Summary: Gottfried Haberler, “Postscript: Reflections on the Balance-of-Payments Aspects of the Energy Crisis”

Haberler’s postscript reopens the balance-of-payments argument of his earlier essays after the oil embargo, production cutbacks, and cartelized price rise had transformed the monetary environment. The piece is deliberately confined: it is not a full account of the energy crisis, nor a study of its industrial consequences, but an inquiry into how a sharp oil-price increase affects exchange rates, current accounts, and the post-Bretton Woods system.

Since the foregoing papers were written (October 1973) there have been major developments affecting the situation in the international monetary arena.

His central claim is that the oil shock creates a large real transfer to oil exporters, but not an inherently insoluble monetary crisis for the industrial countries. Haberler insists on separating the real loss of purchasing power from the payments mechanism through which it is registered. The OECD countries must surrender real resources, but the burden is not large enough to make continued growth impossible.

For the Organization for Economic Cooperation and Development (OECD) countries—that is, the industrial world—alone, this transfer will be equivalent to a unilateral payment, ransom, reparation, or whatever you wish to call it, of something like $50 billion.

The analytical pivot is the distinction between the importing countries as a bloc and the separate national positions inside that bloc. If all industrial oil importers were one economy, Haberler argues, the transfer would be painful but straightforward: consumption and investment would be lower than otherwise, while production could still expand. The complications arise because the oil exporters’ spending and investment will not match each importer’s oil bill. Some countries will run larger deficits, others may be spared, and exchange rates must help distribute the adjustment.

If the oil importers were but a single country, the transfer problem would not be difficult to solve. Fifty billion dollars is a very large sum, but for the combined GNP of the industrial countries it is not a crushing burden.

Haberler is especially concerned to deflate alarmist talk about an automatic world deflation caused by oil exporters accumulating financial claims. Exporters can buy goods, invest abroad, or hold liquid assets; none of these choices mechanically forces importing countries into depression. If oil revenues are not spent, monetary authorities in the importing countries can offset the contractionary effect. Thus the crisis magnifies the need for competent stabilization policy, but it does not abolish policy discretion.

If they keep their money in liquid form (fail to spend it), it is up to monetary management in the importing countries to neutralize a possible deflationary effect.

The essay also rejects the idea that bilateral balance should be restored country by country. Oil exporters may invest disproportionately in dollars, while importing goods from Europe, Japan, or elsewhere. In that case, the United States may receive capital inflows and dollar appreciation even if other countries face heavier oil burdens. Haberler treats such movements not as evidence of disorder but as part of multilateral adjustment. Attempts by deficit countries to force exports through depreciation, or by surplus countries to resist appreciation, risk worsening inflation and obstructing the real transfer.

Because the pattern of new demand is unknowable in advance, Haberler defends floating exchange rates as the least bad institutional setting. The oil shock changes relative prices across industries and countries, but no authority can calculate the correct new parity structure. Floating is therefore not an ideological luxury but a practical response to uncertainty. It allows rates to move while governments monitor intervention and use domestic monetary policy to prevent avoidable inflation or deflation.

The final note on the French float reinforces this conclusion. France’s move away from its anti-floating position illustrates, for Haberler, the impracticality of preaching fixed-rate discipline while refusing its domestic costs. He warns the United States not to resist dollar appreciation if it emerges from market forces and not to answer exchange-rate pressure with commercial retaliation. The postscript’s enduring point is that the oil crisis was a real-resource shock, not a reason to revive rigid parities or protectionism. Its proper monetary lesson is disciplined flexibility: accept the transfer, let exchange rates register changing conditions, neutralize unwanted demand effects, and avoid converting payments anxiety into trade war.