- International Monetary Fund
- Published Date:
- September 1947
THE completion of reconstruction is a prerequisite for making possible the shift of world trade in the direction necessary to establish international payments on a stronger and more permanent foundation. Beyond the immediate task of reconstruction there is the further vast problem of development. Provision of the modern means of production to under-developed regions is essential for the general expansion of production, employment and trade. The diversification of one-sided and less advanced economies and an improvement in the standards of living in such areas will, in time, transform the character and increase the volume of world trade and impart more resilience to the structure of international payments. The development of the productive resources of these areas requires considerable international investment; to some extent this must await an easing of the immediate pressure of reconstruction demands.
A large volume of world trade will facilitate the adjustment of international payments to secure international equilibrium in the post-transition period. With a large volume of world trade the devastated countries will be better able to balance their payments through an increase in their exports rather than through a restriction of their imports. At the same time an expansion of world trade will encourage investment in the under-developed countries. With world trade at a low level, balance can be reached only through further restrictions and a decline in standards of living.
Some of the conditions essential for attaining international equilibrium at a high level of world trade already exist. The increase in production and real incomes in most of the Western Hemisphere countries has enabled them greatly to expand their exports and to a lesser degree their imports as compared with their prewar position. The maintenance of a high level of production and employment in the large creditor countries, and an expansion in their demand for imports, are essential elements in establishing a stronger pattern of international payments. If the full benefits of the world’s greater capacity to produce are to be realized, and if international payments are to be balanced at a high level, the barriers to trade must also be reduced. In the movement in this direction, it is desirable that the creditor countries should take the lead.
The function of the Fund in this field is to see that, wherever possible, exchange restrictions on current transactions which hamper the growth of world trade are gradually eliminated. It will urge on all its members the adoption during the transition period of policies that will enable them to permit freely payments and transfers for current international transactions after the transition period has ended. It must be recognized, however, that the mere substitution for exchange restrictions of other measures such as direct quantitative restrictions or excessive tariffs will not reduce the restraints on trade. The determination to establish an international organization with positive functions in the field of trade is therefore encouraging.
International organizations can make an important contribution to progress in these directions, but fundamentally national policies will determine the kind of world economy which ultimately emerges. The international agencies can help to ensure that the economic and financial measures taken separately by each country do not set up areas of conflict and increase the difficulties of other countries, and thus disturb international economic relations. Within its field the Fund provides the machinery for coordination and cooperation among nations which is indispensable for progress.