15. The Paradoxes of the European Payments Union

However, the other members of the European Union for Payments do not have enough gold and dollars to pay their debts to Belgium. Here the paradox begins: instead of finding for Europe the stable means of payment necessary to satisfy Belgium, she will be asked to modify her commercial currents. Belgium will be asked to buy more in Europe and less in the United States. The distinguished men who direct the E.P.U. are certainly entitled to the esteem that is due experts in charge of a particularly difficult, if not impossible, task. But do they realize exactly the incredible para dox of such a suggestion? Instead of looking for a remedy for the present strange situation, by creating stable means of pay ments, they ask Belgium to reorient her commerce. Having proclaimed urbi et orbi that they want to reestablish international commerce, it is interna tional commerce that they try to submit to the con venience of unstable moneys. The countries belong ing to E.P.U. must not regulate their commerce any longer according to the offer and demand for mer chandis.e or according to the needs and resources of the different countries, but according to the insufIi cient resources in acceptable means of payment ,vhich 180 THE TRIUMPH OF GO~D these countries· possess. Thus the exchange of mer chandise is made subordinate to a system of payment whose precariousness has not been rectified.

Nothing sho1vs more vividly the absurdity of the course they have taken, believlng that the present difficulties could he solved by putting off until later the solution of the monetary problem. Certainly, immediately after the war, when the production of all European countries, was reduced by more than half, one had to be content with an artificial system of payment. But today, when pro duction has,reached and even passed its prewar level, maintaining these makeshifts retards the restoration of international commerce instead of facilitating it. As long as we shall try to regulate commercial ex changes in order to adjust them to the uncertainty of currencies instead of putting an end to monetary instability so as to allow commercial exchanges, to adjust themselves, we shall be on the wrong track. This system of expedients could be excused if there were no way out of monetary difficulties, but it is no longer possible to say that all avenues are closed.

There are two methods that would permit a return to normalcy of payments among the most developed industrial countries. The first would be for the United States to con.. tinue to provide Europe gratuitously with part of the products asked of it. This is what it has done until now. Such a system, however, could be only IiI THE TRIUMPH OF GOLD temporary. It could only serve to leap one difficult step. The other method would be a return to the use of gold as international money. Let it not be said that gold is too rare. It would be enough for the United States to put an end to the paradox of maintaining an unchanged dollar price for gold while American money has lost half of its purchasing power. The devaluation of the dollar would soon remedy the present scarcity by increasing the stocks of gold available in all countries and by stimulating pro duction of the metal. I am not unaware of the psychological and politi cal obstacles to both of these solutions, especially the second. It is, however, the only one that can bring us tangible and lasting results.

That is why we must not cease to proclaim its necessity for Europe, even if this should offend some susceptibilities and precipitate a few storms. 182 16 Progress in Monetary Conceptions (L'Opinion) January 10, 1952) In the contest between those who would return to gold and those who favor management (dirigisme) by paper money, one has to keep the score each time that the occasion presents itself. In this regard the end of 1951 brings some good news. First, the abolition by Canada of its exchange con trols. The privileged situation of that country, where capital flows in, makes it possible to restore freedom. That is a most enviable situation and one that has given Canada the opportunity to shake off the shackles of Bretton Woods. A good example to follow. A second interesting measure is the relinquishing by the Bank of England of her monopoly of exchange operations, which henceforth may be carried on by 183 THE TRIUMPH OF GOLD approved banks with a wider margin than before in relation to official parity. Let us not exaggerate. It is merely a little more flexibility which has been introduced into the exchange market. From this point to carrying out the recent suggestions of Sir Frederick Leith Ross" with a view to bringing the English system closer to the more liberal Italian and French systems, there are still many steps to take and many obstacles to overcome. Nevertheless, it is a bit of elasticity which is introduced into a control whose rigidity has become a burden to all the world.