Monetary cooperation and exchange rate management in the 1950s : Britain, Germany and France in the return to currency convertibility
The architects of the post-World War II international economic order considered the free convertibility of currencies for current account purposes one of the fundamental prerequisites of multilateral trade and thus of economic growth. While the Bretton Woods system started operating in 1946, the Western European countries only formally established currency convertibility in December 1958. So far, analytical studies of the return to convertibility are scarce. The few studies that exist generally treat convertibility as a technical, monetary issue, even a simple formality. The prevailing view is that, because of its trade-facilitating characteristic, convertibility was a widely accepted and uncontroversial economic policy objective shared by the Western European countries. This assumption follows from the belief that the Bretton Woods period was characterized by an international consensus on the benefits and desirability of international trade and long-term economic growth. The collective move to convertibility is regarded as proof of this consensus and of the willingness to cooperate to achieve common goals. Therefore, most accounts consist of historical narratives of Western Europe's path to convertibility rather than analyses of the development within the context of national policy aims. The comparison of Britain, France and the Federal Republic of Germany shows that convertibility was a far more complex, even controversial issue than has so far been argued in the literature. This thesis analyzes the national policy on convertibility in each country, respectively, by comparing the importance of convertibility for trade, macroeconomic policy, foreign policy and economic adjustment. Economic and political considerations played a crucial role in each country's policy on convertibility. The comparative analysis of the three leading countries' national economic policy on convertibility reveals a fundamental divergence in general long-term policy orientations in the three countries, challenging the widely accepted idea of a post-war consensus among Western European countries on the long-term policy objectives. The collective return to convertibility represented a very versatile tool, which the key countries employed to fulfill different, often incompatible, objectives. The national economic and political circumstances, which determined French, British and German policy on convertibility explain why the return to convertibility occurred in December 1958 and why the key countries coordinated their efforts. In particular, the establishment of convertibility was intricately linked to national policies on European integration. As a vehicle for national economic policy the return to convertibility provides important new insights into the formation of national exchange rate policy and international monetary cooperation in the 1950s.