Aspects of the Pathology of Money

Introduction: Four Decades of Monetary Experience

In one sense, the sub-title of this volume may appear to be misleading: the contents of the book have in fact been written between the middle thirties and the middle sixties, so that they cover a little less than thirty years. In spite of this seeming contradiction, the sub-title, for reasons set down below, seems to me to be fully justified.

Each of the four decades—the thirties, the forties, the fifties, and the sixties—had or has a profile all of its own. The thirties were the period when the world was painfully recovering from the Great Depression, a recovery which has remained incomplete because of the outbreak of the second world war in September 1939. The forties, although they have evidently to be subdivided into the war years and the immediate post-war period, are, from the monetary point of view, an uninterrupted era of very strict monetary controls and lacking convertibility, and of either suppressed or open inflation.

The fifties were a period of increasingly obvious recovery, both in world monetary affairs and in the economic life of individual countries. The great opportunities offered during that decade, however, for carrying out a sweeping international monetary reform have not been utilized.1 True, the European Payments Union had been formed at the beginning of the decade, to be dissolved, due to improved conditions in Europe, towards the end of it. But this was at best an attempt at making inconvertibility more liveable with and at undoing part of its evil effects on intra-European commerce. The International Monetary Fund (established by the Bretton Woods Conference in June 1944) could have blossomed up, but did not do so, during the fifties, whereas what actually did take place was a great revival of the Gold Exchange Standard, amplified into the so-called ‘key currency system’.2 It should also be noted that the alleged (though never really existing) ‘dollar shortage’, which caused rivers of scholarly ink to flow for many years, has been reversed and a far more real dollar glut took its place at the end of the fifties as a result of the large balance-of-payments deficits which the U.S. started to experience in 1958.

This glut became the dominant feature of the sixties and to this day is undermining international confidence in the dollar (international confidence in the sterling having already been the victim of the second world war). The expanding flow of monetary debates, at governmental and academic levels, has failed to produce so far a workable scheme for the reform of the international monetary system. As these pages are being written, it is hard to foretell whether the sixties will ultimately go down in history as a decade ending in the worst international monetary crisis the world has known or, a much happier thought, a decade where sound statesmanship guided by wise advice succeeded in averting the crisis and in endowing the world once more, by 1970, with a soundly operational international monetary system.

Because each of these four decades has such a pronounced character of its own, the sub-title given to the present volume and the title of the Introduction both appear to be justified.

The present volume attempts to save from utter oblivion some of my more important monetary monographs and articles; it is, however, limited to material originally written in English and omits translations of certain articles originally written in Polish (before World War II) and in French (throughout my career). This is not due so much to a fear of repetition, for repetitions would have been few and easy to handle, but rather to the fact that material in English was quite sufficiently representative and abundant to fill a sizeable book. To expand it would have resulted in a second volume of comparable size. For the same reason, some of my articles published originally in English have not been included in the present collection.

My first published writings go back to 1930, i.e. precede by five years the earliest item included in the present volume. The last item included is my farewell lecture at the Graduate Institute of International Studies, delivered in Geneva on February 28, 1964. I have written a certain number of articles since, but as they belong to the continuing ‘Grand Debate’, they seemed to me to mark less of a final point in terms of thought than does the above-mentioned lecture. Accordingly none of the latest articles has been included.

The ‘farewell lecture’ has been published in French in the Revue économique et sociale, Lausanne, in October 1964. The text included here is longer and more complete than the French version which represents the lecture as delivered orally. It is one of four hitherto unpublished monographs of mine. The other three are: ‘Post-War European Inflations, World War I—A Study of Selected Cases’; ‘The International Aspects of Inflation’; and ‘Some Queries and Suggestions Concerning the Marshall Plan’.

The first of these has been written during the war for one of the foundations and has been circulated rather widely in mimeographed form, but various conditions prevented its appearance in print. This foundation, which wishes to remain unknown, has none the less authorized the inclusion of this sizeable manuscript into the present volume.

The second was originally written, after the Korean war, for the American Assembly of Columbia University. It is reproduced here with the American Assembly’s permission.

As regards finally the paper entitled ‘Some Queries and Suggestions Concerning the Marshall Plan’, it was circulated privately in the United States in the beginning of 1949.

The reader will find appended to the title of each essay the exact bibliographic reference of its first appearance in print (except for the four essays or monographs mentioned above, of which this is the first printing).

Several essays included in the present volume have originally been published in Fortune Magazine: I should like to express my thanks to TIME Inc., the publishers and copyright holders of Fortune.

Special thanks are due to Messrs Longmans, Green & Co., in London, for permission to include into this collection a reprint of Chapter VIII of my earlier book, International Monetary Economics, published by them in 1939.

Before closing this Introduction, I want to express my very particular thanks to Professor Jacques Freymond, Director of the Graduate Institute of International Studies, for including this volume into the series of its Publications. Thus another debt is added to the many which I have towards this institution of which I was, at one time or another, student, assistant-professor, visiting lecturer, and full professor, and of which I have been for the past few years an honorary professor.

My friend, Professor Gerard Curzon, of the Graduate Institute of International Studies, has helped me greatly in making the selections—which in some cases was not easy—and in seeing the volume through the press.

My wife’s unfailing moral support has been noted in my earlier books and should again be greatly stressed; the present volume is inscribed to my former students, but the next one, now in process of preparation, will be inscribed to her.

Finally I wish to record the enormous help I received from my faithful and devoted secretary and friend, Mrs Alice Goebel.

M. A. H.

Geneva, November 1966.

 

3 To illustrate, see for example the voluminous and penetrating Annual Reports of the Bank for International Settlements.

4 The IMF takes an entirely neutral attitude towards the Gold Exchange Standard, neither endorsing nor rejecting it.

• 1To illustrate, see for example the voluminous and penetrating Annual Reports of the Bank for International Settlements.
• 2The IMF takes an entirely neutral attitude towards the Gold Exchange Standard, neither endorsing nor rejecting it.
• 3The fifties were a period of increasingly obvious recovery, both in world monetary affairs and in the economic life of individual countries. The great opportunities offered during that decade, however, for carrying out a sweeping international monetary reform have not been utilized. True, the European Payments Union had been formed at the beginning of the decade, to be dissolved, due to improved conditions in Europe, towards the end of it. But this was at best an attempt at making inconvertibility more liveable with and at undoing part of its evil effects on intra-European commerce. The International Monetary Fund (established by the Bretton Woods Conference in June 1944) could have blossomed up, but did not do so, during the fifties, whereas what actually did take place was a great revival of the Gold Exchange Standard, amplified into the so-called ‘key currency system’. It should also be noted that the alleged (though never really existing) ‘dollar shortage’, which caused rivers of scholarly ink to flow for many years, has been reversed and a far more real dollar glut took its place at the end of the fifties as a result of the large balance-of-payments deficits which the U.S. started to experience in 1958.
• 4The fifties were a period of increasingly obvious recovery, both in world monetary affairs and in the economic life of individual countries. The great opportunities offered during that decade, however, for carrying out a sweeping international monetary reform have not been utilized. True, the European Payments Union had been formed at the beginning of the decade, to be dissolved, due to improved conditions in Europe, towards the end of it. But this was at best an attempt at making inconvertibility more liveable with and at undoing part of its evil effects on intra-European commerce. The International Monetary Fund (established by the Bretton Woods Conference in June 1944) could have blossomed up, but did not do so, during the fifties, whereas what actually did take place was a great revival of the Gold Exchange Standard, amplified into the so-called ‘key currency system’. It should also be noted that the alleged (though never really existing) ‘dollar shortage’, which caused rivers of scholarly ink to flow for many years, has been reversed and a far more real dollar glut took its place at the end of the fifties as a result of the large balance-of-payments deficits which the U.S. started to experience in 1958.