Gentlemen, it is not without emotion that I open our Fourth Annual Conference. First of all, I should like to thank my friend, Mr. Maurice Petsche, Finance Minister of my country and Chairman of the Board of Governors of the International Bank, for having requested me to speak on both our behalf. His gesture was doubtless prompted by the thought that I have had the honor of taking part in all our conferences since Bretton Woods, and that it would give me great pleasure indeed to preside at the first session of an important meeting in the history of our institutions.

The Honorable Pierre Mendes-France

Gentlemen, it is not without emotion that I open our Fourth Annual Conference. First of all, I should like to thank my friend, Mr. Maurice Petsche, Finance Minister of my country and Chairman of the Board of Governors of the International Bank, for having requested me to speak on both our behalf. His gesture was doubtless prompted by the thought that I have had the honor of taking part in all our conferences since Bretton Woods, and that it would give me great pleasure indeed to preside at the first session of an important meeting in the history of our institutions.

In July 1944, while battles were still raging on the beaches of Normandy and on the islands of the Pacific, men of good will and in good faith were getting together in the quiet setting of New England in order to prepare for the reconstruction and prosperity of the world. It is quite obvious that at that time it was impossible for them to visualize with scientific accuracy what the economic situation of the world would be once the fighting was over. Inevitably, they were thinking of prewar years and were inclined to believe that the future would not differ very much from the past.

Today, we realize that the world has been much more deeply affected by the war than we imagined. The mechanisms which we expected to be promptly restored are not yet functioning. The automatic adjustment of currencies has not yet been resumed, capital markets are no longer playing their traditional part, and balances of payments are in disequilibrium.

That does not mean that our institutions have failed as some people contend, and I should like to show why.

Our institutions have provided us with an indispensable forum in which consultations and debates on questions of international finance can take place. Since Bretton Woods, regular contacts have been maintained, sometimes of a public character, sometimes more discreet as is indispensable in such a field as ours. Legal procedures have been set up by means of which monetary and financial decisions can be discussed and formulated in common, due account being taken not only of national and limited interests, but also of the common world interest. Hence, has come the establishment of a common discipline and the possibility of better coordination between the domestic policies of member countries. From this point of view, our institutions are playing a vital part in the organization of the postwar world.

Everything is not always perfect in that difficult task. Certain obstacles standing in the way of a cooperation which must remain exclusively technical had been foreseen by one of the men to whom we owe the most, Lord Keynes. In the last address which he gave us in Savannah, he already denounced that bad fairy — politics — leaning over the cradle of our infant institutions, among well-wishing fairies, and impeding their action.

But while improvements are desirable, we must not minimize the importance of the technical cooperation existing between the 48 member countries of the Bank and the Fund, in order to adjust and coordinate their efforts. Those results although less obvious are, however, as important as the direct financial aid of hundreds of millions of dollars which our two organizations have granted to their members.

That task of technical cooperation has been carried on under sometimes thankless conditions by the excellent staff of our twin institutions and by their chiefs: Mr. Camille Gutt who has led the Fund ever since its birth with determination, patience, loyalty and good humor, and Messrs. Eugene Meyer, John McCloy, and Eugene Black who have been the successive heads of the Bank. The loss which we have incurred in having to part with Mr. McCloy has been compensated only by our satisfaction in greeting as his successor one of his closest associates who is well qualified to further the work which has been so admirably initiated by his predecessors.

The years immediately following the end of the war and which have just ended may be described as a period of emergency repairs. The problem was to restore as quickly as possible the prerequisites of reconstruction. For that purpose production had to be resumed at a satisfactory level in the largest possible number of countries.

That has now been achieved, at least for the world taken as a whole. The level of world production today is above that of prewar years. To a large extent that important achievement has been obtained through that act of farsighted statesmanship: The Marshall Plan.

The generosity and boldness which are the characteristics of that momentous measure are particularly remarkable in that, at the time when it was enacted, a serious disequilibrium existed in the United States between supply and demand, as shown by the persistent rise in internal prices. Just as the addition of American goods to European production helped in checking inflation in Europe, their export from the United States meant an increase in inflationary pressure in this country. Today, the situation is different. But it is easy to imagine what the situation of a large part of the world would have been had it not received the basic supplies provided by the United States, and what that situation would become if the generous American aid were to be discontinued before the end of the critical period.

It would be unfair not to mention as well the great efforts made by the countries devastated by the war.

But production has not been restored to the same levels in all countries, and while it has risen as high as 180 per cent of prewar in some parts of the world, it is still below index 80 in others. Such extraordinary diversity in economic recovery creates difficult problems of adjustment which the yearly reports presented in the past by the Fund and the Bank have described.

Moreover, a different and new problem has risen: while the economic recovery of the countries of the world is far from complete, there has been an important development to the international monetary problem. In certain countries, a sellers’ market has been replaced by a buyers’ market; in other words, effective demand has fallen below production capacity. It indicates the end of the general scarcity of foodstuffs, of raw materials and of productive resources as a whole. The supply of most goods has been restored in the relatively short period of three and a half years.

While gratifying, such a situation is also the cause of serious worries. From a national point of view, the emergence of a buyers’ market entails the danger of unemployment and of serious economic, social and political consequences. From an international point of view — just as a patient coming out of a severe illness will react most to a sudden shock in those parts of his body which had not fully recovered — the first effect of the buyers’ market, as the Report of the Fund emphasizes, is to increase the disequilibrium in balances of payments, causing great difficulties to certain countries. And it would be futile to hope that exchange stability and freedom of transactions would be durably restored without equilibrium in balances of payments.

That is the problem we have to deal with at the present time. Its different elements are set forth in the Annual Reports which both our institutions present to this session.

What part can we take as regard to this problem?

Childish illusions have often been entertained in some circles concerning the tasks that the Bank and the Fund should tackle; it was assumed by some people that the means at the disposal of our institutions were much larger than they are in fact. Yet we should be careful not to fall into the opposite error.

We should not be content with acknowledging the deficiency of our present resources. Faithful to the Bretton Woods spirit, we must be more ambitious. We enjoy really effective means of action, influence and authority, and it is essential that they should be used to guide the policies of member countries if our civilization is not to be exposed to the strains of inflation on the one hand or to violent deflation on the other hand.

Important discussions have been held on the question of the ability of many countries to resist the reversing of the inflationary pressure of the last years. Some have stated that a deflation would inevitably be followed by extremely serious consequences and would cause profound disruptions and dislocations. Such a view might have been justified if governments as well as public opinion counted, as in the past, on the automatic adjustment of economies. In the past, automatic adjustment did take place, but the consequences of economic depressions in the 19th century were far less widespread than those that would confront us today. We can hardly rely, therefore, in 1949, upon an automatic return to a balanced economy, unless we are prepared to undergo sufferings of a magnitude such as a modern civilization cannot endure.

What we must aim to is not the substitution of a buyers’ market for a sellers’ market or vice versa, but economic stabilization at full employment excluding the excesses of either a buyers’ or a sellers’ market. Recent economic developments have shown us that, of the fluctuations caused by the wars, the first is not necessarily the most acute or dangerous one. Therefore, it is not too early to turn to a study of the means by which the conditions which have marked the 1930’s may be avoided in the future, and to assess the measure in which our institutions might help in stabilizing demand in general and investment in particular.

It is always in the expansion of production and of international trade that solutions to those problems must be found. We should always in the future, as we did in the past, condemn the adoption of methods that lead to economic stagnation, to self-sufficiency, and to autarky, and which result merely in exporting the difficulties of one country to another — the first country not even succeeding in getting rid of them completely.

Whatever the momentary temptations, sometimes understandable among the sufferings of our world, progress cannot be achieved through a policy of egotism and shortsightedness. Progress can only result from the expansion from increased opportunities, both for nations and for men who have suffered so much and for so many years.

That conviction, if it is shared by all of us, and if it inspires our two institutions, will lead us together, after so many difficulties and hazards, toward the rehabilitation of world economy and the building up of a better way of life for men of good will.


Delivered at Session No. 1 (Opening Joint Session), September 13, 1949. Other addresses delivered at the Opening and Closing Joint Sessions, including closing remarks by the Chairman of the Board of Governors of the Bank, are attached as Appendices D and E.