Architects of the International Financial System (Routledge International Studies in Money and Banking)

272 Pages·2005·0.81 MB·English

by  Anthony Endres

Great Architects of International
Finance
Who were the great thinkers on international finance in the mid-twentieth
century? What did they propose should be done to create a stable inter-
national financial order for promoting world trade and economic growth?
This book studies the ideas of some of the most innovative economists
in the mid-twentieth century including three Nobel Laureates. These great
thinkers helped shape the international financial system and the role of the
World Bank and the International Monetary Fund. This book covers the
period from the late 1940s up to the collapse of the fixed US dollar–gold
link in 1971.
The impact of Hansen, Williams, Graham, Triffin, Simons, Viner,
Friedman, Johnson, Mises, Rueff, Rist, Hayek, Heilperin, Röpke, Harrod
and Mundell is assessed.
This book will prove invaluable to students of international economics,
international finance, economic history and the history of economic
thought.
Anthony M. Endres is Associate Professor of Economics in the School of
Business and Economics, University of Auckland, New Zealand.
Routledge international studies in money and banking
1 Private Banking in Europe
Lynn Bicker
2 Bank Deregulation and Monetary Order
George Selgin
3 Money in Islam
A study in Islamic political economy
Masudul Alam Choudhury
4 The Future of European Financial Centres
Kirsten Bindemann
5 Payment Systems in Global Perspective
Maxwell J. Fry, Isaak Kilato, Sandra Roger, Krzysztof Senderowicz,
DavidSheppard, Francisco Solis and John Trundle
6 What is Money?
John Smithin
7 Finance
A characteristics approach
Edited by David Blake
8 Organisational Change and Retail Finance
An ethnographic perspective
Richard Harper, Dave Randall and Mark Rouncefield
9 The History of the Bundesbank
Lessons for the European Central Bank
Jakob de Haan
10 The Euro
A challenge and opportunity for financial markets
Published on behalf of the Société Universitaire Européenne de Recherches
Financières (SUERF)
Edited by Michael Artis, Axel Weber and Elizabeth Hennessy
11 Central Banking in Eastern Europe
Nigel Healey
12 Money, Credit and Prices Stability
Paul Dalziel
13 Monetary Policy, Capital Flows and Exchange Rates
Essays in memory of Maxwell Fry
Edited by William Allen and David Dickinson
14 Adapting to Financial Globalisation
Published on behalf of the Société Universitaire Européenne de Recherches
Financières (SUERF)
Edited by Morten Balling, Eduard H. Hochreiter and Elizabeth Hennessy
15 Monetary Macroeconomics
A new approach
Alvaro Cencini
16 Monetary Stability in Europe
Stefan Collignon
17 Technology and Finance
Challenges for financial markets, business strategies and policy makers
Published on behalf of the Société Universitaire Européenne de Recherches
Financières (SUERF)
Edited by Morten Balling, Frank Lierman and Andrew Mullineux
18 Monetary Unions
Theory, history, public choice
Edited by Forrest H. Capie and Geoffrey E. Wood
19 HRM and Occupational Health and Safety
Carol Boyd
20 Central Banking Systems Compared
The ECB, the pre-Euro Bundesbank and the Federal Reserve System
Emmanuel Apel
21 A History of Monetary Unions
John Chown
22 Dollarization
Lessons from Europe and the Americas
Edited by Louis-Philippe Rochon and Mario Seccareccia
23 Islamic Economics and Finance
A glossary, 2nd edition
Muhammad Akram Khan
24 Financial Market Risk
Measurement and analysis
Cornelis A. Los
25 Financial Geography
A banker’s view
Risto Laulajainen
26 Money Doctors
The experience of international financial advising 1850–2000
Edited by Marc Flandreau
27 Exchange Rate Dynamics
A new open economy macroeconomics perspective
Edited by Jean-Oliver Hairault and Thepthida Sopraseuth
28 Fixing Financial Crises in the 21st Century
Edited by Andrew G. Haldane
29 Central Banking in Eastern Europe
Edited by Nigel Healey and Barry Harrison
30 Exchange Rates, Capital Flows and Policy
Edited by Rebecca Driver, Peter Sinclair and Christoph Thoenissen
31 Monetary Policy and Unemployment
The U.S., Euro-area and Japan
Edited by Willi Semmler
32 Great Architects of International Finance
The Bretton Woods era
Anthony M. Endres
Great Architects of
International Finance
The Bretton Woods era
Anthony M. Endres
First published 2005
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
Simultaneously published in the USA and Canada
by Routledge
270 Madison Ave, New York, NY 10016
Routledge is an imprint of the Taylor & Francis Group
This edition published in the Taylor & Francis e-Library, 2005.
“To purchase your own copy of this or any of Taylor & Francis or Routledge’s
collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.”
© 2005 Anthony M. Endres
All rights reserved. No part of this book may be reprinted or
reproduced or utilized in any form or by any electronic, mechanical,
or other means, now known or hereafter invented, including
photocopying and recording, or in any information storage or
retrieval system, without permission in writing from the publishers.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging in Publication Data
A catalog record for this book has been requested
ISBN 0-203-02214-9 Master e-book ISBN
ISBN 0-415-32412-2
Contents
List of tables x
Preface xi
Abbreviations xiii
1 Essential elements of a doctrinal approach 1
The primacy of ideas 1
On the intellectual architecture of the international financial
order 3
Choice of great architects 5
Economic ideas and international financial policy: normative
issues 8
Main purposes of a doctrinal perspective 10
2 The Bretton Woods financial order – a distinctive economic
doctrine 14
Some intellectual background 14
Bretton Woods: first principles 18
Commentary 22
Policy assignment guidelines at Bretton Woods: a
reconstruction 28
Conclusion 31
3 Alvin Hansen’s Keynesian interpretation of Bretton Woods 35
An American Keynesian at Bretton Woods 35
Clarifying the BW exchange rate principle 38
Promoting international economic stability through monetary
and fiscal policies 44
viii Contents
International action to combat secular stagnation and
underdevelopment 49
Conclusion 52
4 John Williams’s ‘key currency’ alternative for the
internationalfinancial order 56
International monetary problems in the interwar years: a view
from Harvard 56
Williams’s reaction to Bretton Woods and his alternative 62
Principal criticisms of the key currency architecture 68
Other policies essential to the key currency architecture 72
Summary and assessment 75
5 Frank Graham on international money and exchange rates 79
Graham’s critique of gold standards 79
Heretical pronouncements on BW principles 84
The commodity reserve standard proposal 89
A plan for full employment and price stability after BW 93
Conclusion 99
6 Robert Triffin’s supranational central bank: a plan to
stabilizeliquidity 102
Intellectual background 102
Triffin’s revisionist views on the operation of the gold
standard 103
New ‘canons’ of international financial behaviour: qualified
support for BW 107
The key currency convertibility crisis 112
The supranational bank proposal and its limitations 116
Concluding reflections on Triffin’s policy assignment
guidelines 122
7 A Chicagoan international financial order 127
A Chicagoan tradition on international financial reform? 127
Reactions to BW: Simons and Viner 128
Milton Friedman’s case for flexible exchange rates 135
Friedman’s monetary and fiscal framework for international
stability 140
Contents ix
Harry Johnson’s renewed case for flexible exchange rates 144
Policy assignment rules for a Chicagoan international financial
order 147
8 Reconstructing the international gold standard: European
perspectives 150
A genuine gold-based international financial order: the Mises
ideal 150
The bastardized interwar gold standard and an alternative to
BW 153
Mid-twentieth-century gold standard doctrine 158
Mid-twentieth-century gold standard doctrine: a synthesis? 170
9 Salvaging the fixed exchange rate architecture: the ideas of
RoyHarrod and Robert Mundell 176
Roy Harrod’s advocacy of a rise in the price of gold 176
Harrod on IMF renovations: the case of SDRs 180
Harrod’s principles for domestic policy in a reformed BW
architecture 184
Robert Mundell on the failing BW order, circa1965–71 188
The currency area option 195
Reforming the BW financial architecture? 198
10 The plurality of international financial architectures in the
BW era 204
Implications arising from the architecture metaphor 204
Principal beliefs embodied in various architectures 208
A plurality of financial architectures: some lessons from our
survey 212
Notes 217
Bibliography 237
Index 254