By Max Kohnstamm
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Additional info for A Nation Writ Large?: Foreign-Policy Problems before the European Community
We were protected by beneficial inertia from the implications of living in an international market. In this new world. of greatly increased international production. governments found themselves caught between full political responsibilities for the economic welfare of their citizens. and the inadequacy of the instruments (and knowledge) available for dealing with external disturbances. They therefore began to act with increasing bad temper in international affairs. Protectionism. and monetary 'aggressiveness' are symptoms of this frustration.
In both the monetary and trade fields the founders tried, successfully. to avoid the twin scourges of the thirties, autarky and bilateralism. The IMF rules made parity changes cumbersome - to avoid the competitive devaluations which had contributed so much to the economic anarchy of the thirties - and subject to agreement. GATT laid down that tariff-cuts, once made, must be irreversible, and more important. concessions made to one country must be extended to all others: the most-favoured-nation clause became the corner-stone for the new non-discriminatory.
True, it was recognised that this was only beneficial in conditions of full employment, and if it took place within an adequate monetary adjustment mechanism. The latter was thought to have been achieved with the Bretton Woods system, leaving to our days the question of who was to decide the amount of total liquidity in the international system, and hence the rate of expansion of the international economy. As to employment, Keynes managed to secure agreement that it was legitimate to impose quotas to protect employment, a step described at the time as 'an economic Munich' by one American purist.
A Nation Writ Large?: Foreign-Policy Problems before the European Community by Max Kohnstamm
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