1930s AD - Decade

American Journal of Economics and Sociology, The,  July, 1993  by Rodney J. Morrison

• E-mail
• Print
• Link

US participation in the World Economic Conference and the war debts were contentious matters during the presidential succession of 1932-33. The Roosevelt administration wanted to avoid any foreign policy agreements that might jeopardize the New Deal, then in its formative stages. It was thought that American involvement in the Conference would bind the country to the gold standard, thereby constraining New Deal monetary policy, and that Conference participants would demand concessions on debts and tariffs.(9)

By Inauguration Day, March 4, 1933, the international economy was in a chaotic state. More than thirty countries had abandoned gold; exchange restrictions were widespread; tariff and non-tariff barriers were commonplace; and world trade was in serious disarray. Continued adherence to the gold standard by the United States was one of the few islands of stability left in this economic maelstrom. This changed in a day. Immediately upon assuming office, President Roosevelt declared a bank holiday and banned gold exports, except when sanctioned by federal license. Then, in April, he severed the link between the dollar and gold by announcing that the United States would no longer issue gold export licenses. At the same time, Roosevelt revealed his support for the Thomas Amendment, legislation giving him authority to issue up to $3 billion in greenbacks, remonetize silver, and, most significantly, reduce by as much as fifty percent the gold content of the dollar.

III

The London Monetary and Economic Conference

IN THE UNITED STATES what the London Conference might achieve was a matter of some discussion. Those who favored international cooperation were hopeful because of Roosevelt's efforts, in the spring of 1933, to consult with the governments of almost every country that would attend the Conference. But those who thought the President would resist foreign designs were equally sanguine because of something he had declared in his inaugural address: "Our international trade relations," he noted, "though vastly important, are in point of time and necessity secondary to the establishment of a sound national economy. I favor as a practical policy the putting of first things first. I shall spare no effort to restore world trade by international economic readjustment, but the emergency at home cannot wait on that accomplishment."(10)

Roosevelt's policy of putting first things first was not the dominant view in Europe. There it was thought that the United States would have to take a position of leadership if the Conference were to succeed, because "America is probably in a better position to give a lead towards sanity in commercial policy. . . ." There were calls for the U.S. to cut its tariffs, stabilize the dollar, and reduce or cancel its claims on its debtors.(11) For Europeans, the major problem was how to make the United States, "which has been made the world's greatest creditor . . . shoulder a creditor's responsibilities."(12)

Roosevelt's Secretary of State, Cordell Hull, led the U.S. delegation to the Conference. The President conveyed his wishes to Hull in a series of resolutions aimed at six major topics: tariffs; price levels; measures to lay the groundwork for an "adequate and enduring international monetary standard"; non-tariff barriers to trade; foreign exchange restrictions; and commodity controls. The President ordered Hull's group not to enter into any Conference discussions regarding debts, disarmament, or, most significantly, currency stabilization.(13) Instead, Roosevelt directed Oliver Sprague of the Treasury Department to conduct, outside the Conference, tripartite currency talks with British and French officials. The agreement to hold such discussions had been reached by these countries in Washington in May 1933.