IMF History (1972-1978), Volume 1

Front Matter

Author(s):
International Monetary Fund
Published Date:
February 1996
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    © 1985 International Monetary Fund

    Library of Congress Cataloging in Publication Data

    De Vries, Margaret Garritsen, 1922–

    The International Monetary Fund, 1972–1978.

    Includes indexes.

    Contents: v. 1–2. Narrative and analysis —

    v. 3. Documents.

    1. International Monetary Fund—History. I. Title.

    HG3881.5.I58D42 1985 332.1’52 85-2352

    ISBN 0-939934-40-X (v.l)

    ISBN 0-939934-43-4 (set)

    The paper used in this publication meets the minimum requirements of American National Standard for Information Sciences—Permanence of Paper for Printed Library Materials, ANSI Z39.48-1984.

    Foreword

    The International Monetary Fund is again offering to the public a major work describing its history. This new sequel of three volumes covers the period 1972 to 1978. An earlier set of three volumes, published in 1969, recounted the origins of the Fund and the first twenty years of its existence, and an additional two volumes, published in 1976, related the Fund’s history from 1966 to 1971.

    The seven years covered here, spanning most of the decade of the 1970s, were particularly turbulent for the international monetary system and for the Fund. To help its members deal with the severe economic problems that arose in those years, the Fund initiated many activities, greatly increased its lending, and, following the collapse of the par value system and of negotiations to introduce a fully reformed system in the near future, undertook to supervise a gradually evolving international monetary system. Volume I and Volume II, Narrative and Analysis, describe at length these economic problems and the Fund’s actions. Considerable effort has been made to explain not only what happened but also why. Volume III reproduces the most important documents published by the Fund from 1972 to 1978 and makes available several papers previously unpublished.

    Many problems for which the Fund has had to take on increasing responsibility in the years after 1978, such as those arising out of the heavy external indebtedness of a number of developing members, increasing protectionism, the flow of international capital, and the need for Fund surveillance of exchange rates, originated in the period described here. Hence, in publishing these volumes, the Fund hopes to promote understanding of its present work, as well as its past.

    Margaret Garritsen de Vries, the Historian of the International Monetary Fund, who came to the Fund in 1946 as one of its first staff members and who was the author of the History for 1966–71 and part of the History for 1945–65, has written this History. As in the past, she has had full access to the Fund’s records and has interviewed governors of the Fund, members of the Executive Board, and colleagues on the Fund staff. While these volumes are once again, as the Forewords to earlier volumes state, “history written from the inside,” they are the personal responsibility of the author, and no statement or opinion expressed should be understood as committing the Fund in any way.

    August 1985

    J. de Larosière

    Managing Director

    International Monetary Fund

    Contents

    Preface

    The founders of the International Monetary Fund regarded economic cooperation among nations as the key to securing world peace. Since 1969 the Fund has been publishing histories of its activities, and these histories—now totaling eight volumes—reveal the evolution of that cooperation. Here we see, among other developments, how world economic interdependence has gradually come about and how a multimember economic institution, whose existence has distinguished the international economic scene since World War II, has evolved. The histories trace the alterations and developments in the Fund’s policies and activities, with changing economic circumstances and personalities, and the growth of the Fund’s influence and authority.

    The primary source of information for the histories is the Fund’s documents and records, supplemented by recollections of Managing and Deputy Managing Directors, Executive Directors, Fund staff, and other participants in the events portrayed. These persons have had an opportunity to comment on the draft manuscript, and many Executive Directors sent the manuscript to their governments for comment. I myself am a long-standing member of the Fund staff, having come to the Fund in 1946 as one of its first staff members. The Fund, moreover, is its own publisher. For these reasons, these histories are sometimes regarded by outsiders as “official,” although it should be emphasized that the text is not formally approved by the Executive Board or by national authorities.

    The histories are written in the way just described to provide an authoritative account of the Fund’s policies and activities that Fund officials and officials of member governments can regard as accurate, sufficiently complete, and reasonably balanced. The Fund would not grant to an outsider access to the information on which this account has been based. Not wishing to compromise the full and frank consultations and discussions that it holds with members, the Fund scrupulously guards the confidentiality of its records and documents and the secrecy of its discussions with the officials of members and of the minutes of meetings of its Executive Board. Nevertheless, the Fund believes that it is important to make available an authoritative history of its activities for recent years so as to increase public understanding of current international monetary and financial problems and of the Fund’s work.

    Advantages derive from a history written from the inside. The author had a strategic position from which to view history as it unfolded and had constant access to those who helped to shape events. Factors that might have been overlooked by someone less familiar with the institution and the influence of particular individuals can be better evaluated by an author writing from within. Samuel Eliot Morison, official historian of the U.S. Navy during World War II, understood this when he requested President Franklin D. Roosevelt at the outset of the war to attach him to the Navy so that he could observe naval battles and write what he termed “a shooting history.” Not all the shots in the history of the International Monetary Fund were fired within the Fund, however. I have therefore attempted to portray the evolution of the Fund and its activities in the broader setting of contemporary economic developments, and to describe its policies and their evolution against the background dialogue engaged in by professional economists and government officials.

    In preparing the present volumes, I am again indebted to numerous participants in the events recounted here, although I cannot mention all their names. Pierre-Paul Schweitzer and H. Johannes Witteveen gave me insight into developments in their periods as Managing Director. Frank A. Southard, Jr. and William B. Dale explained several events that occurred while they were Deputy Managing Director. J. de Larosière and Edwin H. Yeo III gave me a detailed account of their negotiations which led to the amended Article IV, dealing with exchange arrangements. Sir Jeremy Morse and Edward George supplied files, answered queries, provided explanations and interpretations about the work of the Committee of Twenty, and read a draft of Chapters 814. Sir Joseph Gold described numerous events of which he has personal knowledge, especially in respect to the drafting of the Second Amendment, read the entire manuscript, and made valuable suggestions. J.J. Polak helped me assess several topics with which he was intimately concerned, particularly the staff sketch of a reformed system written in 1972. L. Alan Whittome and other staff of the European Department enriched the chapters describing the negotiations for the stand-by arrangements for Italy and the United Kingdom in the years 1974 to 1977. Leo Van Houtven suggested persons to interview and generally encouraged me as my work proceeded. Philine Lachman explained several legal issues and questions. J. Keith Horsefield, responsible for History, 194565, read this sequel, as he did the sequel for 1966–71, and made several suggestions.

    Faye L. Olin, my editorial assistant since 1975, helped with editing, prepared statistical tables and Appendix A, assembled the documents for Volume III, and was invaluable in numerous ways. Milton K. Chamberlain carefully guided me to the relevant documents and records and patiently checked innumerable facts. Anne C.M. Salda and other staff of the Joint Fund-Bank Library kept me abreast of relevant new books and articles. David D. Driscoll did an outstanding job of editing the final manuscript of Volumes I and II and oversaw the volumes through to publication. Elin Knotter carefully styled the manuscript and prepared the index. Jennie Lee Carter gave the documents in Volume III a meticulous final editing and saw that volume through to publication. Alva C. Madairy and others in the composition unit of the Graphics Section, under the direction of A. Kenneth Hutcherson, put the manuscript into type and saw the publication of these volumes through to completion. Hordur Karlsson designed the dust jacket.

    I am also deeply indebted to Louise T. Pike, Mai Stuart, and D. Mary Windsor, who put countless drafts and redrafts of the manuscript through the word processor.

    Although such expression is rare in a volume like this, I must also publicly express my gratitude to my husband, Barend A. de Vries. Writing histories of the International Monetary Fund has been a way of life for me for over two decades, and I owe a great debt to my family for accommodating such a demanding and absorbing task. Barend, also an economist, on the staff of the Fund for 6 years and then of the World Bank for 29 years, has been a continuous sounding board and a frequent stimulator of my thoughts.

    Needless to say, any shortcomings, errors, or omissions that remain are my own responsibility.

    M.G.deV.

    THE INTERNATIONAL MONETARY FUND 1972–1978

    Volume I: Narrative and Analysis

    “Further evidence will be furnished at Bretton Woods that men of different nationalities have learned how to adjust possible differences and how to work together as friends. The things that we need to do, must be done—can only be done in concert.”

    —Franklin D. Roosevelt, to the Bretton Woods Conference, July 1, 1944

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