World liquidity: problems shelved

"HE most interesting I thing about the Washington meeting of the International Monetary Fund and World Bank was that nothing new happened, despite the widespread interest which had been aroused.

The 2,800 finance ministers, bankers, economic experts and journalists were soon engulied in boredom alter speeches from the representatives of the big countries. It then became evident that the United States government had decided to seek a pause in its controversy with de Gaulle's government and to avoid a discussion of the underlying problems of the world monetary system.

That system rests on the agreements made at Bretton Woods in 1943 which conformed with the interest of the United States at that time, while recognising the special position of the pound sterling in international finance.

The main problem was to give some stability to the world monetary system by finding a picture given of the condition of the party during the events. For the information of these "friends" who consider themselves called to defend against us the role of the Bolsheviks in the October revolution, we give warning that our book teaches not how to love a victorious revolution after the event in the person of the bureaucracy it has brought forward, but only how a revolution is prepared, how it develops, and how it conquers.

party is not for us a machine whose sinlessness is to be defended by state measures of repression, but a complicated organism which like all living things develops in contradictions. The uncovering of these contradictions-among them the waverings and mistakes of the general staff —does not in our view weaken in the slightest degree the significance of that gigantic historic task which the Bolshevik party was the first in history to take upon its shoulders.' Bureaucracies' crisis Dutt and his friends continue their battle to stop the rebuilding of an international movement to take up that task. But the crisis faced by bureaucracies throughout the worlda reflection of the crisis of capitalism-makes it harder for the Stalinists every day.

The real meaning of the October revolution and the struggle against its betrayers becomes clear to numbers of young people who turn towards the Socialist Labour League today.

As Dutt and the other Communist Party leaders turn what was once a communist party into an opportunist sect, they find it impossible to prevent Trotsky's analysis of the victory of the working class under Bolshevik leadership from aiding the Fourth International in preparing for the world October.

Tom Kemp reports on the recent meeting substitute for the old gold standard which had broken down in the course of 30 years of war and crisis.

In particular, if capitalism was to survive, the competitive depreciation of currencies which had brought monetary chaos in the 1930s had to be checked.

During those years governments caught in the slump had sought to open up a market for their exporters by reducing the exchange value of their currencies, or even by running several different exchange values according to the transaction involved.

The International Monetary Fund was intended to prevent resort to such devices by fixing the values of the different national currencies and by setting limits to the extent to which governments could change them.

At the same time, it was recognised that the world economy was in a state of chronic disequilibrium. The power of the USA contrasted with the penury which reigned elsewhere.

Weak currencies

Most currencies, apart from the dollar, were weak because most countries needed goods which could be obtained only from dollar sources and had little to offer in return.

A major part of the world's monetary stock of gold had found its way to Fort Knox. The whole world trading system threatened to seize up through lack of lubricants. The International Monetary Fund and the World Bank, together with American loans and the Marshall Plan, dealt with some of these problems in the post-war world and helped make possible a particularly rapid restoration of world trade levels.

The currency system set up under the International Monetary Fund is known as the gold exchange standard. Under it all currencies are linked together through the dollar and gold.

The U.S. Treasury stands to exchange gold for dollars at the fixed rate of $35 per ounce. The dollar thus stands in much the same relation to this standard as the pound did to the classic pre-1914 gold standard which turned on the City of London.

Important position

Despite the great weakening of British capitalism since that period the pound had conserved an important position in international trade and finance.

After 1945 it could not have been dispensed with without bringing monetary chaos, since many central banks held sterling as their reserves, and sterling balances had been accumulated by countries which had supplied Britain during the war.

This, together with the unrivalled experience and connections of the City, left the U.S. government with but little choice. Greatly weakened in relation to the dollar the pound, nevertheless, was accepted as one of the 'key currencies'. , which remain to this day.

At the same time' the continued decline of British capitalism, expressed in repeated balance of payments crises, holds a big question over the role of the pound and thus over international bility.

Until the mid-1950s it seemed that the dollar at least was impregnable. Since then, however, the picture has changed. Repeated balance of payments deficits have drawn down the gold holdings of the U.S. and have thus led to doubts about the gold value of the dollar itself.

More dollars have been pouring into the circuit of exchange, enabling U.S. business to establish a dominant position throughout the capitalist world, while the dollar, as a currency unit, has weakened, especially in relation to the currencies of Western Europe.

Gold value

It is clear that the gold exchange standard can be no stronger than the currencies that compose it and that a weakening of one throws an increased burden upon the other, leaving gold as the only sure store of value for central banks which can afford to procure it.

Meanwhile, the volume of world trade has continued to increase, partly through the expansion of economies like the German, French and Japanese, partly through the continued outflow of dollars and pounds.

Many countries have had to draw on their reserves and borrow from the richer countries or from international institutions like the International Monetary Fund and World Bank to prevent economic collapse and revolution.

Means for continuing this process are, however, limited by the rules of these institutions, as well as by the attempts to limit the outflow of dollars from the U.S., and to bring the British balance of payments into equilibrium.

This supply of gold is limited, it is unequally distributed and tends to pile up in the richer countries with export surpluses.

So, as it has been put, in the course of the marble game some players run out of marbles. If there is not a fresh share-out they will have to withdraw from the game. This is what is facing many of the countries represented at the Washington meeting.

They hoped to hear about propositions for a new share-out or some means of getting more marbles to play with. They went home empty-handed. What has happened is that the whole question of the future shape of the world monetary system has been handed over for the consideration of the big powers grouped in what is known as the Group of Ten.

U.S. favoured pause The U.S. appears to have favoured this pause hoping in the meantime to bring its own balance of payments problem under control and winning allies to deal with French criticisms of the dollar. The latter have attraction for countries which have to watch their industry passing under U.S. control, or fear inflation, and thus are suspicious of plans to create new forms of 'liquidity' But the French line makes little appeal to those countries which, without new credit facilities, face economic collapse.

Perhaps the U.S. administration hopes to be able to hatch a new plan in the Group of Ten which, while safeguarding the dollar, will rally support from these quarters, i.e., the national bourgeoisie of the less developed countries in particular. It may also be hoping that growing internal problems will force a shift in the French line by next spring; it is known that substantial sections of French business are opposed to de Gaulle's back-to-gold tendencies.

In the meantime hard bargaining can be expected inside the Group of Ten.