political revue


Year XXXI, 1989, Number 3, Page 201



Robert Triffin and the Economic Problem of the 20th century*
“The fundamental dilemma of international economic relations in this century lies in the inadequacy of national sovereignty as a framework for policy decisions and their implementation in an interdependent world.”
R. Triffin, Europe and the Money Muddle, 1957.
It is not the purpose of this brief note on the work of Robert Triffin to illustrate the career of an economist. This was admirably accomplished by Triffin himself in an essay published some years ago.[1] Rather, the intention is the more limited one of drawing attention to certain “essential” aspects of his thought, without which it is impossible to understand the structural features of the contemporary economic process. Triffin himself pointed out how in his relations with political and government circles, he found himself faced with the “need for endless repetition of similar” but essential points and arguments to many different audiences”.[2] We are talking about the work of an economist in close dialogue with governments and politicians, continually obliged to reinterpret economic developments within their historical context in order to demonstrate each time how they relate to the “essential” problems of our time.
Thus Triffin’s theoretical work cannot be properly understood, except in the context of the economic process and its specific historical features. Schumpeter, whose pupil Triffin was at Harvard, wrote that “the subject matter of economics is itself a unique historical process”. Indeed, one of the main difficulties of contemporary economics consists in identifying a significant object of study. The universities are full of economists skilfully handling their professional toolkits. Yet there is still a significant gap between academic economics and reality. The real problem in contemporary economics and politics is that a wealth of academic output is reduced to an empty exercise, because the object under consideration is irrelevant and the decisive problems are elsewhere. As Schumpeter rightly maintains, “most of the fundamental errors currently committed in economic analysis are due to lack of historical experience more often than to any other shortcoming of the economist’s scientific equipment”.[3]
Triffin’s greatness consists precisely in the fact that he was able to identify in the contradiction between the principle of national sovereignty and the need for a world supranational order the fundamental economic problem of our century; and that throughout his long career he always tried, with admirable lucidity and tenacity, to show that the principal contemporary economic problems are generated, directly or indirectly, by the lack of any solution to this “fundamental dilemma”.
The International Monetary Problem.
At the end of the fifties, at a time of strong and sustained growth in the world economy, it would have been hard to foresee a progressive erosion of American economic leadership in the western world. Today this phenomenon is acknowledged by many observers. But perhaps it would not be too much to say that awareness of a veritable crisis in the international monetary system based on the dollar as a reserve currency only began with the publication of Gold and the Dollar Crisis.[4] Here the faults of a system intended to govern, over a long historical cycle, the expansion of international trade and finance were clearly denounced for the first time. The “Triffin dilemma”, as it came to be known, made crystal-clear the fundamental difficulty for a global economy to work properly without a global currency. In short, Triffin maintained that “if the United States corrected its persistent balance-of-payments deficits, the growth of world reserves could not be fed adequately by gold production at $35 an ounce, but that if the United States continued to run deficits, its foreign liabilities would inevitably come to exceed by far its ability to convert dollars into gold on demand and would bring about a ‘gold and dollar crisis’.”[5]
The significance of the “dilemma” was not only an immediate one. Triffin formulated it after profound reflection on the nature of the international economic order and its historical evolution, starting from the original experiment of the Gold standard from before the First World War. The system based on the dollar, and whose fundamental rules had been established by Bretton Woods, was nothing but a variation on the hybrid system, based on gold and on the use of national currency reserves, which had been tried out in the twenties, but which had foundered so disastrously in the years of the Great Depression. History had already shown the profound contradictions which will inevitably emerge when recourse is made to a national currency as international reserve means: in this case a “built-in de-stabilizer” mechanism enters the world monetary system.[6] Triffin maintains in his “Conclusions” to the Gold and Dollar Crisis that “inadequate gold supplies are supplemented in such a system by a growing accumulation of national key currencies as international reserves. Such accumulation inevitably centres on the ‘safest’ currencies of major creditor countries, and results in ‘unrequited’ capital imports by them. The very countries that should lend to the others are thus unwittingly borrowing short term capital from them. These capital movements do not, by themselves, relieve the gold shortage, but only disguise it as a shortage of the key currencies in question. In order to contribute to the needed expansion of world liquidity, they must stimulate additional matching capital exports by the key currency countries, or a contraction of their surpluses on current account. Either of these reactions, however, can only lead to a progressive and persistent deterioration in their net reserve position up to the point where their currency no longer appears as the ‘safest’ for reserve investment by other countries. The consequent slowdown, cessation or reversal of key currencies as world reserves then brings back to the fore the underlying gold shortage problem and imposes at the same time difficult balance of payments readjustments upon the central countries of the system.’’[7]
It is perhaps hardly necessary to point out today how this analysis of the international situation, which Triffin made in 1959, has been fully confirmed by subsequent events. International confidence in the solidity of the dollar has been progressively weakened; the late sixties saw the beginning of speculation, particularly on the European financial markets, and finally on the August 15, 1971, the American Government announced the non-convertibility of the dollar into gold. The Bretton Woods era was over, and that of monetary fluctuation had begun, with increasing monetary and commercial disorder. The oil crisis of 1973, and the spread of inflation on an international scale were simply the most obvious consequences of this process. Recently, at a distance of more than twenty years after his original analysis of the dire consequences of the “dilemma”, Triffin had to raise his voice once again to denounce the serious dysfunctions of an international system which allows the country with the greatest volume of industrial production (and per-capita income) to drain financial resources from the rest of the world, including underdeveloped countries. It is a real “world monetary scandal”.[8]
For Triffin, this systemic imbalance can only be restored by following the course already taken at national level to guarantee full public confidence in the currency at international level, i.e. by replacing commodity money with fiduciary money guaranteed by a “lender of last resort”. In a modern economy, it is no longer thinkable to trust automatic adjustment mechanisms in the balance of payments as had been done, on the whole, with the Gold Standard of the previous century. National governments are now obliged to pursue a policy of full employment and a high rate of growth. And if every government pursues its national objectives in splendid isolation, it is highly probable, if not to say certain, that the international economic system will degenerate into uncontrollable chaos. On the other hand, there is no longer any major industrialized country which can do without international trade: the progressive globalization of production is already a fact of life in the development of industrial civilization. Thus governments are continually required to agree to greater convertibility of currency and greater freedom of circulation for capital. But, wrote Triffin in 1959, “Convertibility cannot be meaningfully defined for policy purposes, except as a relative concept whose ultimate culmination would imply the total surrender of national sovereignty by member countries over all forms of trade and payments restrictions, and even over exchange rates. Such surrenders are utterly inconceivable today in favor of a mere nineteenth century laissez faire, unconcerned with national levels of employment and economic activity. The negotiation and implementation of negative convertibility commitments are inseparable from the parallel negotiation and implementation of positive integration commitments among the countries concerned. National policy instruments cannot be thrown away. They can only be traded against international, or supranational policy instruments adequate to serve the broad objectives of economic policy in the modern world.”[9]
In the current debate on the reform of the international monetary system, this thesis on the need to create a world reserve system, in the last resort, a world bank and universal currency, is now inextricably linked with the name of Triffin. If we exclude Keynes and Robbins — whom we shall speak of — no other modern economist has defended this line of reform with such consistency and perseverance. At the beginning of the century K. Wicksell wrote that “the essence of all banking activity is really concentration”, but then showed himself very hesitant to extend this national principle to the international context.[10] And in more recent years J.R. Hicks wrote that “with the development of world markets, and (especially) of world financial markets, national central banks take a step down, becoming single banks in a world-wide system, not at the ‘centre’ any longer”.[11] But these are occasional statements which are never referred to an entire programme of scientific research and socio-economic reform.[12] The indisputable merit of Triffin is to have concentrated his studies and his reform projects on the problem of world currency. For Triffin, the correct solution to the monetary problem, which from the institutional point of view is the foremost economic problem, must be in tune with the evolution of the global economy. Other solutions, such as simple cooperation between central banks and governments, are merely “palliatives”, attempts to find formal solutions to problems which can only be solved by effectively giving up monetary sovereignty. “The displacement of national fiduciary reserves by international fiduciary reserves should similarly be viewed as one aspect of the adjustment of the former tribal, feudal, and national institutions through which this control could previously be asserted, to the ever-changing realities of a more and more interdependent world. Both phenomena should be viewed in a vaster historical perspective: the long march of mankind toward its unity and a better control of its own fate”.[13]
In defending this technically unexceptionable solution of the international monetary problem, Triffin is able to draw a boundary line between those who are for conserving national sovereignty and those who want substantial socio-economic progress by means of supernational instruments to govern the economy. The objection can naturally be raised and — is raised ad nauseam — that the proposed solution is premature and that some other provisional answer has to be found. But in the mean time the boundary line has been drawn. Provisional solutions, from now on, have to be justified in the light of the fundamental orientation set out by Triffin: do they allow or impede mankind in its progress towards monetary, economic and political unity?
Regional Unions.
Triffin, in formulating his proposal for a world bank, was always fully aware of the immediate political difficulties which stood in its way. He therefore aimed, as an indispensable intermediate stage, at the realization of regional monetary-economic unions. The “fundamental dilemma” cannot be resolved “overnight through a sudden and radical transformation of our institutions and habits of thought. The days of a world government are not yet at hand… Regional cooperation, on the other hand, is far more likely to succeed in developing habits of continuous consultation and negotiation over a broader range of government responsibilities; and it may, if successful, gradually evolve towards the actual merging of areas too small and too interdependent on one another to preserve national welfare and security on the basis of national sovereignty exercised within present political boundaries.”[14]
As far as regional unification was concerned, Triffin succeeded in fulfilling an important role as instigator, both in the setting up of some regional bodies for economic cooperation, and in the consolidation phase. Two decisive experiments in this connection were the European Payments Union (EPU), which came into effect in 1950, and the European Monetary System (EMS), which currently constitutes the most advanced project for monetary union, and whose goal of creating a real European currency is under discussion. Less fortunate, as Triffin himself admits, were his attempts to promote economic and monetary unions in Latin America, Asia and Africa.
Naturally the proposals for regional unification met with serious opposition from those who felt that this route would inevitably compromise the principle of international free trade. The creation of an economic union, according to some economists, would certainly have the effect of creating trade between participant countries, but at the same time it would divert trade away from countries outside the union toward new partners within it. The net result might thus be a reduction in volume of international trade as a whole. Recalling this debate some years later, Triffin remarks with some pride, “Let me merely mention that in the 1950’s the European Payments Union (EPU) played a more effective role than the IMF in the changeover of Western Europe from bilateralism to world convertibility, and that the regional trade-liberalization agreements of the Organization for European Economic Cooperation (OEEC), and later the European Economic Community, have certainly proved ‘trade creating’ rather than ‘trade diverting’ as initially feared by Jacob Viner, Gottfried Haberler, and tutti quanti.”[15]
At this point it is worth examining in some detail the method, or the strategy adopted by Triffin for the construction of regional unions. Triffin has fond memories of the work he did together with Jean Monnet in the Action Committee for the United States of Europe. The analogies between the method adopted by Monnet in the field of politics and that of Triffin in the monetary field are evident. Fundamental to this was the experience of building the European Coal and Steal Community (ECSC). In the situation of extreme uncertainty and growing Franco-German tension that characterized postwar Europe, Monnet proposed tackling the international global situation “from a limited but decisive starting point. In his Memorandum of May 3, 1950, to the French Government, Monnet wrote, “From such a situation there is only one possible way out: by means of concrete and resolute action on a limited but decisive point, which causes fundamental changes in this point and progressively modifies the basic terms defining the problem as a whole.”[16] In fact, the creation of ECSC meant the beginning of cooperation between France and Germany, and the process of European unification which, through the European Community, is still in progress.
The same approach characterizes the action of Triffin, starting from the European Payments Union. In evaluating its results, Triffin wrote in 1957: “The agreement on the European Payments Union consisted of an exceptionally clear and simple document, incorporating flexible and precise undertakings of a quite revolutionary nature, which drastically altered the entire structure of bilateral and multilateral regulations within Europe from one day to the next”.[17] In an article published in 1953, entitled Système et politique monétaires de l’Europe Fédérée, Triffin delineates the essential criteria for his strategy of regional monetary unification. The guiding idea is that of “monetary integration”. “A single currency”, writes Triffin, “constitutes the symbol, rather than the substance, of monetary integration. Spectacular as it may be, the difference it represents on the economic plane is small in relation to the coexistence of national currencies freely convertible at fixed and invariable rates. A single currency unit will then become possible and relatively easy to institute. But that can only be the crowning glory, not the starting point, of a realistic and concrete programme of monetary integration.”[18] A corollary to this approach is that of the “‘stages” which should progressively lead from a system of relatively closed markets to an integrated economy. These stages are: 1) the creation of a multilateral system of payments among member states of the union; 2) the elimination of quantitative controls on trade and commerce; 3) the reduction or elimination of customs barriers and the stabilization of monetary parity; 4) the definitive consolidation of rates of exchange by means of a single currency, to circulate initially alongside the national currency, issued by a central European body. Triffin notes further that all these elements are to be found in embryo form in the European Payments Union. “It only remains to expand them quantitatively and progressively in order to make the Union into a true Central European Bank and to make the accounting unit the common European currency” (which Triffin proposed — in 1953! — should be called the ECU).
Finally, Triffin specifies the relationship between monetary integration and monetary unification. “Defined thus, monetary integration has to precede monetary unification, which would be impossible, and certainly impracticable, without it”. Furthermore, complete monetary unification would be possible only in the context of a political union, in other words a federation. “In the context of a political federation it is possible to take as one’s ultimate objective the consolidation of national currencies within a common European currency. The most serious obstacle to this is political rather than technical, since in essence it presupposes definitive acceptance of a common monetary authority and belief in the efficacy and continuity of commensurate renunciation of sovereignty.”[19]
At this point we need only underline how Triffin remained true to this method wherever he was able to influence government decisions towards setting in motion some form of economic and monetary unification. Those decisions made possible by the institution of the EMS seem indeed to be inspired by the wisdom of gradualism: stable exchange rates, a European clearing system, and a basket currency as point of reference, which should progressively transform itself into a genuine European currency. Nevertheless, it has yet to be seen how effective this approach really is. The European Payments Union has not in fact generated any monetary union; and the Brussels agreements on the EMS provided for a second stage — the European Central Bank in fact — to be realized by 1981, but have not been followed. The relationship between monetary integration and unification is certainly a point which deserves further exploration, since the experience of regional monetary unification probably indicates the line which should be taken, at global level also, for any serious reform of the international monetary system.
Triffin, Keynes and Robbins.
The innovative nature of Triffin’s theoretical contribution may perhaps be better evaluated when compared with the view of the international economic order taken by two other, earlier, great economists: John M. Keynes and Lionel Robbins.
Keynes may be considered the last significant exponent of international liberalism. His opinions on the conditions for the correct functioning of the international economy are fairly important: he moved from the position where he was critical of the Gold Standard, in the Twenties, when Great Britain deluded itself that it was able to sustain the pre-war value of sterling, to a position of open support for protectionist and autarchic policies, in the years of the Great Depression.[20] The General Theory, conceived in this historical context deeply imbued with economic nationalism, makes few references to relations between national and international employment plans. But these few references suffice for us to infer that Keynes’s attitude towards self-sufficiency and to the simplistic philosophy that “whatever is useful to employment and to internal growth is also useful to the progress of the world economy”[21] was extremely favourable. The fact that the same principle also underpinned beggar my neighbour-style economic policies is not even taken into consideration. And yet this is more or less the line of conduct, which inspires contemporary Keynesian economists, who at most consider relations between their own nation and the outside world as “external constraints”. The international economy thus remains a reality lacking any rational government. It is now accepted as an indisputable fact that the internal economy has to be controlled if an acceptable level of employment and development is to be reached. But that the international economy as a whole has to be directed with equally effective instruments of government if we want to reach the same results, this is a problem that is rarely discussed. And yet we would certainly consider any claim to achieve full employment within a nation by means of a series of uncoordinated regional plans and without any national instruments of economic policy as absurd.
Keynes partially redeemed himself from this reductive and conservative position at the time of the negotiations which led up to the Bretton Woods conference and to the foundation of the postwar international monetary order. In this connection his proposals for an International Clearing Union and for the creation of a global currency, Bancor, are well known. Keynes was led to this by the fact that Great Britain was weakened by the war effort and, as a power in decline, could no longer claim for its own currency the role of international reserve, which in any case was now occupied by the dollar. The only hope of opposing with some measure of success a simple handover from Great Britain to the United States was thus to promote the creation of an international monetary organization supra partes.
Taking all things into consideration, the motivations that drove Keynes to propose this ambitious plan are of relative importance today (in actual fact, Keynes fought to the last for Great Britain to enjoy some imperial advantage). It should merely be pointed out that the same logic today prompts Third World powers to call for a new international economic order with supernational monetary institutions (supra partes), open to the participation of all peoples and all countries, regardless of their relative wealth or poverty. And it is certainly not by chance that at the very moment at which the USSR has raised the question of its full participation in international monetary and commercial bodies, the project of a global clearing house and currency — Keynes’s former proposals — should once more re-emerge, defended today by Triffin.[22]
On several occasions, Triffin referred to the precedent of the International Clearing Union and Bancor, and in this sense it is right to see him as carrying on the work of Keynes on the international plane, or rather as the only post-Keynesian to place himself unequivocally in the area of building a new democratic international order. Nevertheless, the difference between Triffin and many other economists who would call themselves Keynesian is clear. At international level there is absolutely no possibility of rational economic control without progress on the institutional level. So-called inter-governmental cooperation (very much in vogue nowadays, thanks to the publicity of international summits) leaves things exactly as they were: it recognizes the need for a common policy, but then each individual country continues to do as it pleases. We should think again about the idea of an international conference of those in charge of regional planning: what is the likelihood that such a conference will reach a coherent national plan and above all, given that they succeed in defining this plan, how likely is it that it will be fulfilled without any national means of government? In order to understand how some economists see this question it is worth quoting Triffin once more. “Professor Haberler, for instance, loves to point out that international commitments would be unnecessary if each country ‘kept its house in order’. He is perfectly right, of course, but this excellent advice seems to me to be based on the most academic and utopian assumption of all, i.e. that each government will always follow unflinchingly the best policy and not be thwarted by its own mistakes or by the action of others. The need for institutional agreements derives precisely from the opposite — and, I think, more realistic — assumption, i.e. the inevitability of occasional, or frequent, failures of governments to implement the policies that are best for their country and for the others.”[23]
If the relationship between the thinking of Triffin and that of Keynes is problematic, still greater problems arise in connection with that of L. Robbins. And yet reference to Robbins’s work, Economic Planning land International Order,[24] which came out at about the same time as the General Theory, is essential to an understanding of the political context in which Triffin’s plans for monetary unification were formed, and also the conditions for their success or possible failure. Robbins, faced with the growing wave of economic nationalism which characterized the years of the Great Depression, offers the alternative of an economic order based on international democracy, in other words federal institutions. The traditional currents of thought which stem from international liberalism or socialism failed miserably to address the problem of guaranteeing an ordered development of the international economy. In a world of sovereign governments acting independently of each other, the most probable result is anarchy, not order. Robbins therefore proposed to apply the institutional solutions defended by the authors of The Federalist concerning the struggle over the ratification of the American Constitution, to the situation of international anarchy of the twentieth century. Robbins identified for the first time, and with great clarity, the institutions indispensable to a democratic government of an international economy. Fundamental among these is currency. Robbins declares that in a modern economy, a market without a common currency is impossible. For the same reason, it is impossible to have an international economic order without a world currency.
We are particularly interested here in Robbins’s analysis of aspects of the power of money. This is necessary to an understanding of the difference between monetary integration in a confederal system of countries and in a federation. In a confederation, each individual government preserves its sovereignty intact: the confederation does no more than sanction a convergence of interests in a situation of common need (as happened in the case of the thirteen American colonies when they joined forces against the mother country). In a federation, some responsibilities, such as currency and foreign policy, are entrusted from member countries to the federal government. As Robbins points out, in a confederation, even if agreement is reached on exchange rates and on free circulation of capital, there is never any certainty that monetary integration achieved in this way will survive over time. “The political factor acts positively as well as negatively. When the area of the local reserve system runs parallel with that of political sovereignty, there is great danger that, when strain arises, the authorities of the system will be prevented from taking any action necessary to preserve equilibrium. They can be prevented from allowing local credit to contract or — what in a progressive society is more probable — from restraining it from expanding as rapidly as elsewhere. The area of strain will be coterminous with the area of administrative discretion. And the probability is that this discretion will be exercised.”[25]
The distinction between the confederal and federal situation is thus extremely useful in judging how likely it is that what Triffin calls “monetary integration” will lead to monetary unification. History has shown that in federations (such as the USA, Canada, Switzerland etc.) monetary union is as likely to come about as in unitary countries. The development of modern industrial economies would be unthinkable without monetary union. In confederal situations (as in the common markets of Latin America and Europe), attempts at monetary integration have not met with success, in that they have not led to true monetary union. Basically, governments accept monetary agreements when they have no choice, but only in order to safeguard their own national sovereignty, not for the sake of joining the union. This was the case for the European Payments Union for example, which came out of the Marshall Plan, under American guidance. It thus seems legitimate to state, in examining attempts so far at monetary union, that the real difficulty lies in the political context which accompanies the attempt. A precondition of success is that alongside the process of monetary integration there should be a process of political unification.
This seems to be the present situation in the European Community, and yet we have to make a clear distinction between the nature of the EMS and the ECU and previous attempts. As Triffin has frequently pointed out, it is unthinkable that in the complex economies of today, in which monetary policy has such a strong effect, for good and for ill, on the rates of employment and economic growth, member countries of a union should give up monetary sovereignty without at the same time there being another political body, a federal democratic government, taking on the management of economic affairs. There may be a period of uncertainty during the transition, but the final goal of the process should be clear: monetary union is only possible in the context of a federation of countries. The European Community, with a parliament elected by universal suffrage, and after the federalist attempt to transform it into a European Union, is in exactly the situation described: it is a confederation in which the incentives to achieve effective European democracy (and hence a real European government) have already made themselves felt, and will presumably continue to do so, since to maintain a democratically elected parliament devoid of any real powers is a scandal which in the end will no longer be tolerated by European democratic parties and public opinion.
These observations, even if they do not help provide any theoretical solution to the contrast which in the fifties divided the promoters of European unity into those who followed a functional model and those who followed a constituent model,[26] at least allow us to establish that as far as events and concrete projects are concerned, in Europe today there is no longer any contradiction between those who propose advances in monetary integration and those who propose constitutional advances (e.g. the democratic reforms of the Treaty of Rome). Each step forward in one direction reinforces, by making necessary, the other action: who ever wants a European currency has also to want European government, and vice versa.
Finally, it should be said that the ongoing process of European unification also contains useful guidelines for global action leading to reform of the international monetary system and in the long term towards a global currency. The goal of a European currency has become that much more attainable with the development of an embryonic European democracy. Analogously, a world currency will become a realistic objective when active moves towards international democracy can be observed. Naturally, in a world still divided and governed by superpowers this goal seems a long way off. But what matters is the direction we are going in. An active process of international détente and cooperation between rich and poor regions of the world can be greatly facilitated by the constitution of regional unions on a continental scale, as is happening in Europe, Latin America and even in Africa (OAU) and Asia (ASEAN).On political ground too, Triffin’s intuitions thus show themselves to be perfectly correct. Regional unification processes are by no means an obstacle to the broader unity of the human race. We live in a century in which we can see the need to create means of government for a society whose horizons now encompass the whole earth. As regards economic and monetary affairs, this need has to be transformed into a reform which bases the construction of a world currency on a basket of solid continental currencies, like the dollar, the ECU, the rouble, the yen, etc. It is certainly an ambitious and far-off aim. For many politicians these are sufficient reasons not to worry about the problem and to seek more comfortable solutions. But for those who, like Jean Monnet and Robert Triffin, think that “politics is not the art of the possible. It is the art of making possible tomorrow what still seems impossible today”, the way is clear.
An Economist for Peace.
The important results achieved by Robert Triffin, both in science and in active political economics, would not have been possible without a close adherence to certain moral principles, which should be remembered not so much in order to praise him, but because they show how close the relationship is between the cognitive activity of the social scientist, moral motivation and historical process.
No scholar can avoid asking himself the fundamental Weberian question of the relationship between facts and values. “Every conceptual cognizance of the infinite reality by the finite human mind rests in fact on the tacit presupposition that a finite part of it must form the object of scientific consideration, and so it becomes essential in the sense of being worth knowing”.[27] The choice of the object of study, the examination of what is essential and worth knowing and what is not, is the relationship between the individual and history. In this fundamental area Triffin’s choice is exemplary. “I had experienced, as a child”, he reveals in his short autobiographical work, “the German occupation of Belgium in the First World War, and shared for years the general hatred of the Boches, while crying with my family over the death at the front of some individual young soldiers quartered in our house and obviously innocent of the tornado engulfing us all. In Louvain, however, the rise of Hitlerism, the teaching of Einstein etc. had imparted to me deep pacifist feelings. The best lever I could see to serve these in an economic career was to join the rarefied group of central bank experts who in fact play a crucial role in each country’s economic life, and are forced to deliberate constructively discussion across obsolete political borders — or at the League of Nations, at the same time, or at the Bank of International Settlements on gold and foreign-exchange problems of common interest. My Harvard life had taken me in a totally different direction, but when the opportunity came at the Federal Reserve, I seized it immediately and gladly forgot monopolistic competition and pure theory. I have never regretted it.”[28]
Naturally, his activity as economic consultant brought him into contact with state interests and political power, which by definition — until a world federation is brought about — aims to subordinate truth and knowledge to its own interests. But see how Triffin reacts: “I shall always remember the comments of Professor Rappart, Chairman of a Conference of French-speaking Economists to which I had presented, in 1949, an outline of my plan for a European Payments Union. After praising it, he caressed his white beard and added: ‘you are far too optimistic, young man. When you reach my age you will have learned that such a proposal cannot be agreed to in a negotiation involving so many governments and contradictory national interests.’ To which I answered: ‘If my main concern were to make safe forecasts, I would agree with you and be proven right nine times put of ten. But I prefer to be wrong nine times out often, if I can contribute once in ten times to divert us from catastrophe, and help build a better future’.”[29] Triffin recalls another significant episode: when his son was faced with the question of whether to enter the department of State, he advised him to first acquire academic status which would allow him “to resign his job rather than carry out ‘instructions’ which he might find contradictory to his most deeply-felt ideals”. And as a citizen of the world, faithful to his cosmopolitan ideals, Triffin considers the slogan, “Right or wrong, my country” to be treason. He who serves the interests of mankind does not bend to the demands of national raison d’état.
In conclusion, Triffin was able to keep up the fight for world currency over many years not only because he had chosen it as a “problem worth studying”, but also because he considered it an objective “worth pursuing”. “Hier stehe ich, ich kann nicht anders”.[30] If an ever greater number of young economists follow his example, the fight for a world currency and political unity of mankind can be won.

* Text of the report presented at the Robert Triffin Jubilee: Evolution of the International and Regional Monetary Systems (Brussels, 8th-9th December 1988).
[1] “An Economist’s Career: What? Why? How?”, in Banca Nazionale del Lavoro Quarterly Review, 1981; pp. 239-259.
[2] Op. cit., p. 248.
[3] J.A. Schumpeter, History of Economic Analysis, Oxford University Press, 1954, p. 5 and p. 13.
[4] Robert Triffin, Gold and the Dollar Crisis: The Future of Convertibility, New Haven, Yale University Press, 1960.
[5] R. Triffin, “Gold and the Dollar Crisis: Yesterday and Tomorrow”, in Essays in International Finance, New Jersey, Princeton University, 1978, p. 2.
[6] R. Triffin, Gold and the Dollar Crisis, cit., p. 87.
[7] Ibidem, p. 145.
[8] R. Triffin, The World Monetary Scandal: Sources… and Cures?, Bulletin de l’IRES n. 77, Université Catholique de Louvain, 1982.
[9] R. Triffin, Gold and the Dollar Crisis, cit., pp. 146-7.
[10] K. Wicksell, Lectures on Political Economy, London, Routledge & Sons, 1934 and A.M. Kelly, 1971, vol. 11, p. 119. On page 373 Wicksell states, in connection with the functioning of the “ideal bank”, that “at least theoretically gold could easily be replaced by credit, both for internal needs and for international payments of any amount, and for the great and ever-increasing stocks of gold in minted form, accumulated with so much toil and trouble, are useless and superfluous”.
[11] J.R. Hicks, Critical Essays in Monetary Theory, Oxford, Oxford University Press, 1967, p. 60.
[12] An exception should perhaps be made for Jan Tinbergen, who in Reshaping the International Order (Amsterdam, Elsevier, 1976) proposes a plan for the reform of the international order based on “a planetary sovereignty”. A proposal to be effected by a “world federal government”, with the necessary powers to guarantee security and international justice is contained in the more recent work of Tinbergen (in collaboration with D. Fischer), Warfare and Welfare, Integrating Security Policy into Socio-Economic Policy, Wheatsheaf Books, Sussex, 1987.
[13] R. Triffin, Our International Monetary System, New York, Random House, 1968, p. 179.
[14] R. Triffin, Europe and the Money Muddle, New Haven, Yale University Press, 1957, pp. 303-4.
[15] R. Triffin, “Gold and the Dollar Crisis: Yesterday and Tomorrow,” cit., p. 14.
[16] The Monnet Memorandum was published by Le Monde on March 9, 1970.
[17] R. Triffin, Europe and the Money Muddle, cit., p. 161.
[18] R. Triffin, “Système et politique monétaires de l’Europe Fédérée”, in Economia Internazionale, February-March 1953, p. 207.
[19] R. Triffin, ibidem (the passages quoted are on pp. 211 and 212).
[20] Cf. the article “National Self-Sufficiency,” from 1933; now published in The Collected Writings of J.M. Keynes, London, Macmillan, 1982, Vol. XXI, pp. 233-247.
[21] See also the passage from the General Theory stating that “It is the simultaneous pursuit of a domestic employment policy by all countries together which is capable of restoring economic health and strength internationally, whether we measure it by the level of domestic employment or by the volume of international trade.” (Collected Writings, cit., Vol. VII, p. 349).
[22] “… the International Monetary Fund — or any other institution that might replace it — should acquire the functions of a central bank that regulates the size and composition of international liquidity reserves as well as the functions of an interstate clearing house. It is known that the origin of this idea and its active propaganda is linked above all with the name of Professor Triffin…” (D. V. Smyslov, The International Monetary System: Evolution, Prospects and Cooperation between East and West, The Institute of the World Economy of the USSR Academy of Sciences, mimeo, 1987).
[23] R. Triffin, An Economist’s Career, cit., pp. 252-3.
[24] London, Macmillan, 1937 (reprinted by Arno Press, New York, 1972).
[25] L. Robbins, Economic Planning and International Order, cit., pp. 277-8.
[26] See A. Spinelli’s essay “Il modello costituzionale americano e i tentativi di unità europea”, (1957) now in Il progetto europeo, Bologna, Il Mulino, 1985. On the same problem, see also M. Albertini, “L’unificazione europea e il potere costituente”, in Il Politico, 1986, n. 2, pp. 199-214.
[27] M. Weber, “Die ‘Objektivität’, sozialwissenschaftlicher Erkenntnis”, reprinted in M. Weber, Weltgeschichtliche Analysen, Politik, Alfred Kröner Verlag, Stuttgart, 1968, p. 212.
[28] R. Triffin, An Economist’s Career, cit., p. 242.
[29] Ibidem, p. 246.
[30] Luther’s famous words: “Here I stand, I can no other”.




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