On Wednesday the Organisation for European Economic Co-operation began to
prepare for a European Ministers' Con- ference on convertibility which is to meet in London in mid- July. The organisation's immediate object must be to decide whether the removal of currency restrictions will result, as it did in 1947, in a decrease of trade. Then, the return to con- vertibility was accompanied by a preoccupation with gold and dollar reserves at the expense of trade, so that sterling was spent not on British exports, but on conversion into dollars up to the point where the sterling area could no longer finance the dollar trade of the Continent and the pound was forced to become inconvertible again. Therefore the first need is to discover whether there really does exist an enduring, as opposed to a transitory equilibrium not merely between the sterling and dollar areas but also between Europe and the dollar area. This can be decided on the short term by the progressive removal of quantitative restrictions not only within Europe but between Europe and the dollar area before the pound is made convertible. This may be one of the recommendations to be made by the OEEC. The second need, in any attempt to minimise the dangers of convertibility, is surely to look again at the problems which inspired the Bretton Woods Conference, i.e., how to insulate countries in a world where the main currencies are convertible against the internal fluctuation of international economy. So tar, international full employment, currency restrictions, and bi-lateral American aid have meant that the International Monetary Fund and Bank have never been put to the test, but successive reports have recognised. that with their present capital and constitutions they would be bound to fail. A sinister by-product of these developments is the way in which convertibility is becoming once again a political issue. The Labour Party, which introduced it after the war, are now reviving their traditional fears and memories. If Mr. Butler commits Britain to convertibility without adequate reserves and a reasonable prospect of stability in the US economy he will indeed have been guilty. But this seems less likely than that the Labour Party will oppose it because they arc afraid that socialism cannot work when that central currency control has been demolished.
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