totaling 88 bilI billion billion bil- bil I lion dollars of which the United States is to subscribe billions This fund is expected to stabilize and safeguard the value of foreign n currencies in terms of gold remove trade barriers in favor of open or reciprocal trade agreements to provide provide provide pro pro- vide free and open trade among member nations 2 Organize an international bank for reconstruction and development with a subscribed capital of 91 billions billions billions bil bil- bil- bil I lions of dollars of which the United I States is to furnish billions Purpose of the bank is primarily to facilitate flotation of foreign loans in private capital markets by providing pro international guarantees and to tomake tomake tomake make term long-term capital loans direct to member nations for specific projects projects projects of reconstruction and develop ment mente Why the need for these safeguards safeguards safeguards safe safe- guards Following World War I American investors took a beating and in the late were caught in inan inan inan 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 in interest interest interest in- in terest by the foreign government and the bank Risks then of international international international inter inter- national loans would not fall on investors investors investors in in- themselves nor even on any anyone one country but upon all of the 44 member countries Obviously Obvious Obvious- ly the objective of this guarantee of loans is to encourage a substantial volume of private international investment in investment investment in- in vestment which is essential to our own p economic well being no Great Need for Rebuilding France Italy Norway Poland Finland Czechoslovakia a large area area of Russia the Balkan nations large sections of England China much of India and Burma plus the Axis nations of Germany and Japan Japan Japan Ja Ja- Ja- Ja pan have been laid waste by the war their productive facilities prostrate prostrate prostrate pros pros- their currencies depreciated and many years will be required for them to rebuild their export indus indus- tries They will require foreign capital capital capital cap cap- ital to get under way In our own country we have a tremendously tremendously tremendously tre tre- tre- tre enlarged productive in industrial industrial industrial in- in plant Our agricultural production prod production pro pro- d has reached a new high of efficiency After the war our economic economic economic eco eco- policy will be aimed at full employment and full utilization of our agricultural and industrial facil facil- 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 abroad good American dollars for dollars for if these nations nations nations na na- are to buy a large volume of our productive machinery our in industrial industrial industrial in- in and agricultural products in inthe inthe inthe 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 of the monetary monetary monetary mone mone- tary fund fand as distinguished from the bank for the protection of our in investors investors investors in- in currencies in all these countries countries coun- coun tries must be stabilized in terms of gold and at equitable rates of ex ex- change The United States Slates holds 60 per cent of the worlds world's gold supply Economists point out there must be elimination of exchange fluctuations of discriminatory exchange practices practices practices tices of competitive currency depreciations depreciations depreciations depre depre- if the American dollar is isto isto isto to be protected For instance how can the American American American Amer Amer- ican farmer be protected in the world market if a sizable wheat producing producing producing pro pro- country such as Russia and Argentina can resort to monetary action which places the wheat producers producers producers pro pro- of those countries in a preferred preferred preferred pre pre- position with respect to American American American Amer Amer- I ican wheat exporters If the American American American Amer Amer- ican farmer is to continue to export wheat or any other commodity and to receive a fair price in good American American American Amer Amer- ican dollars for the product he sells at home he must know that the I W I y jr During a lull in the proceedings of the Bretton Woods conference U. U S. S Secretary of the Treasury Henry center got ot into informal conversation with the lion Hon J. J L. L Ilsey Usey minister of finance for Canada and chairman of that nations nation's delegation left and M. M S. S Step Stepa- Stepa a- a nov chairman of the Russian delegation These chats helped to iron out man many of or the smaller problems world price of wheat or other commodity commodity commodity com com- in terms of our own dollars will not be seriously disturbed by large fluctuations in the principal exporting exporting exporting ex 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 international international inter 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 forthe forthe forthe the assistance necessary to enable it to maintain stable and unrestricted ed exchange relationships with other other other oth oth- er member countries i iFor For instance in some countries I importers are not permitted to purchase purchase purchase pur pur- chase dollars required to buy goods goodsin in the United States In other countries countries countries coun coun- tries of which Germany was an example example example ex ex- ample before the war foreign trade was disrupted by use of so-called so multiple currencies or barter arrangements arrangements arrangements ar ar- ar- ar and during the war many new restrictions have been devised because of military sity The operation of the monetary fund fundis is intended to remove all these restrictions restrictions restrictions re re- re- re and set up a standard and uniform practice currency value and exchange rates so that American American American Amer Amer- ican business may have the greatest possible freedom in international I trade in the p postwar era The same Freedom is intended to be provided for business in the other countries for freedom of business would be I meaningless unless these other countries countries coun coun- I tries accorded an equal measure of freedom to their own people I There has been criticism aimed at these proposals from some bankers bankers bankers bank 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 banking banking bank bank- ing groups has been directed at any departure from established custom that is custom and practice established established established 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 year 20 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 8 per cent and higher These practices today however are an accepted accepted ac ac- ac- ac part of our domestic econ econ- omy Criticism from the larger international international intern a- a bankers has been directed at atthe atthe atthe the Bretton Woods proposals no doubt because governments will control control control con con- fiscal and monetary policies on onan onan onan an international scale and also because because because be be- cause interest rates under these proposals proposals pro pro- proposals will be lower U. U S. S Benefits Most Another criticism has been directed direct direct- ed at the bank and the fund because the United States is the largest sub sub- scriber It is argued here however that from any fair standard this country should be the largest subscriber subscriber sub sub- scriber because we have more to I gain than any other country We I have the money to lend we have havea I a large Jarge part of the worlds world's gold and I we have the facilities no other nation nation nation na na- na- na tion has to provide export goods in inthe inthe the immediate postwar period Lastly Lastly Lastly Last Last- ly we have been untouched by the ravages of war insofar as our material material material ma ma- wealth is concerned One of the most important groups to give approval to Bretton Woods proposals is the Committee for Economic Economic Economic Eco Eco- Development headed by Paul PaulG G G. G Hoffman president of the Studebaker Studebaker Studebaker Stude- Stude baker corporation This group made up of bankers economists and business business business busi busi- ness leaders would even give the International in international international In- In bank further power to tomake tomake tomake make loans for term long-term and short- short term stabilization purposes claiming claiming claiming claim claim- ing that under the present regulations regulations regulations regula regula- the bank does not have that cut clear-cut power There have been some suggestions favoring the establishment of 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 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 reason reason rea rea- son that the fund must first establish establish establish lish values of the moneys to be loaned by the bank if there is to tobe tobe tobe be a smooth range long 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 agreements likely would lead to a world divided politically and eco eco- Eventual conflict between between between be be- tween these groups would be likely Chance for Cor Leadership Pointing to the leadership the United States has maintained during the war fiscal experts here declare that never before has this nation occupied occupied occupied oc oc- oc- oc such a key position or had such an opportunity it to take over world leadership in the economic fiel field 1 Governmental leaders including including including ing Secretary of ot the Treasury Henry r look upon the Bretton Woods agreements as just as essential essential essential essen essen- to world peace and security as the Dumbarton Oaks agreements Secretary maintains they are inseparable Hence his urgent urgent urgent ur ur- ur- ur gent appeal to the congress for legislation legislation legislation legis legis- lation which will insure this nations nation's participation prior to the world parley parley parley par 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 nations nation's sincerity It would give notice to all that the United States instead of choosing economic isolation isolation isolation isola isola- tion which would inevitably lead to political isolation is already on record record record rec rec- ord with a determination to do our part toward the attainment of world peace and security In a special message to the congress congress congress con con- gress February 20 President Roosevelt Roosevelt Roosevelt Roose 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 econom- ic cooperation as the foundation for expanded world trade We propose to do this not by setting up a but by international international international negotiation and agreement di directed directed di to the improvement of the monetary institutions of the world and the laws that govern trade the international fund and bank together together to to- together gether represent one of the most sound and useful proposals for in international international international in- in 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 |