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The Evolution of The International Monetary System, 1945-77
71
Economic Analysis and Policy
Vol. 07 No. 01, March 1977
THE EVOLUTION OF THE INTERNATIONAL MONETARY SYSTEM, 1945-77
By Brian Tew. Hutchinson, london, 1977.
H.W. Arndt Australian National University
For many years, successive editions of Professor Tew's Internat;onal Monetary Co-operation provided the most convenient account of post-war international monetary developments. So drastic have been the changes during the 19705 that he has found it necessary to rewrite the book almost entirely. The focus is now less on co-operation since. as he explains. "alas. there is less of it in practice". There is less also about sterling and the International Monetary Fund, much more about the dollar and the Group of Ten. Part I takes the reader along "The Road to Convertibility, 1945·58" . from the immediate post-war complexities of bilateralism, through the "binary phase" of the dollar area and the "soft settlement area" (comprising the sterling area and the European Payments Union) to the establishment of current-account convertibility among all the major western currencies in December 1958. Part III describes the Bretton Woods system from its beginnings in 1945, through its vicissitudes during the 1960s to its collapse in August 1971. Part IV brings the story right up to early 1977, from the Smithsonian Agreement, the largely abortive efforts at comprehensive reform of the system, the OPEC oil price increase and the operation of managed floats since then. Between Parts I and III, the historical narrative is suspended to permit the introduction of fifty pages of theory, devoted chiefly to an explanation of various meanings of convertibilitY and of alternative (current and capital account) adjustment mechanisms_
This arrangement makes it a book which first or second year students and others not already reasonably well versed in international economics will find rather difficult. Such readers cannot be expected to know their way about the technicalities of exchange controls, swings, closed circuits,
72
Economic Analysis and Policy
Vol. 07 No. 01, March 1977
transferable accounts, first and second category compensation et hoc genus omne with which the book starts out, to know the reasons why the world
ever got itself into such a mess and why it was important to get out of it. Nor do the theoretical chapters help all that much when the reader gets to them. For white Professor Tew is a master at simple and lucid eXpOsition, he tends to take a good deal for granted about the economic and welfare implications of income effects and monetary effects, about the modus operandi of changes in exchange rates or in domestic money wage levels and about the significance of international capital movements for external balance. But to anyone reasonably familiar with such basic matters who wants a guide to all the problems that have beset the international monetary system in the past decade this book can be warmly recommended. Professor Tew is particularly good in explaining the issues under debate in the long negotiations for a Grand Design of international monetary reform, the operation of floating rates and the pros and cons of varying degrees of management and the international monetary effects of the OPEC oil price increase. While conspicuously reticent in expressing openly his own views on any of the debatable issues, he makes extensive use of quotations from official reports and other authorities in a way that sometimes enables the reader to guess towards which side he leans. It is also clear that. if there were a Pulitzer Prize for consistent excellence in repOrting on international monetary developments, Professor Tew would award it to Le Monde.
Economic Analysis and Policy
Vol. 07 No. 01, March 1977
THE EVOLUTION OF THE INTERNATIONAL MONETARY SYSTEM, 1945-77
By Brian Tew. Hutchinson, london, 1977.
H.W. Arndt Australian National University
For many years, successive editions of Professor Tew's Internat;onal Monetary Co-operation provided the most convenient account of post-war international monetary developments. So drastic have been the changes during the 19705 that he has found it necessary to rewrite the book almost entirely. The focus is now less on co-operation since. as he explains. "alas. there is less of it in practice". There is less also about sterling and the International Monetary Fund, much more about the dollar and the Group of Ten. Part I takes the reader along "The Road to Convertibility, 1945·58" . from the immediate post-war complexities of bilateralism, through the "binary phase" of the dollar area and the "soft settlement area" (comprising the sterling area and the European Payments Union) to the establishment of current-account convertibility among all the major western currencies in December 1958. Part III describes the Bretton Woods system from its beginnings in 1945, through its vicissitudes during the 1960s to its collapse in August 1971. Part IV brings the story right up to early 1977, from the Smithsonian Agreement, the largely abortive efforts at comprehensive reform of the system, the OPEC oil price increase and the operation of managed floats since then. Between Parts I and III, the historical narrative is suspended to permit the introduction of fifty pages of theory, devoted chiefly to an explanation of various meanings of convertibilitY and of alternative (current and capital account) adjustment mechanisms_
This arrangement makes it a book which first or second year students and others not already reasonably well versed in international economics will find rather difficult. Such readers cannot be expected to know their way about the technicalities of exchange controls, swings, closed circuits,
72
Economic Analysis and Policy
Vol. 07 No. 01, March 1977
transferable accounts, first and second category compensation et hoc genus omne with which the book starts out, to know the reasons why the world
ever got itself into such a mess and why it was important to get out of it. Nor do the theoretical chapters help all that much when the reader gets to them. For white Professor Tew is a master at simple and lucid eXpOsition, he tends to take a good deal for granted about the economic and welfare implications of income effects and monetary effects, about the modus operandi of changes in exchange rates or in domestic money wage levels and about the significance of international capital movements for external balance. But to anyone reasonably familiar with such basic matters who wants a guide to all the problems that have beset the international monetary system in the past decade this book can be warmly recommended. Professor Tew is particularly good in explaining the issues under debate in the long negotiations for a Grand Design of international monetary reform, the operation of floating rates and the pros and cons of varying degrees of management and the international monetary effects of the OPEC oil price increase. While conspicuously reticent in expressing openly his own views on any of the debatable issues, he makes extensive use of quotations from official reports and other authorities in a way that sometimes enables the reader to guess towards which side he leans. It is also clear that. if there were a Pulitzer Prize for consistent excellence in repOrting on international monetary developments, Professor Tew would award it to Le Monde.