Unlicensed Amateurs
ON the eve of his departure for this week's International Monetary Fund meeting in Washington. Mr Callaghan de- scribed France's attitude towards the world's money problems as one of 'primi- tive barbarism.' On Tuesday, in Washing- ton, his French opposite number, M Debre, countered with a reference to the 'un- licensed amateurs' crowding at the bedside of the international economy. It must reluctantly be conceded that the French finance minister's description is the more accurate.
In the immediate present, this unhappy exchange demonstrates two things. The first is that nothing of any significance is likely to emerge from the IMF meeting. There simply is not the necessary measure of agreement. Nor is it a case, as it is.popu- larly presented in Britain, of France alone blocking the march towards international monetary refOrM by an otherwise united world. To suppose this is to be guilty of an absurd overestimate of French power. If it were true, the_n the rest of the world, led by the United States and Britain, would long ago have ignored France and forged a new international monetary system with- out her.
The second clear conclusion to be drawn from the -remarks of the British and French finance ministers is that Anglo-French relations in general, and in the international monetary field in particular, could scarcely be worse. The Government would be well advised to consider whether an improve- ment might not be in everybody's interest, not least in Britain's.
There are, broadly, two areas of con- cern to Britain. The first we share with others: the threat of a world liquidity shortage, the fear that the way things are going there will soon not be enough inter- national reserves to enable countries to ride out temporary balance of payments fluc- tuations, so that everyone will start cutting back on their imports, causing a world trade recession and 1931 all over again. But this danger has been with us for a long time. Indeed, it is already four years since the abortive Maudling plan—there has never been any shortage of workable plans: merely one of agreement—was presented to the IMF. The danger of a world recession is certainly real, but it is equally certainly not imminent.
So- it is reasonable to turn first to the other area of concern to Britain : the role of sterling as a world currency, which leaves it (and us) unusually vulnerable to opinions and events overseas. Nor is it only the management of the economy that suffers: it was, for example. a run on the pound that precipitated the withdrawal from Suez ten years ago. Meanwhile, the countervailing benefits of sterling's world role steadily diminish. There is. in any case, little joy in having one's own bank- notes circulating the world if one is unable to issue any More.
It-is in The context of this situation that the 'barbaric' French attitude needs to be considered. The French insist, first, that the two reserve currency countries must cease running a balance of paymenk deficit before there can be any progress on mone- tary reform. This is, of course, particu- larly difficult for America. caught up in Vietnam. But since we have already made it our OWIl policy to get out of the red, there is nothing unacceptable in this con- dition. Then, again, they want to see an end to national currencies as a medium of reserve. This, of course, offends .deeply against American susceptibilities, bdt there is no conflict with British interests here. Indeed, the French are now hinting that they may be prepared to hack something like a European Monetary ; Fund, which would take over our sterling liabilities.
Of course, the French objective is clear: it is to detach Britain from its satellite rela- tionship with the United States in the international monetary sphere. and so move a step nearer a system in which the dollar, too, would give way to gold or a gold-based equivalent as the principal medium of reserve. But there is nothing to fear in this. Although the Americans have an obsession about gold, world reserves can in fact be increased by a rise in the price of gold much more easily than in any other way. And our dependent relationship with the United States in the international money field would in any case have. to be replaced by a more intimate European arrangement if we were to join the Coinmon Market. which, according to the Foreign Secretary, remains Government policy.
At the present time a bilateral British approach to the French offers a "better prospect of solving the sterling problem in a satisfactory context than any other course, however many words may have to be eaten in the process. And an agreement reached in this field could even pave the way to more important accords. But:if the opportunity is not grasped soon it could well prove too late.
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