Courtesy Reuters

Jamaica, or the Non-Reform of the International Monetary System

"ALL is well that ends," Treasury Secretary William Simon said jokingly at the cocktail party that followed the conclusion of the recent Jamaica Conference. It would indeed be hard to give in a few syllables a more discerning judgment about the long drawn-out international monetary negotiations of the past four to five years, since the suspension of the convertibility of the dollar into gold in August 1971, and the resulting collapse of the system of par values or fixed exchange rates which had existed since 1944.

The original purpose of the negotiations had been to bring about a full-fledged, comprehensive reform of the international monetary system. But this attempt was given up in January 1974 after, but as we shall see not mainly because of, the quadrupling of the price of oil. In its stead some "interim arrangements" were to be implemented. It took another two years of negotiations to reach final agreement at Jamaica on these interim arrangements, even though they consist mainly, though not exclusively, of the legalization of the international monetary practices which had evolved in the meantime. The Secretary's joke thus well expressed the feelings of most of those present under the mango trees.

In what follows, I propose to deal in turn with (1) the tensions that developed within the Bretton Woods system and why it was allowed to break down; (2) the reform effort that ensued and why it failed; (3) the Jamaica agreement and its significance; (4) where we should go from here, and how.*

II

Since the Second World War, international monetary relations have been guided by the Agreements reached at Bretton Woods in 1944. Those agreements created the International Monetary Fund (IMF), which was to supervise a new code of conduct in international monetary relations and to help countries in difficulties to continue to adhere to this code by granting them temporary financial assistance. They also created, more or less as an afterthought, the International Bank for Reconstruction and Development, more commonly known as the World Bank which, over the

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