These are effected by means of the manipulation of interest rates, the credit squeeze, open market operations, the issuing of administrative guidance and guideline to banking and other monetary institutions, imposition and remission of tax, export subsidy and import quota, tariff measures, devaluation, expansion and contraction of public works through the instruments of deficit and surplus budgeting, etc. The ineffectiveness and inefficacy of all these methods stare us in the face every day of our lives.
In the second place, since Beveridge and Keynes, talk of full employment has filled the air. But nowhere in all the capitalist countries is full employment permanently attained. It is to their credit, however, that they daily strive might and main to attain this ideal objective, and that their failure is due not to lack of prodigious efforts on their part but to the intractable forces of capitalist economics.
In the third place, many governments and their agencies have entered into the field to provide cheap houses for low-income workers, but with the unsatisfactory results which we have already noted.
In the fourth place a few Governments have embarked on the direct management – that is nationalisation – of some industries. Here again we are all familiar with the unsatisfactory results which have flowed from this method in a basically capitalist economy.
It is believed that by means of all these manipulations of economic forces, and by means of indirect and direct controls and direction of specific categories of individuals, firms and transactions, efficient exploitation and mobility of resources and co-ordination of the means of production, exchange, and distribution will be achieved for the benefit and happiness of the people. But experience has shown that all these partial, pasmodic, and half-hearted devices, which are now fashionable and are erroneously given the label of PLANNING, have only succeeded in making the economic confusions under capitalism even worse.
Regulation of International Trade and Payments: Just as the need for some form of domestic control and direction of economic forces has dawned on most, if not all, of the countries of the world, so has the necessity for some form of international control and direction of these same forces become manifest to all the governments of the world. To this end, various agreements and institutions have been executed and established. There are world Commodity Agreements, entered into between the producer and consumer countries, in respect of commodities such as wheat, tin, coffee, sugar, and cocoa. These agreements provide for a floor and a ceiling price for each of the commodities concerned, as well as for production and consumption quotas, buffer stocks, and other devices by means of which the range of prices between the floor and the ceiling can be maintained. The whole essence of these agreements is to ensure that the forces of supply and demand do not operate freely and capriciously to the occasional and alternate prejudice of producers and consumers alike, by controlling and directing them in the manner already described.
These agreements are perhaps the best achievements of capitalism. They have given to the producers of the commodities in question a permanent incentive to continued production. At the same time, they have made it possible for the manufacturers, who turn these commodities into finished products, to
plan their production schedules confidently and in advance, and to pursue a price policy which assures them of steady and stable markets.
We hasten to observe, however, that these agreements are by no means an unmixed blessing. To start with, they are not always all-embracing: with the result that those countries which do not subscribe to the agreements can upset .he price stability which the agreements envisage by pursuing their own independent price policies.
Furthermore, any of the parties to the Agreements may opt out of them, as Britain did in 1953 in the case of the Wheat Agreement, when she took advantage oflow ‘free’ wheat prices, thereby weakening the effectiveness of the Agreement to a very great, extent.
In addition to Commodity Agreements, a number of World Organizations have been established with the same objects in view. We will mention the three main ones, leaving out their affiliates and subsidiaries which are fairly large in number. The three main organizations are the International Bank for Reconstruction and Development, commonly known as the World Bank; the International Monetary Fund, usually referred to as the LM.F.; and the General Agreement on Tariffs and Trade, popularly known as G.A.T.T.
The World Bank and the IMF are the famous Bretton Woods ‘twins’. They are Specialized Agencies of the United Nations. established in Washington in 1945 under the 1944 Bretton Woods Agreements. The Bank and the Fund are ‘twins’ in the sense that they both deal in loans: the one specializing in long-term loans, and the other in short-term loans.
More specifically, the functions of the World Bank are to furnish capital for post-war reconstruction, to promote and supplement private foreign investment, and to encourage the expansion of world resources and productive capacity, especially in under-developed countries. On the other hand, the IMF was established for the express purpose of maintaining and improving International Liquidity.
It was recognized, long before the outbreak of World War II, that International Trade was being unduly hampered by the inadequacy of gold as an international medium of exchange, by exchange restrictions imposed by various countries, and by speculative arbitrage operations. Specifically then, the functions of the I.M.F. are to encourage stability of exchange, maintain orderly exchange procedures amongst its members, sustain a multilateral system of payments for current transactions between members, and help to eliminate unnecessary foreign exchange restrictions that may hamper international commerce.
From its own functions, it will be seen that the G.A. T. T. is a very close and powerful ally of the Bank and the Fund. The functions of the G .A. T. T. are: to ensure, on the international plane, non-discrimination in trade, negotiated reduction in tariffs, and the gradual elimination of other barriers to International Trade.
Furthermore, the G.A. T. T. accepts the most-favoured nation principle (that is any advantage given by any signatory to any other country is to be given to all signatories to the Agreement), and the signatories to it undertake not to increase the existing specific or ad valorem duties in respect of goods scheduled in the Agreement,
to a level higher than those which prevailed before 1939, and not to impose duties on goods at present not subject to duty.
These are grand and laudable objectives. But the achievements are relatively uninspiring and unedifying. The ma-in reason for this is that, in spite of their outward sophistication and civilization, and of their altruistic protestations, the nations which compose these International Bodies still pursue their individual naked economic self-interest and aggrandizement. Indeed, there is unassailable evidence of an increasing overtone of what Sir Norman
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