july 1946

After the Savannah Conference

Fred M. Vinson

Volume 24 Number 4
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THE

AFTER

SAVANNAH
By Fred M.

CONFERENCE

Vinson

FOR

the past five years this Government

has advocated
inter
national economic cooperation to restore world trade and to
free it from the restrictions that isolate countries and divide
for dealing with
them into conflicting blocs. The responsibility
these problems does not rest in any one country. The problems
are international and
can be dealt with
they
only through inter
national cooperation. We have not been content with securing
agreement

on

abstract

International

principles.

economic

prob

lems must be dealt with in concrete terms. We have proposed

means for
co
that the United Nations
continuing
provide the
Bank
for Reconstruction
through the International
operation
and Development,
the International Monetary
Fund and an in
trade

ternational

organization.

in world
This policy recognizes frankly that the breakdown
economic relations in the 1930's was an important factor in pro
the great depression and that the eco
longing and intensifying
nomic

warfare

of

the

1930's

was

part

of a master

plan

for aggres

and Japan. Conquest

sion by Germany
began by isolating the
intended victim from the world economy through bilateral agree
ments which put the weaker nation at the mercy of the stronger.
international
These practices must be outlawed by cooperative
on world

action

currency

and

trade

practices.

industrial and agricultural production has revived in all

countries, world trade cannot be restored to the high level neces
sary for a balanced world economy. The World Bank is intended
Until

to
can

facilitate
again

reconstruction
use their own

and
resources

development,
for
production.

so

that
The

countries
Bank

will

capital necessary for sound and

help provide the supplementary
on terms fair to both the lender and the
projects
productive
borrower. The capital of the Bank, to which 38 countries have
as a surety fund. The loans
now subscribed, will be used
primarily
made or guaranteed by the Bank will be financed almost entirely
by private investors. But all countries will share in the risks of
to their
these loans in proportion
subscriptions.
has been so great that it could
The urgency of reconstruction
not be delayed until the World Bank was in full operation. To
take care of emergency reconstruction
needs, the capital of the

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AFTER THE SAVANNAH CONFERENCE

was

Bank

Export-Import

and

increased,

its

623
was

authority

ex

tended by Congress to permit it to make loans for reconstruction

areas. After the World Bank is
in Europe and other devastated
Bank will continue to carry
in full operation, the Export-Import
out its special function of offering our businessmen
help in
In
the
and
American
this,
exports
Export
financing
imports.
a useful American supplement to the inter
will
Bank
be
Import
national institutions designed to facilitate the expansion of trade.
The expansion of world trade requires the elimination of the
restrictive and discriminatory
currency practices that grew up in
the prewar decade. The United States, England and France tried
to
this task through the Tripartite
accomplish
unsuccessfully
Accord of 1936; the problem is now much more difficult because
of the extension of these devices during the war. The Monetary
Fund, to which 39 countries have already adhered, will facilitate
a full flow of trade by
stable and orderly exchange
promoting
Fund
undertake to maintain
of
The
members
the
arrangements.
fair currency standards under which trade can expand and grow.
Countries that abide by these standards can obtain help from the
Fund out of the resources subscribed by the members.
for international economic coopera
These financial measures
measures
to reduce the
tion must be supplemented
by other
a
Conference
barriers to trade. The Bretton Woods
adopted
that the participating
resolution which recommended
govern
ments

seek

"to

means whereby
trade

and

reach

agreement

they may

in other

ways

as soon

as

possible

best reduce obstacles

promote

mutually

on

and

ways

to international

advantageous

com

mercial relations." This government has been aware of the neces

to other
sity of dealing with trade problems and has submitted
to relax trade barriers of all kinds, to
governments
proposals
trade
and to establish an international
eliminate discriminations
maintain
fair
trade
that
will
practices.
organization
was
Financial Agreement
At the time the Anglo-American
of the United Kingdom
the Government
expressed
negotiated,
its full support for the American proposals on trade. The first
steps have already been taken to carry out these proposals. The
has agreed
and Social Council of the United Nations
Economic
to convene

an

international

conference

on

trade

and

employment

and eight
in the latter part of 1946. The British Commonwealth
invitation
of the
nations
have
the
accepted
important trading
to
consider
United States to meet in advance of the conference

FOREIGN AFFAIRS

624
reductions

in trade barriers

in accordance

with

the American

proposals.
This whole program for international
economic cooperation,
now
cannot be put into operation
until
nearing completion,
can
war
meet
her
of
balance
Britain
has
payments problem. The
international
her
economic
She
position.
seriously disrupted
will require help from abroad to secure for the next few years
the living standard of
the imports she must have to maintain
to
and to enable her industries
function. If she could
her
people
States
and
the
United
from
Canada, she would be pre
get help
to
effect
fair
these
into
currency and trade practices.
put
pared
The Financial Agreement with Britain will make it possible to
into operation
the United Nations
program of
put promptly
international

economic

cooperation.
ii

The World Fund and Bank are the result of careful planning
that began in 1941. The agreements were formulated at the con
on
in 1944, and ratified inWashington
ference in Bretton Woods
these four years, there has been
December
27, 1945. During
the Fund and Bank in the United
of
discussion
thorough public
This
Canada.
Britain
and
debate, in the best democratic
States,
tradition, has been very helpful. Its effect has been to achieve the
a
program of
support of an informed public for
comprehensive
international economic cooperation.
of the Fund and the Bank
the Articles of Agreement
While
came into effect at the close of 1945, these two institutions were
still merely shadows. They had to be brought to life. The inaugu
ral meeting of the Boards of Governors of the Fund and the Bank
was called by the United States to convene in Savannah, Georgia,
into
March 8, 1946, for the purpose of bringing these institutions
or Bank
of
members
the
Fund
The
countries
already
operation.
at the meeting
were
and seven other countries sent
represented
Savannah
successful
The
observers.
meeting was extraordinarily
on
which
and
the organization
in dealing with the questions
and Bank depend.
World
Fund
the
of
operation
in the World
One important problem was to keep membership
to
not
which
had
nine countries
Fund and Bank open
yet ratified
and New Zealand,
and some Latin
Australia
the Agreements.
in December
could not accept membership
American Republics,
were
not
in
session.
Russia
has ap
their
because
legislatures

AFTER THE SAVANNAHCONFERENCE

625

not yet decided whether she will participate

fully with
parently
in theWorld Fund and Bank. All these
the other United Nations
and Haiti,
showed their continued
countries,
except Liberia
Bank
interest in the Fund and
by sending observers to the in
a resolution which
keeps
augural meeting. The Governors adopted
until
December
31, 1946, on the original
open
membership
in the Bretton Woods
terms, to all countries that participated
to
Conference. This will give these countries ample opportunity
in the United Nations
consider more fully their participation
economic

program.

It had always been thought that other countries will wish to

join the Fund and Bank, and the Articles of Agreement
provide
to them in accordance
shall be
that membership
with|pre
open
at Savannah,|new
the by-laws
scribed terms. Under
adopted
an
can
countries
by filing
application with
apply for membership
the Fund and Bank setting forth all relevant facts. The Executive
Directors will consult with the applicant; will recommend to the
Board of Governors of each institution the quota and subscrip
tion and such other conditions as they believe the Governors
may wish to prescribe; and the Governors will then pass on the
application.
A number of countries
indicated their interest in becoming
members of the Fund and Bank during the inaugural meeting.
At their request the United States Government
placed before the
of
the applications
Governors
Lebanon, Italy, Syria and Turkey,
for consideration
which were referred to the Executive Directors
Action on the ensuing recommendations
and recommendation.
at their first annual
will probably be taken by the Governors
in
1946.
meeting
September
The Governors also agreed on a quota of $68,000,000 for Den
mark in the Fund and a similar subscription in the Bank. Because
had no government
Denmark
independent of Axis control, she
was
at the Bretton Woods Conference
represented
by the Danish
in Washington
Minister
acting in his personal capacity. The
has now ratified the Bretton Woods Agree
Danish Government
ments and is a full and original member.
The Articles of Agreement
provide that the principal offices of
the Fund and Bank will be in the United States. The Governors
in which the institutions would be located.
had to select the
city
The United States felt that, all things considered, the Fund and
the Bank would derive the greatest advantages
from being sit

626

FOREIGN AFFAIRS

in Washington.
uated
It must be remembered
that these are
not ordinary institutions with ordinary stockholders. They are
and their chief business
cooperative
enterprises of governments
would have
is with governments. Their location inWashington
to carry
the great merit of making
it easy for all the members
on their business with them, since all members have adequate
in that city. But more than merely
this conven
representation
at
are
not
Bank
is
stake.
The
Fund
ience
and
business institutions
so as to con
must be
in the ordinary sense. While
operated
they
serve their assets and allow the most fruitful use of their facilities,
are not
institutions. The business of the Fund
they
profit-making
matters
and Bank involves
of high economic policy. They should
not become just two more financial institutions.
The Governors adopted a number of resolutions for interpret
by the Executive Directors.
ing the Fund and Bank Agreements
of the Fund
the Executive
Directors
At the request of Britain,
were asked whether
to protect a country from
persistent
steps
on its balance of payments,
unemployment,
arising from pressure
are

to be considered

disequilibrium.
permit

use

of

They

measures

were

its resources

necessary

to correct

also asked whether

for other

than

current

a fundamental

the Fund
monetary

may
stabi

in connec
lization operations which afford temporary assistance
in the cur
tion with seasonal, cyclical and emergency fluctuations
the
rent balance of payments. Further, they were asked whether
Fund has authority to permit the use of its resources for relief,
reconstruction

or armaments,

or

to meet

large

or sustained

out

flow of capital. The Executive Directors of the Bank were asked

to make long-term stabilization
loans.
it has authority
whether
are
called
that
The interpretations,
except
requested by Britain,
Act adopted by our
for in the Bretton Woods
Agreements
Congress.
in

At Savannah there was some difference of opinion among the

Governors as to whether the Executive Directors of the Fund and
Bank would have to devote all of their time to the business of the
Fund or whether they could be partly occupied with other duties.
The Articles of Agreement
provide that the Executive Directors
office and
session at the
shall function in continuous
principal
shall meet as frequently as the business of the Fund and Bank
requires. It is clear that this provision assumed that the Executive

AFTER THE SAVANNAH CONFERENCE

627

Directors would always be quickly available for business sessions.

This question is closely related to the responsibility
intended to
be vested in the administrative
officials of the Fund and Bank.
If final authority
in the administrative
is vested
officials, the
Executive Directors become little more than an advisory body.
In my opinion, this would be contrary to the manner in which it
was intended to operate the Fund and Bank. It is questionable
two
in practice it would be an effective way to manage
whether
of
international
The
Director
the
institutions.
Managing
large
Fund and the President of the Bank must be capable men with
great vision and a high sense of duty. The men chosen meet these
re
high qualifications. Even so, it is unwise to lodge complete
man.
one
It
for
in
and
is
necessary
management
sponsibility
to require that the
of
the
administrative
officials
policies
prudent
be made in consultation with the Executive Directors.
The United States felt it essential that the Executive Directors
devote all of their time to the business of the Fund and Bank.
The United Kingdom
felt that the Executive Directors might
well be responsible officials of the Treasury or the Central Bank
of a member, available to come to the head office for a meeting
from time to time when required, but not expected to devote
all their time to the business of the Fund and the Bank. What
ever the merit of this argument as it affects
appointed Directors,
it clearly does not extend to the elected Directors.
Seven of the
12 Executive Directors were elected
countries
that do not
25
by
have a right of appointment. Each of these Directors
represents
on an average five countries. It is inconceivable
that an elected
two or more countries, should
Executive Director,
representing
give only part of his time to his international duties. The coun
tries that elect such a man have a right to expect that his com
devotion to their interests in the Fund and Bank will not
plete
be impaired by duties with his own government which leave him
less than full time to represent them.
There will be plenty of work to occupy the Executive Directors
during the first two years. The Fund must consider the question
of initial exchange rates, multiple exchange rates, exchange con
trols and exchange restrictions. The Bank must consider the
the types of security to be
raising of funds from the market,
terms
the
of
similar
loans
and
issued,
problems. The next two
a
years will be critical period inwhich international monetary and
financial problems will be of major importance. For these two

628

FOREIGN AFFAIRS

should always
years it is essential that the Executive Directors
be available to give their time in full to the problems of the Fund
and Bank. The solution worked out in the by-laws of the two in
stitutions
is a practical one. An Executive
Director
and his
will
all
of
devote
the time and attention required to the
Alternate
business of the Fund or Bank, and one or the other will be contin
uously available at the principal office. In the end, the problem will
have to be solved in the light of experience.
institutions
These
have great responsibilities
and they are
entrusted with tremendous resources. They will need able Direc
tors, men of the highest competence who will devote their time
and attention to the Fund and the Bank. Their salaries have to
to those
be somewhat
paid by banking institutions.
comparable
The salary for a full-time Executive Director
is $17,000 a year
and for an Alternate $11,500 a year, both net of income tax. (The
fixing of salaries in this form is necessary to assure equality of
to the international
staff of the Fund and Bank,
compensation
and is in accord with the practice of the United Nations.)
These
seem
not
excessive compensation
salaries
for the kind
good but
an Executive
of men the Fund and Bank must attract. Where
or Alternate
serves only part-time,
Director
will
compensation
to the time served. An Executive Director
or
be in proportion
Alternate
serving both the Fund and Bank will be paid in equal
each.
parts by
of the Fund and Bank were
The first Executive
Directors
elected at the inaugural meeting of the Board of Governors.
It is
a mark of the
was
that there
cooperative
spirit of this meeting
almost complete unanimity
in their selection. The men chosen
a very
in interna
comprise
capable group with long experience
assures
tional finance. The wide geographic distribution
ample
representation

to

every

important

economic

area

of

the world.

The United
States, Britain, China, France and India have ap
and
and Belgium have elected,
Canada, Netherlands
pointed,
Directors of the two institutions. The Latin American Republics
are
Mexico
and Brazil on the Fund and by Cuba
represented by
and Chile on the Bank. In addition, Czechoslovakia
and Egypt
have Directors on the Fund and Poland and Greece have Direc
tors on the Bank.
A special problem has arisen regarding the five Executive Di
or sub
rectors
appointed by the countries with the largest quotas
was
coun
in
and
Bank.
the
Fund
It
that
these
scriptions
expected

AFTER THE SAVANNAH CONFERENCE

629

tries would be the United

States, Britain, Russia, China and
France. Because Russia has not yet joined the Fund and Bank,
India has become the country entitled to appoint Directors. Ob
at some later time an ar
if Russia accepts membership
viously,
assure
to both Rus
to
will
be
necessary
representation
rangement
sia and India until the next election of Directors.
of the Fund and Bank provide that
The Articles of Agreement
come into the Fund and Bank, additional
when new members
Executive Directors may be elected to broaden the representa
a resolution which
the Governors
tion. At Savannah,
adopted
Directors will be elected
provides that such additional Executive
to serve until
1948 provided the countries not repre
September
have votes totaling 4,000, and the un
sented by the Directors
one or more who did not
participate
represented countries include
In this way all countries will
in the Bretton Woods Conference.
on the Executive Directorate,
be assured of full representation
until the next election of Executive Directors.
IV
in Savan
of the inaugural meeting
The greatest achievement
nah was not in settling these difficult questions of organization.
It was important that they be decided
in a manner offering
the greatest hope of efficient and successful operation. But far
was the
transcending these achievements
spirit which pervaded
the meeting.
The Savannah meeting
showed that all countries are deeply
conscious of the necessity of making
the Fund and Bank work.
on matters of detail were ironed out
Differences
by discussion,
common de
of
take.
democratic
and
The
the
process
give
through
an
termination to work together made the meeting
inspiration
can and will
to all who have faith that international
cooperation
succeed. The Fund and Bank will need capable and devoted
officers and staffs and wise governors and directors. But above all
their strength must come from the constant help and support of
the
of all nations.
people
The World Fund and Bank cannot live as the creatures of any
one nation.
They will succeed in performing their important tasks
if
only
they continue to be the basis for constructive cooperation
and forbear
among all nations. This will require understanding
ance. The
must
of
all
countries
insist
that
their
representa
people
tives on the World Fund and Bank should not seek petty and

630

FOREIGNAFFAIRS

institutions are too important to

temporary advantages. These
the world to be endangered by narrow and shortsighted policies;
they must be operated for the benefit of all mankind.
The World Fund and Bank have important tasks to perform.
To each has been entrusted a particular field of endeavor. The
Fund has been charged with establishing
stable and orderly ex
and
fair cur
change arrangements
helping countries maintain
rency standards. The Bank has been charged with helping coun
tries to secure capital for worth-while
projects of reconstruction
and development.
Each institution, by performing
its functions
well, will facilitate the success of the other. It is, therefore, of the
utmost importance that they work together in harmony.
It iswell to point out that the Bretton Woods Agreements Act
in these two institutions took
authorizing American participation
for
cognizance of this promem. The Act made special provision
of the work in so far as that could be done in the
coordination
a
in
American
legislation. This Act is model of careful drafting
on
the rights of the Fund and
this respect. Without
encroaching
Bank as international institutions, it requires the American Gover
nor and Executive Directors
of the Fund and Bank to do all in
assure
to
close cooperation between them.
their power
to the Fund
The United States appointed a single Governor
and Bank; and of the 38 countries that are members of both the
Fund and Bank, 31 have followed the precedent of the United
States and named a single Governor. The Governors of the two
the importance of close coopera
institutions further emphasized
to be
tion between them by selecting the American Governor
Chairman of the Boards of both institutions, and by selecting the
for the United Kingdom, China, France and India to
Governors
of both Boards. The By-laws of both the Fund
be Vice-Chairmen
of the other institution
and Bank provide that a representative
to
without
of the
be
invited
vote, in meetings
may
participate,
and the Executive Directors.
Board of Governors
in which the Fund and Bank have been working
The manner
our
legislation
together gives great promise of the harmony which
to promote. The inaugural meeting was a joint one: all of
hoped
the business of the Fund and Bank was placed before the same
on either the Fund or Bank was
group of men and any action
considered on the basis of the interests of both. It ismy hope that
the success of this joint meeting will be a precedent when the
Governors of the two institutions meet again in September.

AFTER THE SAVANNAHCONFERENCE

631

v
Any discussion of the operation of the World Fund and the
Bank must take note of the special position and responsibility
are located in this
States. The two institutions
of the United
country. We are the largest subscriber to them. The American
is Chairman of the Boards of Governors of the two
Governor
institutions. Some of the high officials of the Fund and Bank are
Americans. Ours is a
of tremendous power and is, there
position
a
of
also
fore,
special responsibility. The faith that other
position
nations have shown in the United States must not be abused for
selfish ends. I know that our people want us to do all in our power
to make the World Fund and Bank truly international
insti
tutions.

The United States is the greatest single economic force in the

entire world. If the world economy is to function, we must import
the high level of balanced
and we must invest. We can maintain
that is
trade and productive
international
foreign investment
our
own
and for the prosperity of the
required for
well-being
world only ifwe have a high level of production and employment.
For it is our level of income that governs our imports and foreign
of world
and these are important determinants
investment;
that the United
economic activity. The greatest contribution
States can make to the peace and prosperity of the world is to
America strong and prosperous and the advocate of justice
keep
in "the council of the nations.
Because of the importance of our policies in the successful oper
ation of the Fund and Bank, Congress established
the National
on International
Council
and
Financial Prob
Advisory
Monetary
to
lems
coordinate the work of the American Governor and the
on the two institutions, and the
American Executive
Directors
of
all
in foreign
of
this
government
policies
agencies
engaged
financial and monetary
transactions. The Council consists of the
the Secretary of State, the Secretary
Secretary of the Treasury,
of Commerce,
the chairman of the Board of Governors
of the
the
the
chairman
and
of
Federal Reserve
Boardfof
System,
Bank. Its structure will facilitate
Trustees of the Export-Import
of the
the highest degree of cooperation between the Government
States and the Fund and Bank. The Secretary of the
United
is ex-officio chairman of the National Advisory Council.
Treasury
also
He is
for the United States on the Boards
the Governor

FOREIGNAFFAIRS

632

of the World Fund and Bank, and chairman of the Boards of

Governors of the two institutions.
The National
Council will have ultimate
Advisory
responsi
on interna
in
the
bility
formulating
policy of the United States
tional financial matters.
it is important
that the
Obviously,
in
the
and
Bank
American
Fund
work
should
representatives
so
National
Council
with
the
that
the
United
closely
Advisory
States will not find itself acting at cross purposes with these two
in every possible way be
institutions. Our own policies must
made to facilitate the attainment of the objectives for which the
?
we have in
Fund and Bank were established
objectives which
common with the United Nations. The National
Advisory Coun
cil is aware of the importance of its work. The policies it has been
out are a
carrying
complete fulfillment of the concept of inter
national

economic

cooperation.

the end, the success of the Fund and Bank will not depend
||In
on the Articles of Agreement,
the by-laws, or the Bretton Woods
on the men who run them.
Act.
It
will
depend
They
Agreements
must be managed by human beings. We cannot expect them to be
free from the ordinary errors to which
the human
completely
mind is subject. But we must ask and insist that the men who
manage the Fund and Bank should be men of vision, imbued with
the high ideals which the two institutions represent. All officials
and members of the staffs of the Fund and Bank must always be
aware of the international character of their duties. They are in
for a world free from war
truth among the trustees of mankind
want.
must
and
They
keep that sacred trust.