Abstract

Mr. Chairman, the situation described in this fourth report of the Executive Directors of the International Monetary Fund is not an unexpected one. The situation which has now emerged was mentioned and commented upon in the very first report issued by the Executive Directors.

Chairman of the Executive Board and Managing Director of the International Monetary Fund

Mr. Chairman, the situation described in this fourth report of the Executive Directors of the International Monetary Fund is not an unexpected one. The situation which has now emerged was mentioned and commented upon in the very first report issued by the Executive Directors.

It is essentially, as the preceding speakers have mentioned it, a switching over from a world sellers’ market to a world buyers’ market. It is, however, more than that: it is the transition from an abnormal, postwar market to a more normal, if not yet fully normal, peacetime market. It reflects itself in the increasing importance of price and demand factors. Although the process has been a gradual one on the one hand, and does not yet cover every field of production, on the other hand it has certainly been a dominating feature of the year under review.

Since the end of the war, the essential concern of the countries of the world — especially those directly disrupted or dislocated by war operations or enemy occupation — has been to produce. The restoration of production has now been largely completed and the primary problem is and will be more and more to sell. The traditional role of international trade is thus to be restored.

The primary purposes of the Fund are to facilitate the growth of that trade and to eliminate foreign exchange restrictions which prevent it. Temporary restrictions on payments and transfers for current transactions are permitted under conditions described in the Articles of Agreement but continuous regard must be given by the members and by the Fund to those primary purposes. As international trade competition develops, this question will assume increasing importance.

The same may be said of exchange rates. In September 1946, the Executive Directors reported as follows:

“Because the entire world is in need of goods, some countries may maintain foreign exchange values for their currencies which are not for the time being a great handicap to the sale of their exports, but which prove to be too high when production is revived all over the world and the immediate shortage of import goods is in large part met.”

This warning has been repeated in the subsequent reports and its importance will escape no one’s attention, especially if it is taken in conjunction with another primary purpose of the Fund: the ultimate establishment of a multilateral system of payments.

The very fact that today the material difficulties of war reconstruction and of production have, generally speaking, been solved, throws a particular light upon what else remains to be done. And what remains to be done is perhaps harder than what has been done thus far.

No nation can do it alone. Individual countries may bring to the solution of the remaining problems a considerable and even vital contribution, but a large international effort will be necessary to arrive at a real settlement. This is not the problem of one country, or of one continent. It is a world problem.

Let us not be over-impressed by the technical complications and lose sight of the larger issues which are at stake. International uncertainty does not exist only in the economic sphere. It prevails also in the political sphere.

One of the principal remedies is to restore order in the economic field — which, of course, includes the monetary matters. To allow the present disorder in this field to spread — or even to remain — would be likely to cause an aggravation of existing uncertainties. Thus, if the effort to be made is considerable, the stakes involved make it well worth while.

It is under these serious circumstances that the Fund enters its fourth year of existence. Much at this stage is expected from it, possibly more than the restraints of its Charter may allow. There are things the Fund alone cannot settle. Much, however, can be done with the full good will and cooperation of the members acting in conformity not only with the letter but with the spirit of the Fund Agreement. It is my earnest wish that this cooperation will materialize and that the hopes placed in the Fund will not remain unfulfilled.

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Address delivered at Session No. 1 (Opening Joint Session), September 13, 1949.