J. V. Mládek
In 1944, at the time when the monetary future of the world was being discussed at Bretton Woods, the map of Africa showed four independent countries—Egypt, Ethiopia, Liberia, and the Union of South Africa. The bulk of the continent consisted of colonies, protectorates, trusteeship territories, and departments administered by six European powers and the Union of South Africa.
Africa at that time presented a rich variety of currency arrangements. Egypt and South Africa had national currencies and were full members of the sterling area. Ethiopia had created its State Bank and was preparing the introduction of the Ethiopian dollar, replacing foreign currencies and the long-used Maria Theresa thaler. Liberia, which, despite the law of 1935 creating a Liberian dollar, in fact depended on the use of foreign currencies, had just replaced the West African pound by the U.S. dollar as the main medium of payment. In each dependent territory a traveler would find either a European currency or a special local currency issued by one of a variety of agencies, some of them located in Europe.
Mr. Mládek is Director of the Central Banking Service in the Fund, and until recently was in charge of the Fund African Department. He has occupied various other positions in the Fund, including that of Executive Director and Director of the European Office in Paris. Before joining the Fund he served in the Czechoslovak Ministry of Finance and was Director and Commissioner of the National Bank of Czechoslovakia.
Under the colonial regimes, the dependent territories were closely linked with the metropolitan financial, banking, and monetary systems. Metropolitan countries were the major sources of investments and credits, but also depositories for the dependencies’ assets; the values of “dependent” currencies were anchored in metropolitan currency units and, with some exceptions, followed the adjustments of the metropolitan currencies’ rates. The financial ties were not the only factor responsible for the channeling of an important proportion of each area’s trade toward its metropolitan market. In many dependent territories the trade organization itself was an offspring of metropolitan firms, or consisted of agents whose experience was limited to their country of origin. The tastes and habits of the European expatriates and settlers, sometimes adopted by a part of the indigenous population, kept up a demand for metropolitan products.
The concentration of trade and payments in the intra-area channels had assumed a new significance in the 1930’s, when international trade began to struggle with formidable obstructions of import and payments restrictions and tariffs. Viewed against this growth of barriers in international transactions, the monetary areas continued to enjoy internal liberal trade and payments regimes. After the war, when the world was even more severely partitioned by payments and import restrictions, the relative freedom of payments between the members of each area and the preferential treatment of imports originating in it was one of the most relevant features of the monetary areas. The discriminatory aspects of import regimes varied, however, from one area to another and in some instances from one territory to another. Certain territories, for instance, enjoyed a particular international status forbidding discrimination in foreign trade.