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Published online by Cambridge University Press: 22 May 2009
In accordance with the request of the United Nations Economic and Social Council, the International Monetary Fund submitted to the Council's thirteenth session, a study on the capacity of underdeveloped countries to service investments of foreign capital. With compensatory financing eliminated from its consideration, the remainder of the country's international receipts appeared to furnish a reasonable total with which to compare its foreign debt service. Such a total would include the goods and services the country was able to sell abroad, the foreign capital that it was able to attract by its investment opportunities and the donations that it received for particular purposes other than compensatory financing. This total would be subject to wide fluctuations. Markets for the raw materials exported by underdeveloped countries were notoriously subject to sudden shifts in demand which could drastically affect both volume and price. Again the capital flow to underdeveloped countries could be suddenly interrupted if the markets for their raw material exports turned weak or if they pursued unstable or confiscatory policies at home. The dangers to an underdeveloped country's balance of payments position arose from the wide fluctuations in the value of raw material exports and inflow of capital that might occur almost overnight. It was these that raised questions of how quickly and how far imports of goods and services could be contracted in order to permit the service of the foreign debt to continue to be paid in full.
page 604 note 1 Economic and Social Council, document E/2024, June 18, 1951.
page 605 note 2 Second Annual Report on Exchange Restrictions, April 1951; New York Times, May 28, 1951. At a meeting in Portugal in June 1951, the United States delegation to the International Chamber of Commerce called for the abolition of the United Nations Economic Commission for Europe and stressed the difference between that organization and the International Monetary Fund: “The International Monetary Fund rightly in our opinion is working toward an international solution of the international economic problems. It stresses the importance of eliminating exchange restrictions and trade discrimination against the United States now that the dollar has become less scarce due to American rearmament. In sharp contrast to this international approach to the inflation problem, the Economic Commission for Europe favors an upward revaluation of European currencies in terms of the dollar – without any liberalization of exchange controls.” ECE was charged with advocating “measures which, if followed, would complete the breakup of the world economy into a collection of nationalistic and non-cooperative planned economies.” (Ibid., June 14, 1951.)
page 605 note 3 International Financial News Survey, April 6, 1951.
page 605 note 4 International Monetary Fund Press Release 161, March 19, 1951.
page 605 note 5 International Financial News Survey, June 29, 1951.
page 605 note 6 The gold mine subsidy was erroneously reported in International Organization, V, p. 381, as being inconsistent with Fund policy.