Gottfried Haberler · 1993
Haberler’s chapter interprets the 1976 Jamaica and Manila meetings as the formal ratification of a monetary order that had already emerged after the breakdown of Bretton Woods. The Jamaica amendment did not create floating exchange rates so much as legalize and discipline their use, while also moving the IMF away from gold-centered convertibility and toward surveillance of national policies.
At the conference in Kingston, Jamaica, on 7–8 January 1976, the Interim Committee of the Board of Governors of the International Monetary Fund (IMF) hammered out the Second Amendment to the Articles of Agreement of the IMF.
The argument is historical and institutional. Haberler treats Bretton Woods as a successful but time-bound system whose “adjustable peg” became unstable once inflation differentials, speculative capital movements, and delayed parity changes made fixed rates vulnerable to one-way bets. The shift to floating was therefore not an accidental collapse into disorder but a response to structural changes that made defended parities increasingly implausible.
The conclusion is that widespread floating is here to stay.
A central cause of the old system’s failure was the liberalization of international finance. Capital mobility had supported postwar growth, but it also magnified exchange-rate pressure and made official reserve defenses less credible. Haberler’s point is not that capital mobility was undesirable, but that monetary institutions had to adapt to it.
Similarly, increased capital mobility, a necessary ingredient of the rapid growth of the world economy, which was made possible by the gradual dismantling of exchange control, produced larger swings in the capital balance.
Against critics at Manila, Haberler denies that floating itself caused world inflation. Inflation remains chiefly a domestic monetary-fiscal phenomenon. Floating can transmit depreciation into import prices and can make inflationary policies visible sooner, but it also prevents countries from postponing adjustment through reserve losses, exchange controls, or politically delayed devaluations. Its main virtue is limited policy autonomy: it gives countries more room to choose demand-management policies, though it cannot insulate them from real shocks such as oil-price changes, protectionism, or recessions abroad.
The chapter’s most practical discussion concerns managed floating. Haberler accepts official intervention to smooth disorderly markets, but he sharply distinguishes this from “dirty floating,” meaning exchange practices that mimic controls, distort trade, or conceal balance-of-payments adjustment.
By dirty floating I mean such policies as split exchange markets, multiple exchange rates, import deposit schemes, ‘taxes’ on the purchase of foreign currencies differentiated according to the prospective use of the foreign currency, and the like.
He is skeptical of reference rates, target zones, and schemes that would recreate the speculative weaknesses of par values. The IMF’s post-Jamaica role should therefore be surveillance, not exchange-rate planning: it should discourage manipulation, multiple rates, protectionist devices, and unconditional liquidity creation, while using conditional lending to press countries toward stabilization.
Haberler also redefines the old Bretton Woods triad of adjustment, liquidity, and confidence. Under widespread floating, the notion of a single global reserve shortage loses much of its meaning. Reserves still matter for individual countries, but “world liquidity” is no longer a coherent policy target in the way it appeared under gold-dollar convertibility. The Fund should not treat SDR allocations or quota increases as substitutes for national anti-inflationary discipline.
The closing policy sections criticize pressure on Germany and Japan to inflate in order to reduce surpluses. For Haberler, current-account balances should not dominate domestic policy under floating: surpluses and deficits are linked to capital flows, and if adjustment is needed, exchange-rate movement and liberalization are preferable to inflationary expansion or import restriction. The chapter’s enduring position is a liberal defense of managed but disciplined floating: national responsibility for inflation, IMF oversight against abuse, conditional crisis lending, and resistance to protectionism disguised as monetary management.
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