15. The Paradoxes of the European “Payments Union”

(L’Opinion, December 13, 1951)

What is happening at this moment at the European Payments Union is very significant and demonstrates to the blindest the error of trying to revive international commerce while refusing to restore the only known instrument of international payments, gold.

Belgium is a country whose monetary policy has always deserved the praise of the entire world. Yet Belgium sells in Europe, to the other members of the E.P.U. more merchandise than it buys from them. This growth of exportation is a contribution to world economy and to European economy that should be encouraged. But by doing this, Belgium becomes a creditor of the E.P.U. and its credits must be paid part in gold, part in dollars. The amounts thus received enable Belgium to pay for the merchandise she buys in the United States, for like all Europe, she imports more from the United States than she exports to it.

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 paradox of such a suggestion?

Instead of looking for a remedy for the present strange situation, by creating stable means of payments, they ask Belgium to reorient her commerce. Having proclaimed urbi et orbi that they want to re-establish international commerce, it is international commerce that they try to submit to the convenience of unstable moneys. The countries belonging to E.P.U. must not regulate their commerce any longer according to the offer and demand for merchandise or according to the needs and resources of the different countries, but according to the insufficient resources in acceptable means of payment which these countries possess. Thus the exchange of merchandise is made subordinate to a system of payment whose precariousness has not been rectified.

Nothing shows more vividly the absurdity of the course they have taken, believing that the present difficulties could be 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 production 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 exchanges 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 continue 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 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 production of the metal.

I am not unaware of the psychological and political 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.