On behalf of the U.S. delegation, I should like first to thank the Prime Minister of India for the warm welcome which he has extended to the Boards of Governors. We have come to this meeting with a keen awareness of the profoundly important role which the Asian members of these two institutions are playing and will continue to play in the Free World. In a vivid sense their needs and their aspirations epitomize the task of the Bank and the Fund. It is the concern of all the Governments represented in this room to find ways of contributing more effectively to the well-being of all peoples. As members of these institutions we have expressed our conviction that free countries gain much by friendly and effective association in a common attack on the financial and economic problems which confront them. We are pleased to have the Governors for Malaya, Tunisia, Morocco, Spain, and Libya join with us here today, in our consideration of these vital questions.

Statement by the Governor for the United States 1Robert B. Anderson

On behalf of the U.S. delegation, I should like first to thank the Prime Minister of India for the warm welcome which he has extended to the Boards of Governors. We have come to this meeting with a keen awareness of the profoundly important role which the Asian members of these two institutions are playing and will continue to play in the Free World. In a vivid sense their needs and their aspirations epitomize the task of the Bank and the Fund. It is the concern of all the Governments represented in this room to find ways of contributing more effectively to the well-being of all peoples. As members of these institutions we have expressed our conviction that free countries gain much by friendly and effective association in a common attack on the financial and economic problems which confront them. We are pleased to have the Governors for Malaya, Tunisia, Morocco, Spain, and Libya join with us here today, in our consideration of these vital questions.

We also wish to express our appreciation of the able address by the Chairman of the Boards of Governors, who has focused our attention on some of the basic problems confronting our countries as they seek to develop their economies and expand their trade. We agree with him that sound internal finance is an essential condition to sound international economic policy. We should like to emphasize that economic development can and should go forward with noninflationary monetary policies so that the greatest benefits can be realized.

We in the U.S. Government find great encouragement in the increasingly effective way in which the Fund and the Bank have been performing their tasks. By improving the capacity of both institutions to operate throughout the Free World, the member countries can greatly intensify their efforts to deal with the problems of economic development and financial and economic stability. It was to this end that the President of the United States and I recently exchanged letters in August expressing the results of our thinking about international action which might fruitfully be taken. Pursuant to instructions which President Eisenhower gave to me, I have introduced resolutions at the Procedures Committee calling for a study of an increase in the resources of the Bank and the Fund.2 President Eisenhower has also asked me to read to you the following message:

One of the great opportunities which free nations have to be of service to one another—and to the larger cause of freedom itself—is that of fostering economic growth and well-being. A key element certainly is the timely provision of needed capital resources.

It is universally true, in my opinion, that governmental strength and social stability call for an economic environment which is both dynamic and financially sound. Among the principal elements in maintaining such an economic basis for the Free World are (1) a continuing growth in productive investment, international as well as domestic; (2) financial policies that will command the confidence of the public, and assure the strength of currencies; and (3) mutually beneficial international trade and a constant effort to avoid hampering restrictions on the freedom of exchange transactions.

During the period of their operations the International Bank for Reconstruction and Development and the International Monetary Fund have performed an indispensable function in providing both short- and long-term financial assistance to various nations in need of it. There is widespread agreement as to the effectiveness of these two great institutions. A constructive increase in their resources would greatly enhance their usefulness to the Free World community.

These facts have prompted me to ask that consideration be given to certain measures designed to increase the capacity of both the Bank and the Fund so that they may Better serve the rising needs of our Free World economy. It is my conviction that through these institutions we can give real encouragement and hope to all our member countries in the decade ahead. A progressively broadening attack upon some of the paramount economic problems of our time can be made possible by this program. I am confident that it can provide a new source of bright hope for the peoples of our world.

I should also like to say something about the International Development Association to which President Eisenhower referred in his August letter. We are now studying this proposal in my own Government. I have no blueprint to offer at this time for such an Association. Essentially, however, it would be an affiliate of the International Bank which would make long-term loans for economic development repayable in whole or in part in the currency of the borrowing country. As I have said, the U.S. Government is making its own studies of the feasibility and desirability of establishing an IDA. We hope that other countries will at the same time be giving thought to the matter, and we shall look forward to having informal discussions with you. If these informal studies and discussions lead to encouraging conclusions, it would be appropriate to undertake more formal study and negotiation, looking to the establishment of such an Association.

We are meeting at a time in which the economic development of the Free World is both encouraging and challenging. We must expect of our free economies that they will be at the same time dynamic and strongly resistant to both inflation and recession. We must expect also that they will provide an environment which invites and encourages investment and that they will generate the savings which make investment possible. To my mind, a most satisfying aspect of the experience of our countries, taken as a whole, in the years since the war has been the upward trend of world savings, production, and world trade.

The Bank and the Fund have again demonstrated, in the past year of their operations, that they are well designed to contribute both to growth and to economic and financial stability. The Fund has completed two years of operation on a very large scale indeed. The International Bank has also been going through the most intense period of activity in its history, and in the fiscal year made a larger volume of loan commitments than in any preceding year.

As indicated in the President’s letter to me on August 22, it is our earnest hope that the Executive Boards of the Fund and Bank will consider promptly the question of the most practical means of increasing the quotas of the Fund and the capital of the Bank. Various aspects will, of course, have to be dealt with in these studies, including the amount of the increases, the manner in which subscriptions and quota increases would be subscribed or paid, the extent of participation by the members as a whole, and many others. No doubt some weeks would be needed for the Executive Boards to complete the studies. However, I hope that the importance of the matter will be so evident as to create a sense of urgency, and that by the end of December the Boards of Governors may expect to receive the reports from the two Executive Boards.

Statement by the Governor of the Bank for the Federal Republic of Germany 1Ludwig Erhard

Last year’s Annual Meeting took place at a troubled time on the exchange front. Its most important result, as it seems to me, was the quick easing of the situation brought about by the statements on rates of exchange by the U.K. and German delegations and the Managing Director of the International Monetary Fund, which, for their substance, were in perfect agreement with each other. To appreciate properly what this easing of the situation meant, it will be necessary to recall the world economic situation in the fall of 1957. Important raw material markets tended to be weak and uncertain. In the United States of America, the boom was about to turn. The development most commonly referred to as recession threatened to spread all over the world. If we can today state with satisfaction that the forces of expansion are again at work in most countries, this gratifying result is not least due to the fact that the Annual Meeting of 1957 laid the foundation for it, as far as exchange policy is concerned. Looking back over the development of last year, we find that there is something else that strikes us as remarkable. The recent development has made it quite clear that the economy of the world shows most resilience under trying circumstances where it is based on free competition and committed to social aims.

The International Monetary Fund and the International Bank for Reconstruction and Development made a contribution to the successful outcome of this test, not only at their Annual Meeting, which is a very valuable platform for a frank exchange of views and experience and for an international understanding on basic money and credit policies. An even greater contribution to success was the advisory and financial activities of these two institutions. In this past year they both have justified the expectations of their members even more completely than in other years, and I wish to express my gratitude for this to the responsible leaders of the two organizations, Mr. Jacobsson and Mr. Black.

Although businessmen very frequently regard a banker as a man who makes loans only when the sun shines and refuses or even withdraws them in fog and wind, the International Bank has achieved a very high volume of lending last year, with due regard to its business responsibility, and has thus demonstrated that it considers it not the least among its tasks to extend a helping hand to developing countries which are in difficulties to enable them to complete long-term investment projects according to plan. The International Monetary Fund has given considerable assistance to international liquidity, helping countries to overcome short-term balance of payments difficulties and has thus fulfilled an essential condition for the functioning of free international trade. In many cases, the governments of countries in payment difficulties were, by the assistance of the Fund, enabled to take appropriate internal measures to restore the external balance of their countries, without having to resort to new quantitative and payments restrictions.

I fully realize that many tasks remain to be solved, requiring the common effort of all countries of the free world. Let me, as it would appear fitting for a meeting of Governors of the International Monetary Fund and the International Bank, pick out just one task which I consider essential and on which I expect some policy statements will be made before the Meeting is over. We have to see to it that the Fund and the Bank are able to continue their activities unhampered and with adequate means at their disposal. The Federal Government is prepared to make an appropriate contribution, also in future, within its possibilities. As you all know, we in the Federal Republic of Germany were, after the collapse, faced with almost insurmountable tasks. That the difficulties in the way of reconstruction could be overcome was not least due to the aid we received from the Free World—let me recall the Marshall Aid in this connection—and to hard work governed by an economic policy which followed the principle of economic freedom and was designed to maintain the stability of the national currency. The Federal Government in such a condition is aware of its moral commitment and responsibility to extend in turn aid to those countries which strive for order, prosperity, and stability.

I am enough of an optimist to believe that the handicaps in the way of national economic development, which at times seem to be insurmountable, can be overcome, if the idea of a closer multilateral cooperation, which has already assumed shape in the International Monetary Fund and the International Bank, is pursued with even more intensity than before, and if at the same time the world economy can develop free of trade barriers and other obstacles, thanks to mutually adjusted national policies which work in the same direction. I am happy to receive on the occasion of this Annual Meeting the hospitality of a country which is making every effort to consolidate its economic bases and to build itself up on that foundation. It was with great satisfaction that I found recently in an article of Prime Minister Nehru, “The Tragic Paradox of Our Age,” another confirmation of the large measure of agreement which exists between the policy of India and the economic principles of other free democracies. Indeed, the considerable potential of energies which exist in every nation can be fully developed only if each citizen, within certain tenets and limits established by the leaders of the state and generally recognized, has the guaranteed freedom to shape his own life and choose his own aims. Such a system of individual freedom with social commitments has manifested itself in my own country, as far as economic matters are concerned, in the form of the social market economy. With ten years of experience behind me, I think I may say that this economic system, properly applied, will have, in countries which are as yet less developed, results similar to those it has had in industrialized states, where it has brought about a surprising increase in general prosperity.

May the joint effort of all members of the International Monetary Fund and the International Bank succeed in establishing balanced international trade, and may the Annual Meeting in which we have joined today provide further impulses to this end.

Statement by the Governor of the Bank for Pakistan 1Syed Amjad Ali

We are happy to meet today in an important part of Asia where the struggle to better the economic plight of the masses is being waged on a national scale with resolute determination. This effort to provide better living conditions for their peoples is being made by all underdeveloped countries in varying degrees according to their resources and special conditions. Some results have been achieved. On the positive side, advance in industrial development has been remarkable. Communications have also greatly improved, but there is still very large scope for further improvement. Per capita income has increased, but only marginally, and it still stands as low as between $60 and $70 per annum in this subcontinent. Some increase in employment has also taken place, but there remain millions of unemployed and underemployed. In this great effort of the underdeveloped countries, their foreign exchange resources have dwindled to a very low level, their economies are surcharged with inflation, and 10 per cent of their foreign exchange earnings stand committed for servicing their external borrowings.

During the last few years, generous assistance has been given to the underdeveloped countries by the United States of America and to the Colombo Plan countries by the Commonwealth countries. We are extremely grateful for this aid and assistance because without it even the small progress we have made would not have been achieved.

The development in these underdeveloped countries has been greatly handicapped by the fall in raw materials prices, and in the prices of simple manufactures which some underdeveloped countries export, and the continuous adverse terms of trade. The effect of this recession in prices and trade on foreign exchange earnings is so great that 75 per cent of the foreign assistance goes to fill the gap on account of this loss. It is, therefore, apparent that if the underdeveloped countries have to break through this hard pan of marginal progress then international action would be necessary in the field of stabilization of prices and larger foreign assistance. The fashionable axiom, “trade and not aid,” can have meaning for the underdeveloped countries only if the prices of their raw materials are stabilized at economic levels. My delegation will make proposals for a study of this vital question during the meetings of the Fund. We consider that the Fund is the only international organization which can study these problems and propose solutions.

The underdeveloped countries are conscious that “trade and not foreign aid” can alone provide an all-time solution of their problems. It would, however, be realized that for some years to come, this foreign aid and assistance would be essential so as to expand the economies of the underdeveloped countries, putting them in a position to trade in larger volume and thereby earn more for their needs and requirements. It is also necessary that the less developed countries are provided with markets for their simple manufactures, which would help them to earn more and at the same time reduce unemployment in their countries.

We welcome the proposal of the President of the United States to enlarge the share capital of the International Bank and the International Monetary Fund. I may recall here that it was the President of the United States who gave the world a new concept of helping other countries through the Point Four Program, and it is again the United States which is proposing the enlargement of the funds of these two great institutions so that they would be able to provide more assistance to the needy countries. It will be appropriate to mention here that the underdeveloped countries will not be able to make use of these additional funds unless the International Bank makes longer-term loans and uses a more flexible yardstick to measure the creditworthiness of these countries.

We, the underdeveloped countries, are greatly encouraged to see the universal realization of the need for their economic development. Some of us who have been associated with these problems since 1949 have seen the growing consciousness of this concept and the results which have come about through international action. The various technical assistance programs, the increased aid by the U.S. Government, the Colombo Plan, the increased operations of the International Bank and the Monetary Fund, the establishment of the International Finance Corporation, and now the proposed expansion of the Bank and the Fund—all these actions are to meet this great challenge of our time, the freedom from want for all peoples of all countries.

Statement by the Governor for China 1Tse Kai Chang

The Fund has greatly expanded its volume of financial transactions during the past year. Its record has clearly shown that it can provide assurance to its members, and that it can act promptly and efficiently whenever emergencies arise. To facilitate the performance of its duties, the Fund maintains even closer contact with its members than heretofore. In the circumstances of the world today, our attention is once more directed to the question of adequacy of international reserves and liquidity. We hope that, through the collaboration of all member countries, a solution to this problem will be found, so that the Fund can be further strengthened in carrying out its activities.

This year we have before us on the agenda two proposals introduced by the distinguished Governor for the United States. The primary objective of the two proposals is to extend the scope of Fund-Bank operations. Both measures are indeed a great tribute to the Fund and the Bank. What greater recognition can be given to the two organizations than the manifested desire, on the part of the members, that ways and means should be found so that their activities could be further expanded?

All these measures are now in a formative stage. My delegation, therefore, is only in a position to make some very general comment. Inasmuch as the implementation of all these measures will lead to the acceleration of economic development and improvement in international liquidity, we wish to give them our support. We are indeed not unaware of certain difficulties that might arise in relation to my own country, as regards the final implementation of these measures. However, such difficulties, which we believe can be resolved in time, should not stand in the way of our sincere support of these measures.

Statement by the Governor for the Philippines 1Miguel Cuaderno, Sr.

We are all aware that three important proposals are to be taken up at this meeting and which, because of the source of such proposals and their importance to our twin institutions and to countries like my own, make our meeting this year a very significant one. I refer to the proposals to increase the quotas of member countries in the Fund, to increase the authorized capital of the Bank, and to establish an International Development Association.

In principle, our delegation believes in providing the Fund with adequate resources with which to assist member countries in time of need. In this connection, our delegation would like to take this opportunity to express the appreciation of our Government for the immediate favorable action of both the Executive Boards and the Governors of the Bank and the Fund on our request for an increase of our quotas in both institutions, recognizing as they must have the fact that the Philippine quota, especially in the Fund, was relatively smaller than those of some of the countries under similar economic conditions.

The reluctance of my Government up to this time to take advantage of the decision to increase our quota in the Fund impels our delegation strongly to recommend that, if the proposal to have all the member countries increase their quotas in the Fund is approved, the authorities of this institution should re-examine their method of assessing a member country’s request for assistance. If the very narrow meaning that is given to the purpose for which the Fund was established, and the onerous conditions which lately are being imposed for the grant of Fund assistance are continued, my Government fails to see how an increase in the members’ quotas could be of help to them in times of need. Indifference to the urgency of the assistance solicited and the peremptory manner of dismissing the application for such assistance because the country concerned seriously doubts, and not without reasons, an important decision which it is required by the Fund authorities to make, certainly make that country hesitate supporting the proposal to increase the members’ quotas in the Fund.

It is difficult to believe, despite a desire to be charitable in one’s judgment, that after all these years of contact with the underdeveloped member countries there are among the officials of the Fund those who would not see or realize that a world of difference exists between the conditions existing in the industrial countries and those in the underdeveloped countries.

The comprehensive statement in the Annual Report of the Fund this year on the multifarious and complex problems besetting many underdeveloped countries in their difficult task of trying to achieve development with stability should induce the Fund authorities to treat their problems in an entirely different light from that with which they gauge those of the highly developed countries.

As has well been stated by Professor Hierta of Stockholm, the underdeveloped countries have for their free use the inherited economic theory of the highly developed countries, but the underdeveloped countries should not accept it uncritically; they should remold it to fit their own problems and interests. The professor was right when he also stated that much of the orthodox economic theory is a rationalization of the dominant interests in the industrial countries where it was first put forward and later developed. In the main, economic theory has not so far concerned itself with the problems of underdeveloped countries. Therefore, if it is uncritically applied to such problems the theory becomes wrong and misleading.

It is a keen sense of disappointment which constrained me to make these candid statements. I used to look up to the Fund as a source of inspiration and hope. I used to admire the advice and guidance it used to give and the promptness with which it used to come to the rescue of the members in distress. Our delegation supports fully the proposal to raise the capitalization of the Bank. There was a time, long ago, when I thought the Bank was giving very little attention to the needs of the underdeveloped countries. However, now I see that there is much to hope under the present policies and management of the Bank.

Statement by the Governor for Argentina 1Emilio Donato del Carril

As shown by the Thirteenth Annual Report of the Fund, this assembly faces the fact that every country of the world is today confronted with the problem of creating favorable conditions to attain a satisfactory pace of economic growth and at the same time to maintain stable prices and a high level of employment. In spite of the vigorous development experienced after the Second World War by most of the industrial economies, they are still in danger of cyclical fluctuations. The severity of these fluctuations is tempered through measures of fiscal and credit policies that compress demand when it is excessive and stimulate it when it lags in its role of maintaining an adequate level of economic activity.

We must point out here, however, a basic difference between the fully industrialized countries and those which are in the process of development. We must recognize that there are not only economic reasons, but also political and social implications that produce very different consequences when demand is compressed in countries of different economic structure. The great theoretical and practical problem before the countries in the process of development is how to obtain the capitalization that is essential to attain a high pace of economic growth, avoiding, or at least mitigating, the great sacrifices of their peoples.

The rapid growth of still not developed economies depends primarily on the efforts that each country makes to obtain strong internal capitalization. However, we must count on the cooperation of the strongly capitalized countries if we want to accelerate the development process, for our income is still too low to produce sufficient internal savings.

This is an aspect that has great interest for Latin American countries, which need for their evolution the additional incorporation of foreign private capital. In this respect, it is well known that the international flow of private capital has heavily contracted since the great world depression.

One of the cardinal objectives of these international financial organizations is to promote a healthy development of international trade linked to an intensified growth of the countries that are in the process of development. This is the policy of the Fund as expressed in Article I of the Fund Agreement, especially in paragraph (ii), where it states that one of the purposes of the Fund is “to facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.” To reach these ends, our countries believe that the problem of external disequilibrium must not be considered as a separate crisis, but rather as a normal fact of long-term growth and that it must be solved with due observance of the differences that derive from the stage of development in which the different countries are.

The correction of basic disequilibria originating in external factors must be accomplished through the joint efforts of every nation. It is imperative to achieve this correction in the briefest possible time in order to avoid or attenuate social turbulence in the countries still not developed. This is the concrete reality that must be taken into account when measures to reduce the effects of monetary imbalances are considered. The Report alludes precisely to this problem when it points out that several less developed countries have found it more difficult to reduce exchange restrictions, due to the fall in the demand for their export products, because they “would have found it necessary to take measures in other fields that were more intensive than they were prepared to face.” These measures could, directly or indirectly, reduce internal consumption, partially paralyze their industries, and stop the process of development that is the only workable solution for correcting the already mentioned structural deficiencies.

The larger countries have as their main responsibility the prevention and correction of excessive cyclical fluctuations, but they must understand also that they strongly influence the choice of roads by the peoples of the countries in process of development to overcome stagnation and poverty. These countries are prepared to make every sacrifice necessary to carry out their development on the road of democracy and rule of law. Our nation has adopted measures of great internal transcendency just to maintain itself within this framework. In an effort to achieve the revival of the economy, stagnant for almost thirty years and never recuperated from the effects of the great world depression, we have obtained the cooperation of foreign capital. We hope to see in two or three years the concrete results of this effort, which shows itself mainly in the fields of oil, coal, electric power, steel, and transportation. Before such time, the utmost efforts will be made to diminish the effects on the monetary stability and the balance of payments of the unavoidable disequilibrium.

We are in the same position as the other countries on the road to development—especially those of Latin America—which seek a way to overcome the present difficulties but at the same time avoid social and political pitfalls that could endanger what has been attained up to now.

If the international financial organizations facilitate that action through an understanding policy of true cooperation in the analysis and solution of our problems, their prestige and authority will have been cemented once more in helping the countries that are making the effort of development to reach their goals.

Statement by the Governor for France 1Wilfrid Baumgartner

Both Bretton Woods institutions have contributed largely, since the end of the war, to the economic reconstruction and uplift of the world. The question has been raised this year of increasing their resources, and therefore our discussions may have still more importance than in the past.

I would like, in a few words, to sum up the spirit in which France is likely to support the ideas now submitted to us. As regards the Bank, its members should obviously make it able to adjust its resources to its increasing activities. I may perhaps recall that more than ten years ago, I personally signed with it the loan agreement, the first of its kind. I still feel indebted to the Bank. My country may be expected to avail itself again of the Bank’s action, especially in the less developed areas of the French “Communauté,” that recently expressed so clearly their wish as to their future, and in which France has invested in the last ten years more than $7 billion.

As regards the Fund, and keeping in mind the nature of its mission, increasing its resources might seem a controversial issue. The problem of international liquidity is one of those in which, among economists, one can notice, if not changing minds, at least variations in trends. We are, in France, so grateful to the Fund for its financial help and technical support that we are quite sure it would wisely use its increased facilities. The Fund help, granted with respect to the efforts previously decided by our Government, has enabled us in the current year—thanks also to an upturn in psychological trends—to restore, in our external accounts, an equilibrium that we ought to strengthen while making progress toward freer trade and payments. Thus can we appreciate how useful it is to adjust in due time external help to national efforts.

Statement by the Governor of the Bank for Indonesia 1Soetikno Slamet

Instability is sometimes or even often due to purely internal matters, but it is also fair to state that there is an interdependency between the budget and balance of payments on the one hand and the short-run fluctuation of export markets on the other hand. I do not expect the end of all evils if and when some stabilization of raw materials prices is achieved, but it will certainly lessen the burden of many of us. Stabilization, in my view, does not mean the freezing of the price level but to prevent it from bouncing too wildly. Stabilization should provide the export markets with a cushion which is not rigid, as no cushion is.

I am glad to state that increased interest has been shown lately in this problem. The decision of GATT to devote a special study to it, a symposium in Vol. XI of Kyklos of this year regarding “The quest for a stabilization policy in primary producing countries,” the more favorable attitude of the United States and Great Britain vis-à-vis the United Nations’ Commission on international commodities trade, and, last but not least, the interest shown in our own circle toward the matter, are encouraging indeed.

Now with this increased interest, this better climate in mind, I wonder if we could not do more with our increased means, if such increase would eventually materialize. Instead of waiting until balance of payments shortages occur and then come to the rescue, I wonder if we could not act earlier and in a more fundamental manner. I wonder if we could not use our increased funds—I am now particularly referring to the International Monetary Fund—for instance, for contributing to buffer stocks, which, as we know, are meant to achieve some stability in the export markets.