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BDARD DF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Office Correspondence To Oft*iirm«n ^ p f t 1 p f l Date September 19, Subject: Mr* Morrill You will find attached a copy of a brief comment on Mr* Aldrich's statement regarding the Bretton Woods Agreements which Dr. Goldenweiser has furnished me for distribution to those interest ed« Attachment September 16 ^ MR. ALDRICH'S PROPOSAL Ilr. Aldrich does not l i k e the Bretton Woods Agreements and he suggests that they be not adopted. The reason he giv3S for not l i k i n g them, usido from thoir complexity which he does not elaborate, i s that he thinks they divert a t t e n t i o n from more e s s e n t i a l undertakings, such as a rational commercial p o l i c y . J!r. Aldrich mentions the f a c t that the Bretton Woods Agreements adopted a r e s o l u t i o n s t a t i n g the n e c e s s i t y of l i b e r a l i z i n g commercial p o l i c i e s , and, as a matter of f a c t , the agreements s p e c i f i c a l l y s t a t e d "that they i n themselves do not expect and could not solve the postwar economic problems. His approach, t h e r e f o r e , i s ' not that the Agreements i n themselves overlook the other t h i n g s , but that we ought to do f i r s t things f i r s t , and economic p o l i c i e s are f i r s t . I t i s somewhat' i n t e r e s t i n g to enumerate the things that Mr. Aldrioh a c t u a l l y proposes: 1. Agreement with England about the reduction of t a r i f f s and other trado b a r r i e r s . 2. A large g r a n t - i n l a i d to England t o help her back on her f e e t . / 3. Forgiveness of World War I debts and generous treatment about lend-loaso obligations. !*• Expansion of JBfcport-Import Bank to enable i t to jnake i n t e r national l o a n s . 5« Creation of a S t a b i l i z a t i o n Fund among central banks, the Fund being r e l a t i v e l y small. 6. Adoption of domestic p o l i c i e s with regard t o s i l v e r , gold, f i s c a l matters^ e t c . that would accord with Mr. Aldrich 1 s ideas of sound public policy. What i s striking about this program i s that i t includes both the Fund and the Bank, but under different nunas. Consequently, what Mr. .aldrich r e a l l y proposes i s that the functions of the Bank und the Fund be adopted, but in accordance with a pattern that suits his preference better, and that t h i s be coupled with the kind of domestic f i s c a l policy that he approves, and with a reduction of t a r i f f s . There may be some difference of opinion about the details of his domestic program, but i n general his" proposal v/ould be entirely in l i n o v/ith the Brotton Woods Agreements. I t would, howovor, be vary much l e s s practical and effective for the following reasons: - 2 - Tariff reductions are a long-term and confusing subject with a great many vested interests involved, and the deferment of inter* national investment and international 6urr.ency stabilization until t a r i f f s have been substantially reduced i s certainly not & practical way of approaching the problem. On the contrary, i t would seem that the chances of progressive tariff reduction would be greatly increased i f in the meantime currency s t a b i l i t y was established eaid reasonable channels for international investment for rehabilitation *nd reconstruction, as weJLi us for the development of undovolopod countries, wore in operation. The other point at which one might differ with Mr. Aldrich i s that he seas England and the United Spates as being the two Countries that need to get agreement among themselves with all the rest of the world joining i n or falling in l i n e more or l e s s in accordance with the tune adopted by these two groat powers. This program i s not in accord with the democratic process. I t would certainly seem much more propitious and in l i n e with the Atlantic Charter and other democratic pronouncements, v/hioh Mr. Aldrich quotes with approval, to have both currency stabilization end international landing handled in a cooperative wpy with joint responsib i l i t y of «LL1 nations and joint undertakings by all countries. S t i l l deeper than these differences i s the definitely apparent desire by Mr. Aldrich that the lead in all these international agreements be i n the hands of the great financial interests rather than of the Government. The crux of the matter i s right there. On tho basis of tho manner in which tho financial powers handled the situation in the Twenties, i t would not appear to be vary promising to entrust the postwar world to their management.
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