London Economic Conference

The London Economic Conference was a meeting that took place between representatives of 66 nations in the summer of 1933. Held at London's Geological Museum, the purpose was to attack global depression, revive international trade, and stabilize international currencies. However, while vacationing on his yacht in the North Pacific, Franklin D. Roosevelt issued a radio message to London, condemning the conference for trying to stabilize currency, and he indirectly declared that the United States would not participate in the negotiations. [Baily, Thomas A.; & Kennedy, David M. (1994). The American Pageant (10th ed.). D.C. Heath and Company. ISBN 0-669-33892-3.] [ [http://www.time.com/time/magazine/article/0,9171,789364-1,00.html London Economic Conference - TIME ] ]

Background

When the world economy collapsed after World War I, it was greatly assumed that the United States would serve as a hegemon. The agenda for the Conference, drafted amongst representatives of six major nations who met in Geneva in 1932, strongly stated that intergovernmental debts should be settled as they represented a major obstacle in the road to recover from the Great Depression. There Europeans thought that “the settlement should relieve the world” [League of Nations, "Draft Annotated Agenda", Official Number: C.48.M.18 (Conference M.E.1) II (Geneva: League of nations, 1933) 7-9; "Foreign Relations of the United States", 1933 I (Washington: Government Printing Office, 1950) 453, 462-6.] , while American experts like Senator Borah strongly disagreed as “the troubles of the world were really due to the War, and to the persistence of Europe in keeping great armaments, and to the mismanagement of the silver;” therefore, he was not willing to postpone, reduce, or cancel the payment of debts “and have Europe go ahead with a programme which has practically sunk the world into its present economic condition.” [The World Economic Conference, Herbert Samuel, "International Affairs (Royal Institute of International Affairs" 1931-1939), Vol. 12, No. 4. (Jul., 1933) 445.]

Contrary Actions

The hope that the United States would continue adherence to the gold standard quickly vanished when President Roosevelt declared, the day after assuming office, the Emergency Banking Act of 1933 and banned gold exports, via Executive Order No. 6102, formally taking the nation off the gold standard. Later in May he approved the Thomas Amendment, a legislation that “required the President to pursue a policy of inflation through the issue of paper money.” [Roosevelt’s 1933 Monetary Experiment, Elmus Wicker, "The Journal of American History", Vol. 57, No. 4. (Mar., 1971) 867.]

Roosevelt’s declaration during his inaugural speech of 1933: “I shall spare no effort to restore world trade by international economic readjustment, but the emergency at home cannot wait on that accomplishment” represented a clear signal to the participants in the Conference that he would resist foreign designs to revive the international economy. [Roosevelt: America's Strategist, M. A. Fitzsimons, "The Review of Politics", Vol. 7, No. 3. (Jul., 1945), 283.]

Secretary of State to Roosevelt, Cordell Hull, led the American delegation to the Conference. The President ordered Hull not to enter into any discussions regarding currency stabilization. However by time the Conference gathered, President Roosevelt had changed his mind into currency manipulation to raise prices, and had American banking experts Oliver Sprague and James Paul Warburg conduct currency stabilization talks with their British and French counterparts. [The Ordeal of Cordell Hull, Julius W. Pratt, "The Review of Politics", Vol. 28, No. 1. (Jan., 1966) 83.]

Roosevelt's Rejection

When the Conference opened on June 12, 1933, all attention rested on the tripartite currency discussions happening outside the Conference. By June 15, the unofficial American appointees with Montagu Norman of the Bank of England and Clement Moret of the Bank of France had drafted a plan for temporary stabilization. In spite of attempts at secrecy, word of their plan escaped before an official announcement could be made and the reaction was destructive in the U.S. as stock and commodity markets were depressed and the foreign exchange value of the dollar rose. Although Roosevelt was considering shifting again his diplomatic policy regarding a new median dollar-pound rate, he eventually decided not to enter into any commitment, even a tentative one. On June 17, fearing the British and the French would seek to control their own exchange rates, President Roosevelt rejected the agreement they had reached with their British and French counterparts in spite of his negotiators’ pleas for his understanding that the plan was only a temporary device full of escape clauses. [Roosevelt's Monetary Diplomacy in 1933, Jeannette P. Nichols, "The American Historical Review", Vol. 56, No. 2. (Jan., 1951), 313.]

Roosevelt’s rejection of the agreement gathered an overwhelmingly negative response from the British, French, and internationalist in the United States. British Prime Minister Ramsay Macdonald feared “Roosevelt’s actions would destroy the Conference” and Georges Bonnet, rapporteur of the French Monetary Commission, is said to have “exploded.” Critics ascertain nationalism as a key player in Roosevelt’s decision to reject the agreement and indirectly causing the collapse of the Conference. [The London Monetary and Economic Conference of 1933: A Public Goods Analysis, Rodney J. Morrison, "American Journal of Economics and Sociology", Vol. 52, No. 3. (Jul., 1993), pp. 312, 314.]

Footnotes

External links

* http://www.time.com/time/magazine/article/0,9171,789364-1,00.html

* This conference is made fun of by H. G. Wells in his 1933 book "The Shape of Things to Come". The book is available for online reading at http://etext.library.adelaide.edu.au/w/wells/hg/w45th/