Jacques Rueff’s introductory report for the May 1949 Congress of French-speaking Economists argues that postwar payments disequilibria reveal the distortion of monetary adjustment mechanisms, not their obsolescence. Its seven sections move from historical evidence through monetary theory to a critique of inflation, Marshall aid arrangements, and the International Monetary Fund, before proposing a restoration of convertibility. The central distinction is between financing an external deficit and activating the forces that correct it: institutions can supply foreign currency while perpetuating the imbalance that makes assistance necessary.
Rueff begins by making international equilibrium seem improbable. Countless independent decisions to consume, invest, and transfer resources generate international claims and liabilities without regard for their aggregate balance.
Le principal caractère d'une balance des comptes équilibrée, c'est son extrême improbabilité.
English translation: The principal characteristic of a balanced balance of payments is its extreme improbability.
If approximate equilibrium nevertheless persisted under earlier monetary systems, Rueff reasons, it must have been produced by an effective mechanism. His question is therefore not whether adjustment existed, but how powerfully and rapidly it operated. This framing turns the historical record into a challenge to governments that treat balancing international payments as their own administrative task.
The evidence concerns the responsiveness of merchandise trade to other international transactions. Countries receiving investment income and other invisible earnings normally imported more than they exported; debtor countries exhibited the reverse pattern. France’s payment of the Franco-Prussian war indemnity coincided with exceptional trade surpluses. After Allied credits ceased in 1919, its trade deficit contracted chiefly through expanding exports, rather than declining imports. Later French capital flight, repatriation, and German reparations likewise accompanied changes in trade balances broadly consistent with adjustment theory. Rueff acknowledges exceptions and calls the evidence a strong presumption rather than an absolute verification.
Germany supplies his most pointed intervention in the transfer controversy with Keynes. Foreign lending initially supported a trade deficit; the cessation of lending and subsequent capital flight coincided with large surpluses. Rueff reads these movements as evidence against a comparatively fixed “natural” export capacity. His qualification is crucial: transfers must be financed through taxation or borrowing, not inflation. The argument concerns the responsiveness of trade under specified monetary conditions, not an unconditional ability to transfer any amount.
The theoretical sections explain those conditions. With inconvertible money, exchange depreciation raises foreign prices in domestic currency, encouraging exports and discouraging imports. Under convertibility, settling an external deficit through gold withdrawals absorbs domestic purchasing power. In Rueff’s account, the resulting excess of supply over demand lowers domestic prices; associated short-term interest-rate movements reinforce adjustment. He distinguishes this income-and-expenditure mechanism from a purely quantity-theoretic explanation.
De faibles variations de prix relatifs doivent donc être suffisantes pour provoquer de profondes modifications des balances commerciales.
English translation: Small changes in relative prices must therefore be sufficient to bring about profound changes in trade balances.
The passage states his answer to economic rigidity: a modest price movement can reverse a trading advantage once it crosses transport, insurance, and tariff costs. Since the corrective pressure intensifies while disequilibrium persists, Rueff regards an unobstructed mechanism as both effective and sensitive. This is the report’s strongest theoretical claim, and the foundation of its policy confidence.
The fifth section explains why postwar institutions fail to deliver that result. Monetary financing of budget deficits replenishes purchasing power that external settlement would otherwise absorb. Relative inflation rates then shape bilateral balances: Rueff interprets dollar scarcity as the predictable consequence of greater inflation outside the United States. Monetary forces remain powerful, but domestic fiscal conditions redirect them away from international equilibrium.
He extends the same reasoning to Marshall aid and IMF operations. Selling aid goods domestically collects purchasing power, but releasing the counterpart funds for government expenditure restores it, cancelling the corrective contraction. Similarly, he argues that the IMF’s placement of national-currency receipts in Treasury instruments makes those resources available for renewed expenditure rather than absorbing them.
Ainsi administré, le Fonds monétaire a toutes les apparences d'un système de convertibilité, mais il n'en a aucune des vertus régulatrices.
English translation: Administered in this way, the Monetary Fund has all the appearances of a system of convertibility, but none of its regulatory virtues.
Rueff’s objection is thus to the monetary consequences of the Fund’s administration: access to foreign exchange does not itself reproduce convertibility’s adjustment mechanism. Even fiscal balance would not suffice if international financing continued to neutralize that mechanism.
The final sections sharpen the political alternative. Without automatic adjustment, equilibrium requires deliberate planning, yet the IMF cannot determine national prices, wages, taxation, and productive structures, while its recommendations lack coercive force. Western governments cannot comprehensively allocate production for export, and subsidies are costly; planning consequently tends toward import restriction and autarky. Britain’s experience illustrates his distinction between improved aggregate balance through purchasing-power restraint and unresolved geographical imbalances.
Si donc on veut vraiment que cesse le désordre européen, il n'est qu'une solution : rétablir le plus tôt possible, dans le plus grand nombre possible de pays, la convertibilité monétaire.
English translation: If, then, one truly wants European disorder to cease, there is only one solution: to restore monetary convertibility as soon as possible, in as many countries as possible.
Rueff concludes that policymakers have mistaken an institutionally produced rigidity for a permanent economic condition. His constructive proposal combines fiscal balance, economic rehabilitation, appropriate parities, and rebuilt central-bank reserves. Marshall assistance offers an unusual opportunity to purchase gold for those reserves, conditional on domestic financial reform. Gold alone is insufficient: it must complete a stabilization programme. The report’s lasting significance lies in its insistence that international liquidity provision and durable external adjustment are different achievements—and that aid should restore the latter rather than indefinitely substitute for it.
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