Area distribution

In order to summarize conveniently the area distribution of the public loans and grants covered in this review, the world has been divided into six area groupings: the United States, Canada, Western Europe, Underdeveloped Countries, Other Countries (mainly Eastern Europe and Japan), and International Organizations. The public loans and grants made or received by each of these groups are shown in Table 1.

Table 1.

International Movements of Public Long-Term Capital and Grants, 1946-50¹

¹Figures may not add to totals because of rounding.

²Less than $50 million.

Table 1.

International Movements of Public Long-Term Capital and Grants, 1946-50¹

Receiving Countries		Payments by Countries (billion U.S. dollars)						Total Receipts
		United States	Canada	Western Europe	Int. Organizations	Underdeveloped Countries	Eastern Europe, Japan, and Unallocated	Billion U.S. Dollars	Percentage Distribution
United States		—	1.1	1.9	—	1.1	0.4	4.5	7
Canada		1.3	—	0.6	—	—	—	1.9	3
Western Europe		20.9	1.7	6.0	2.8	3.6	0.2	35.1	58
International organizations		4.9	0.2	1.3	—	0.5	0.1	6.9	11
Underdeveloped countries		2.9	0.1	4.1	1.0	0.1	2	8.3	14
Eastern Europe, Japan, and unallocated		2.3	—	0.6	1.1	0.1	—	4.2	7
	Total payments	32.3	3.1	14.5	4.9	5.4	0.7	61.0	100
	Percentage distribution	53%	5%	24%	8%	9%	1%	100%

¹Figures may not add to totals because of rounding.

²Less than $50 million.

View Table

Table 1.

International Movements of Public Long-Term Capital and Grants, 1946-50¹

Receiving Countries		Payments by Countries (billion U.S. dollars)						Total Receipts
		United States	Canada	Western Europe	Int. Organizations	Underdeveloped Countries	Eastern Europe, Japan, and Unallocated	Billion U.S. Dollars	Percentage Distribution
United States		—	1.1	1.9	—	1.1	0.4	4.5	7
Canada		1.3	—	0.6	—	—	—	1.9	3
Western Europe		20.9	1.7	6.0	2.8	3.6	0.2	35.1	58
International organizations		4.9	0.2	1.3	—	0.5	0.1	6.9	11
Underdeveloped countries		2.9	0.1	4.1	1.0	0.1	2	8.3	14
Eastern Europe, Japan, and unallocated		2.3	—	0.6	1.1	0.1	—	4.2	7
	Total payments	32.3	3.1	14.5	4.9	5.4	0.7	61.0	100
	Percentage distribution	53%	5%	24%	8%	9%	1%	100%

¹Figures may not add to totals because of rounding.

²Less than $50 million.

The United States and Canada together were by far the largest exporters of public funds; they made available $35 billion, or almost 60 per cent of the $61 billion of public loans and grants. More than two thirds went to Western Europe either directly or through international organizations. The next largest exporter was Western Europe, which accounted for $15 billion, or one fourth of the total. Almost half of these Western European public funds were transferred within Europe; the rest consisted for the most part of loans and grants made to underdeveloped countries, repayments of U.S. and Canadian loans, the 5 per cent counterpart of U.S. grants, and contributions and subscriptions to international organizations. On the receipt side, the most important of the importers was Western Europe. One fifth of Europe’s loan and grant receipts represented intra-European movements; but even after allowance is made for this, European receipts of these funds, consisting principally of loans and grants made by the United States and Canada, were far greater than those of any other area. Underdeveloped countries and international organizations were, in turn, the next largest recipients of public loans and grants. For both of these groupings, however, exports of public funds in the form of loans, grants, and repayments represented a very large offset to their receipts of public funds.

One thing stands out from an examination of Table 1. Triangular transfers were large in relation to the total transfers of public funds that were made. The international organizations provided a channel through which resources, most of which were provided by the United States, were transferred to European countries. Of the $1.1 billion received by the International Bank from paid-in capital subscriptions and from bond sales, $0.9 billion came from the United States, while $0.5 billion of the $0.6 billion disbursed by the Bank in this period was disbursed to Western Europe. Similarly, $2.6 billion of the $3.7 billion contributed to international relief organizations was made available by the United States, while four fifths of the grants by these agencies were made to European countries. In addition, European countries themselves provided indirect channels of capital transfer, principally to underdeveloped areas. The extent to which Europe’s public loan and grant receipts made possible other exports of public loans and grants is one of the most interesting aspects of the movements of public funds in the postwar period. It is discussed more fully on pages 121-23.

Net transfers

One aspect that does not stand out clearly in the preceding comparison of gross movements of public funds is the extent to which the amounts exported by each of the areas shown in Table 1 offset its public loan and grant receipts. Western European countries and underdeveloped areas particularly were large exporters as well as importers of public funds. In order to compare the net transfers actually made, inflows and outflows of public loans and grants have been combined. The following over-all pattern, illustrated schematically in Chart 1, emerges.

Net Inter-Area Transfers of Public Long-Term Capital and Grants, 1946-50

(In billions of U.S. dollars)

Citation: IMF Staff Papers 1954, 002; 10.5089/9781451971637.024.A005

• Download Figure
• Download figure as PowerPoint slide

View Full Size

Net Inter-Area Transfers of Public Long-Term Capital and Grants, 1946-50

(In billions of U.S. dollars)

Citation: IMF Staff Papers 1954, 002; 10.5089/9781451971637.024.A005

• Download Figure
• Download figure as PowerPoint slide

Net Inter-Area Transfers of Public Long-Term Capital and Grants, 1946-50

(In billions of U.S. dollars)

Citation: IMF Staff Papers 1954, 002; 10.5089/9781451971637.024.A005

• Download Figure
• Download figure as PowerPoint slide

The United States and Canada were net exporters of public funds to all countries, except to several Latin American and independent sterling area countries, which were small net exporters of public funds to the United States, mainly because of debt repatriation. Of the total net transfers of $29 billion from the United States and Canada, $22 billion was made available directly to Western Europe and Japan, and more than $1 billion was made available to Western Europe through international organizations.

The relatively small amount of public loans and grants actually made to underdeveloped countries was due to the fact that the $8 billion which they received in loans, grants, and some repayments, principally from Western Europe or from the United States, was offset in large part by debt repatriation and by purchases of foreign-owned assets by independent sterling area and Latin American countries. Australia and Argentina respectively accounted for the bulk of this outflow of public funds from these two areas. Some of these transfers were made to the United States. For the most part, however, they were made to Western Europe with the result that, though the gross outflow of public capital from Western Europe to all underdeveloped areas was greater than the gross outflow from the United States, Western Europe’s net export of public funds to underdeveloped areas amounted to only $0.6 billion, compared with $1.9 billion from the United States.

Despite the effect of debt repatriation on the net public funds transferred to underdeveloped countries as a group, Western Europe was a substantial net exporter of public financial resources to its dependencies. In order to assess the importance of these transfers in relation to those made to and from other underdeveloped areas, the rather heterogeneous underdeveloped country group is subdivided in Table 2 into four main subgroups, to show the net receipts of each subgroup and the principal sources of these receipts.

Table 2.

Net Receipts of Public Funds by Underdeveloped Countries, 1946-50¹

(In billions of U.S. dollars)

¹No sign indicates net inflow; minus sign indicates net outflow. For more detailed figures, see Table 11.

Table 2.

Net Receipts of Public Funds by Underdeveloped Countries, 1946-50¹

(In billions of U.S. dollars)

Paying Countries		Receiving Countries
		Latin America	European Dependencies	Independent Sterling Area	Other Underdeveloped Countries	Total
United States		-0.05	0.03	-0.12	1.99	1.85
Western Europe		-1.24	2.12	-0.30	0.02	0.59
International organizations		-0.05	—	-0.04	0.63	0.54
Other sources		-0.03	-0.02	-0.02	0.01	-0.02
	Total	-1.37	2.16	-0.48	2.65	2.96

¹No sign indicates net inflow; minus sign indicates net outflow. For more detailed figures, see Table 11.

View Table

Table 2.

Net Receipts of Public Funds by Underdeveloped Countries, 1946-50¹

(In billions of U.S. dollars)

Paying Countries		Receiving Countries
		Latin America	European Dependencies	Independent Sterling Area	Other Underdeveloped Countries	Total
United States		-0.05	0.03	-0.12	1.99	1.85
Western Europe		-1.24	2.12	-0.30	0.02	0.59
International organizations		-0.05	—	-0.04	0.63	0.54
Other sources		-0.03	-0.02	-0.02	0.01	-0.02
	Total	-1.37	2.16	-0.48	2.65	2.96

¹No sign indicates net inflow; minus sign indicates net outflow. For more detailed figures, see Table 11.

Both Latin America and the independent sterling area countries were exporters of public funds (Chart 2), mainly because of their large repatriation of foreign-held debt and foreign-owned railways and other utilities, but also because of contractual repayments, loans made by Argentina and Brazil to European countries, and contributions made to international organizations. The overseas dependencies of Europe and the other underdeveloped countries, principally China, Korea, and the Philippines, were thus the only net recipients of public capital and grants in the group. The European dependencies received $2.2 billion, almost entirely from loans and grants made by metropolitan European countries. China, Korea, and the Philippines together received $1.8 billion from the United States and another $0.6 billion from UNRRA.

International Movements of Public Long-Term Capital and Grants to and from Underdeveloped Countries, 1946-50

(In billions of U.S. dollars)

Citation: IMF Staff Papers 1954, 002; 10.5089/9781451971637.024.A005

• Download Figure
• Download figure as PowerPoint slide

View Full Size

International Movements of Public Long-Term Capital and Grants to and from Underdeveloped Countries, 1946-50

(In billions of U.S. dollars)

Citation: IMF Staff Papers 1954, 002; 10.5089/9781451971637.024.A005

• Download Figure
• Download figure as PowerPoint slide

International Movements of Public Long-Term Capital and Grants to and from Underdeveloped Countries, 1946-50

(In billions of U.S. dollars)

Citation: IMF Staff Papers 1954, 002; 10.5089/9781451971637.024.A005

• Download Figure
• Download figure as PowerPoint slide

International movements in the perspective of the balance of payments

Before undertaking a detailed account of these movements of public capital and grants, it is appropriate to assess their relative importance in financing the net transfers of resources that took place in the period under review. The principal sources for financing the cumulative net imports of goods and services (excluding military assistance) of each of four country groupings are shown in Table 3.

Table 3.

Financing of Regional Net Imports of Goods and Services, 1946-50

(In billions of U.S. dollars)

¹Japan, Mainland China (1946-49), Formosa (1950), the Philippines, South Korea, Thailand, Indonesia (1950), and Egypt. The errors introduced through the inclusion of an estimate for China’s 1949 balance on goods and services and through the omission of smaller Middle Eastern countries and Eastern Europe are unlikely to affect the orders of magnitude indicated here. The figures shown do not include European dependencies, for which only incomplete balance of payments data are available.

Table 3.

Financing of Regional Net Imports of Goods and Services, 1946-50

(In billions of U.S. dollars)

		Western Europe	Independent Sterling Area	Latin America	Other Countries1
Net imports of goods and services, 1946-50		20.8	3.7	0.5	4.5
Financed by
	Net receipts of public long-term capital and grants	20.6	-0.5	-1.4	4.3
	Drawing down of official gold and foreign exchange reserves	-0.5	2.8	1.0	0.7
	Private donations and other net capital receipts	0.7	1.4	0.9	-0.5

¹Japan, Mainland China (1946-49), Formosa (1950), the Philippines, South Korea, Thailand, Indonesia (1950), and Egypt. The errors introduced through the inclusion of an estimate for China’s 1949 balance on goods and services and through the omission of smaller Middle Eastern countries and Eastern Europe are unlikely to affect the orders of magnitude indicated here. The figures shown do not include European dependencies, for which only incomplete balance of payments data are available.

View Table

Table 3.

Financing of Regional Net Imports of Goods and Services, 1946-50

(In billions of U.S. dollars)

		Western Europe	Independent Sterling Area	Latin America	Other Countries1
Net imports of goods and services, 1946-50		20.8	3.7	0.5	4.5
Financed by
	Net receipts of public long-term capital and grants	20.6	-0.5	-1.4	4.3
	Drawing down of official gold and foreign exchange reserves	-0.5	2.8	1.0	0.7
	Private donations and other net capital receipts	0.7	1.4	0.9	-0.5

¹Japan, Mainland China (1946-49), Formosa (1950), the Philippines, South Korea, Thailand, Indonesia (1950), and Egypt. The errors introduced through the inclusion of an estimate for China’s 1949 balance on goods and services and through the omission of smaller Middle Eastern countries and Eastern Europe are unlikely to affect the orders of magnitude indicated here. The figures shown do not include European dependencies, for which only incomplete balance of payments data are available.

Two facts are clear from Table 3: (1) net imports of goods and services of Western Europe and of “other countries” from the rest of the world were financed almost entirely by net receipts of public long-term capital and grants, about half of which consisted of grants; (2) net imports of goods and services of Latin America and the independent sterling area, by contrast, were financed entirely by drawing down official holdings of gold and foreign exchange and by net receipts of short-term and private capital. For each of these last two areas, public fund movements resulted in a net outflow of capital, chiefly the result of the large repatriation of external bonded debt and purchases of assets located within the area but owned abroad.

At first glance, the major movements of long-term capital and grants appear to have been significant as a means of financing net import surpluses for only Western Europe and “other countries” (principally Japan, China, Korea, and the Philippines), with Western Europe receiving the bulk of the net public funds transferred. As a result of the large net addition made to European resources through such transfers, however, some European countries were in turn enabled to make substantial exports of public funds to other European countries and to other areas of the world. Though each Western European country, with the exception of Finland, was a net importer of resources from the rest of the world, several were at the same time substantial exporters of resources to other countries.

Western European exporters of public funds. France, the Netherlands, Belgium, and the United Kingdom were the principal countries falling in the category of European exporters of public funds. Of these four countries, France was the largest net recipient of resources from the outside world (Table 4). However, France exported almost $1.6 billion of public funds in the form of loans and grants to other countries, over $900 million going to French territories and dependencies in Africa alone. (This does not include transfers arising out of military operations in Indo-China.) This total represented a transfer equivalent to over one fourth of the gross loans and grants received by France from the United States and Canada during the same period. There was, of course, no direct relation between the loans and grants received by France from the United States and Canada and the large volume of resources transferred by France to the overseas franc area. The magnitude of the transfers to the French Union was such, however, that if there had been no additional North American resources the transfers might not have been possible.

Table 4.

Financing of Net Imports of Goods and Services of Four European Countries, 1946-50

(In billions of U.S. dollars)

Table 4.

Financing of Net Imports of Goods and Services of Four European Countries, 1946-50

(In billions of U.S. dollars)

		France	Netherlands	Belgium	United Kingdom
Net imports of goods and services, 1946-50		5.7	1.9	1.2	1.2
Financed by
	Receipts of public long-term loans and grants	5.6	2.0	1.1	10.0
	Net receipts from public capital repayments	0.3	0.1	-0.2	-0.1
	Less public loans and grants made	-1.6	-0.8	-1.0	-3.7
		4.3	1.3	-0.1	6.2
	Drawing down of official gold and foreign exchange reserves	0.6	-0.1	-0.1	-0.9
	Private donations and other net capital receipts	0.8	0.7	1.4	-4.1

View Table

Table 4.

Financing of Net Imports of Goods and Services of Four European Countries, 1946-50

(In billions of U.S. dollars)

		France	Netherlands	Belgium	United Kingdom
Net imports of goods and services, 1946-50		5.7	1.9	1.2	1.2
Financed by
	Receipts of public long-term loans and grants	5.6	2.0	1.1	10.0
	Net receipts from public capital repayments	0.3	0.1	-0.2	-0.1
	Less public loans and grants made	-1.6	-0.8	-1.0	-3.7
		4.3	1.3	-0.1	6.2
	Drawing down of official gold and foreign exchange reserves	0.6	-0.1	-0.1	-0.9
	Private donations and other net capital receipts	0.8	0.7	1.4	-4.1

The same may also be said for the Netherlands and Belgium, both of which were large recipients of external resources during this period. The Netherlands transferred about $500 million to Indonesia to finance the Indonesian deficit on current account with the outside world, and another $300 million in public long-term loans and grants to other countries. These transfers were equivalent to three fourths of the public loans and grants received by the Netherlands from the United States and Canada in this period. Belgium made available $1 billion in loans and grants, an amount greater than the $800 million in loans and grants which Belgium received from the United States and Canada in the same period; three fourths of the loans and grants made were to European countries.

The most conspicuous example of triangular capital transfer appears in the capital account of the United Kingdom. Long-term loans and grants received by the United Kingdom from the United States and Canada, most of which financed the U.K. dollar deficit, were more than six times its over-all net imports of goods and services of $1.2 billion. The United Kingdom also received an additional $1 billion from abroad in the form of increased holdings of sterling balances by its overseas dependencies. These public fund receipts, particularly the loans and grants made available by the United States and Canada, were so large in relation to the U.K. deficit on goods and services as to be clearly an important element underlying the $3.7 billion of public loans and grants and the $4 billion of private capital and short-term capital that it made available to the rest of the world. Exports of public funds were mainly to Western Europe in the form of relief and rehabilitation grants and the extension of drawing rights under Intra-European Payments Agreements, to British Colonies and other sterling area countries through various loans and grants, and to international organizations. The rest of the capital outflow represented for the most part private capital movements to independent sterling area countries, principally to Australia and the Union of South Africa, and sterling balance releases to India.

One conclusion that may be drawn from these observations is that these indirect channels of public fund transfers, based on the flow of public capital and grants from the United States and Canada to Western Europe, preserved in some fashion a network of multilateral international economic relationships which otherwise might have degenerated into bilateral balancing of external accounts and a consequently smaller volume of international trade. These indirect transfers were based on movements of public capital and grants that did not take place in response to purely economic incentives. They do, nevertheless, suggest that if the transfers of public funds from the United States and Canada to Western Europe were in some manner to become self-sustaining, e.g., by being replaced by private lending or investment, Western Europe might become the apex of a continuing triangular transfer of capital from North America to other, principally underdeveloped, areas to a much larger extent than could otherwise be expected. The experience of the early postwar period suggests that the prewar Europe-to-the-outside-world link has in some measure already been restored².

The following sections contain a more detailed review of the international movements of public capital and grants described in this summary. In turn, they examine movements of public long-term capital and grants to and from the United States and Canada, Western Europe, international organizations, and underdeveloped countries. Though Japan and Eastern Europe are not included in any of these country groupings, references to their public fund transactions, to the extent that information is available, are included in the review of the transactions of the United States, and of Western Europe and the international organizations, respectively.