The Great Depression in the Weimar Republic and its Preconditions - A View on the National, State, and Local Level

Jürgen Nautz

This essay analyzes the causes for the downfall of the Weimar Republic focusing on the years from 1929 to 1933. There are many theories that try to explain the fall of the Weimar Republic, but the two main causes that this paper discusses are whether it failed because of the flaws in its Constitution, or whether the Weimar Republic collapsed because of external circumstances and individual political choices. This essay is structured in a way, where there is firstly a brief introduction, then the two theories are presented individually and finally in the conclusion they are compared. In the end, It is concluded that even though some constitutional mistakes had a great impact in the collapse of the Weimar Republic, the main cause of its decay are external events and the political decisions made during the final years.

The Weimar Republic was the coalition of political forces resulting from the post-Versailles compromise that became the mainstay of the new Republic. It came into effect on November 9, 1918 when Friedrich Ebert, leader of the Majority Social Democrats, succeeded Prince Maximilian of Baden as German Chancellor, formed a government of majority Socialists and Independent Socialists. The Weimar years are extremely crucial in our understanding and construction of German history. Weimar deserves proper analysis in its own standing and in terms of its own accomplishments and mistakes. This essay aims at understanding why the Weimar model, though heavenly praised, failed to deliver its promises. The paper argues that the Weimar Republic has been interpreted as a prelude to the Nazi epoch or as an interlude between imperial and Hitlerite Germany. In spite of reforms brought about, the downturn of the Weimar Republic was heavily influenced by the fallacy of Versailles, the economic disasters following the French occupation of the Ruhr (1923) and the subsequent rise of the National Socialist ideology. It follows that Weimar, as the heir of political liberalism of 1848 which, while inundated by the holocaust of the 1933 Nazi Revolution, is the area par excellence where the future development of a democratic Germany could be unveiled. The conclusion arrived at in this analysis suggests that the fourteen years of the Weimar Republic represents but a brief episode in a political history basically at variance with the trends current during these years. In other words, the success of post-Nazi Germany was mainly based on both the new ideological orientations and its experiences from the shortcomings of Weimar. The essay discusses the impacts of the Versailles Peace treaty, the constitutional " imperialism, " totalitarism, mass insurrections and economic disintegration, as evidenced by hyperinflation and unemployment.

This essay interrogates the phantasmatic return of the Weimar Republic in the distinctive ‘rhetoric of crisis’ of post-2008 European economic crisis. I observe this ‘return’ in light of the peculiar temporality that the Weimar image calls forth: a projective temporality, entailing a tension between the present, and an imminent future: either one of forthcoming collapse, or potential revolution. I address the different politics of use of 1920s Weimar both in conservative political discourses, and in artistic practice.

SHAPING AND RESHAPING THE GLOBAL MONETARY ORDER DURING THE INTERWAR PERIOD AND BEYOND The research work is supported by the Hellenic Foundation for Research and Innovation (H.F.R.I.) under the “First Call for H.F.R.I. Research Projects to support Faculty members and Researchers and the procurement of high-costνresearch equipment grant” (Project Number: 1310 ). History and Historical Theory /3 Series Editor: Catherine P. Brégianni Α΄ edition: Athens, April 2023 Shaping and Reshaping the Global Monetary Order during the Interwar Period and beyond Local Actors in-between the International Institutions Editors: Catherine P. Brégianni and Roser Cussό Alfeios Editions Char. Trikoupi 22, 106 79, Athens (+30)2103623092 e-mail: info@alfeiosbooks.com www.alfeiosbooks.com Research Project Transnational Monetary & Economic Alternatives in the Interwar Politics The 30s Greek Crisis in European Context, Academy of Athens Research Committee Hellenic Foundation for Research and Foundation ISBN: 978-960-6679-72-5 Digital volume with Open access. uRl: https://transmonea.academyofathens.gr/index.php/en/publications/ monograph-and-collective-volumes https://transmonea.academyofathens.gr/index.php/en/ Transnational Monetary & Economic Alternatives in the Interwar Politics The 30s Greek Crisis in European Context SHAPING AND RESHAPING THE GLOBAL MONETARY ORDER DURING THE INTERWAR PERIOD AND BEYOND Local Actors in-between the International Institutions Edited by Catherine P. Brégianni and Roser Cussό Introduction by C. Brégianni ALfEIOS ATHENS 2023 Table of Contents Tables and Figures ........................................................................................................ 12 Introduction Researching the Economy through Innovative Methodologies - From Local to Global, from Global to Local ....................................... 15 Catherine P. Brégianni Part I Financial “engineering” during the Interwar Period............. 23 1 Forced Population Exchange, Spatial Conceptions and the Agency of International Institutions - LoN, Refugee Settlement Commission and Banking Networks in Northern Greece during the Interwar Period .............................................................. Ι. Methodology: Historiographical Aspects Regarding Greek Personal and Technical Networks .......................................................................................... II. Space and Technical Networks .............................................................................. III. Organization of Space and Social Characteristics of Banking Mechanisms .................................................................................................................... Precisions on the Economic Context: Notes on the Costs of Settling the Refugees ........................................................................................................................ IV. Network Morphology .................................................................................................. The Geography of the Banking Establishments .............................................. The Types of Banking Establishments.................................................................... Social Interaction: The Founding of Banking Establishments ................... V. Economic Networks and Social Networks........................................................ Appendices....................................................................................................................... Catherine P. Brégianni 25 26 30 31 40 44 44 57 58 60 64 8 Table of Contents 2 Modern State Building and Transnational Expertise - The League of Nations Advising for Turkey’s Statistical Internationalization (1926-1927) ................................................................. I. The Allied Meetings as Negotiation Tables for Framing “International Co-operation in Statistics”......................................................... II. Importing International Expertise in the Reorganization of State Statistics in Turkey .................................................................................... III. An Invitation for Technical Cooperation with Regard to Turkish Data: Expert Connections and Concepts of a World Economy ........................... IV. Commitment to a Universal Project: Ambitions and Deficiencies ........ V. Sharing State Documents: Turkey’s Statistical Reform and Claim for Modernity ................................................................................................................. VI. Transnational Actors and Instruments of Technical Assistance: Redefining Cooperation in Terms of Advising ................................................ VII. Concluding Remarks ................................................................................................... Appendices....................................................................................................................... 71 75 82 86 89 91 97 101 103 Aykiz Dogan 3 Challenging Modernity - International Agrarianism in Interwar Eastern Europe .............................................................................. I. The Politics and the Ideology of the International Agrarianism ........... II. The Obstacles to an International Agrarian Coalition................................ III. Conclusion: Political Features of Agrarianism .............................................. 109 110 114 126 Michalis Sarras 4 International Quantification and Liberalism - The early Statistical Activities of the League of Nations’ Economic and financial Organization .............................................................................. 133 I. Knowledge and Power within the LoN: a New Approach to Global Interdependence? ......................................................................................................... 133 II. Sparsity of the Literature on early EFO Statistical Activity and Political Innovation ..................................................................................................... 137 A few Predecessors to Quantification by the LoN............................................. 137 Some Studies on EFO’s Statistics .............................................................................. 139 III. The Emergence of International Quantification: “Compare and Globalize” ........................................................................................... 143 Political versus Technical Activities? ..................................................................... 143 The Rapid Development of Statistics ...................................................................... 145 Table of Contents 9 Comparing as the Foundation of Quantification .............................................. 151 IV. Conclusions: IOs and Technical Activity ........................................................... 155 Roser Cussό Part II The Pivotal Role of the Great Depression ....................................... 159 5 The Great Depression in the Weimar Republic and its Preconditions - A View on the National, State, and Local Level .......................................................................................................... Ι. Between Devaluation and Great Slump ............................................................ II. The Great Slump .......................................................................................................... III. Triggers of the Crisis: Viewpoints ......................................................................... 161 162 175 185 Jürgen Nautz 6 The Interwar Depression and the Greek Economy - Lessons Learned and Not Learned ................................................................................. I. Interconnected Economies and the Transmission of Crisis ..................... II. The Fundamentals of the Economy were not as Sound as Thought ... III. The Interwar Depression and Greece .................................................................. IV. The Movement of Key Variables............................................................................ V. Summary and Conclusions ...................................................................................... 189 191 194 198 202 208 Lefteris Tsoulfidis Part III Capital Flaws in the Long Run................................................................... 213 7 From the State Default to War Conflict (1897-1912) - Trends in the Greek Financial Sector .......................................................................... I. National Accounts and Public Expenditure ..................................................... II. The Public Debt Service ............................................................................................. III. Concluding Remarks ................................................................................................... Annex ................................................................................................................................. Antonis A. Antoniou 215 216 224 228 229 10 Table of Contents 8 Debt Crisis and Structural Reforms in the Eurozone - The International Monetary Fund (IMF) in the Greek Program and the Implications for Transatlantic Relations ....... 231 Ι. The Background ............................................................................................................ 231 ΙΙ. IMF’s Participation in the Greek Program ........................................................ 233 The Greek Government’s Policy over IMF’s Implication in the Greek rescue Program. ................................................................................................................. 234 The Greek Program........................................................................................................... 236 ΙΙΙ. A Critique of Neo-liberalism and the Divergence of Views between the IMF and the Europeans on the Greek Debt.............................................. 241 IV. The Greek Program and its Implications for Transatlantic Relations .. 242 Sotiris Rizas I. II. III. IV. V. VI. 9 London Agreement on German External Debts (1953) - The Actors and the Consequences............................................................. Facts and Background ................................................................................................ The Actors and the Negotiations ......................................................................... The Agreement .............................................................................................................. The Consequences ........................................................................................................ Then and now: a Comparison to the Greek-debt-case of 2010 ............... Concluding Remarks .................................................................................................. 247 249 252 254 257 258 261 Dimitrios K. Apostolopoulos I. 10 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments - The Limited Role of Bretton Woods International Economic Institutions from the 1960s to the 1970s.................................................................................................................. 263 Averting Dollar Expansion in Trade and Payments: Financing Development Assistance and Fighting the Decline of the Dollar in the 1960s .................................................................................................................... 270 Funding the IMF Balance of Payments Assistance and IBRD Development Policies, and U.S. Objective of Stabilising the Dollar in the 1960s. An Ill-functioning Strategy .................................................................. 270 U.S. Policies to Stem the Decline of the Dollar and to Stabilize International Payments in the early 1960s ........................................................ 274 Financing the Bretton Woods Institutions in the Private Capital Markets and Closer U.S. Attention to Currency Stability ............................. 286 Table of Contents II. Bringing the Bretton Woods Institutions to Center Stage in the Fight to Reverse the International Payments Imbalances in the 1970s. A Short-Lived route .................................................................................................... 292 Export Oriented Policy, the Middle East, and Support for the Dollar in Exchange Markets ...................................................................................................... 292 Short-term Capital Markets, the Stabilization of World Trade and Payments, and the Dollar: the Role of the IMF and the IBRD in the 1970s ..................................................................................................................... 295 Bypassing the Bretton Woods Institutions and U.S. Banks: OPEC Finance and Direct Lending to Developing Countries........................................... 302 Resorting once more to the Bretton Woods Institutions: the Carter Administration Response to OPEC Lending Policies ............................................. 304 III. Concluding Remarks ................................................................................................... 308 Simone Selva Epilogue International Cooperation and Expertise on Statistics - A Challenge for Global History ................................................................... 311 Roser Cussó Authors CV .................................................................................................................... 315 Index of Persons ....................................................................................................... 321 11 12 Tables and Figures Tables 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 4.1 5.1 5.2 5.3 5.4 5.5 5.6 5.7 Capital of the ABG at its Foundation (1929), in drachmas Cultivated Land in Greece (census of 1929) Short Term Agricultural Credits from the ABG (in market drachmas) Agricultural Loans under Rural Collateral from the Agricultural Bank (in market drachmas) Population in Greece Foundation of the Bank’ Establishments per Year Foundation of the Bank’s Establishments per Region and per Year Population of the Hellenic Macedonia [1912], 1926 Network Formation of the Agricultural Bank of Greece, during the 1930s Indices of Production, Net Imports or Exports and Supply per Capita. Quinquennial Averages: 1909-13=100 Overseas Imports into Continental Europe Effect of Agricultural Reforms, up to 1930 Price Index of Grains, East Central Europe, 1930-33 (1929=100) Agricultural Prices/ Industrial Prices in Rumania “Price Scissors” Wholesale price indexes in Yugoslavia (1926=100) Wholesale Prices in Bulgaria (1929=100) Foreign Trade in millions of Swiss Francs Foreign Trade, 1928-30, 1932 and 1934, Exports (in million Swiss francs) Exports of Foodstuffs and Raw Tobacco (in millions of Swiss francs) Share of Greater Germany (including Austria and Czecho-Slovakia) in Foreign Trade of South-Eastern European Countries (1938) Main Activities of the LoN’s EFO, 1919-1931 Hyperinflation in the Weimar Republic, July 1922-December 1923. Value of 1 Gold Mark from July 1922 to December 1923 (in 1,000 paper marks) German Reich: Economic Sectors Value (added in billion euros) German Reich: Economic Sectors Value (added in percent) Gross National Product and Gross Domestic Product at 1913 Market Prices (RM) Gross Domestic Product in Hesse 1913-1936 Net Domestic Product in Hesse 1913-1936 Number of Unemployed, Hesse 1921-1938 (annual averages) German Commercial Banks: Relation Capital and Reserves to Balance Sheet Totals 33 35 37 38 39 48 53 64 65 116 117 118 119 119 120 120 121 122 128 130 131 146 162 164 164 166 168 168 170 177 Tables and Figures 5.8 5.9 5.10 5.11 5.12 6.1 6.2 7.1 7.2 7.3 7.4 7.5 7.6 7.7. 10.1 10.2 13 Development of Consumer Prices, Raw Material Prices, Agricultural and Industrial Commodity Prices in Hesse Number of Unemployed, Hesse 1921-1938 (annual averages) City of Kassel: Basic data Number of Unemployed in Kassel, 1929-1932 (in absolute numbers) Size of the workforce, Henschel and Wintershall AG, 1928-1938 Rate of Unemployment, Greece 1928-1935 Index of Industrial Production (%) Allocation of GDP by Sector of Production Evolution of Revenue and GDP Tax Revenue Allocation Allocation of Public Expenditure Public Revenues from Loan Issue and other non-related to Loans Public Revenues Debt Outflows Exports to Imports Percentages 1851-1930 U.S. Gold Stocks (in millions of dollars) Exchange Rate Movements 1970–1978 (percentage change) 182 183 184 184 185 204 207 218 219 221 223 224 225 227 290 295 Figures 4.1 5.1 5.2 5.3 5.4 5.5 5.6 5.7 6.1 6.2 6.3 6.4 6.5 6.6 7.1 A Fragment of Table 74 from the 1926 International Statistical Yearbook GNP Index (1913 Market Prices) and Industrial Production Index (borders of 1928, after 1934 incl. Saarland; 1913=100) Number of Unemployed, Germany, 1926-1935 Revenues, Expenditures and Debt of the German Reich in the Fiscal Years 1926/27-1932/33 (Millions Reichsmarks) Reichsbank: Gold and Foreign Exchange Holdings, incl. Foreign Deposits, 1913-1945 Number of Laws and Emergency Decrees issued in 1930, 1931, and 1932 Decline of Prices and Production in Selected European Countries, 1929- 1934 Number of Unemployed, Germany, 1926-1935 The Rate of Profit and Interest Rate, USA 1896-1939 Fundamentals Matter: Net Profits (Billions $ 1929), 1896-1939 Normalized Price Indices of the US and Greek Economies 1896-1939 GDP ($2011) and Per Capita GDP ($2011), Greece 1896-1939 Ratio of Government Revenues to Government Expenditures Public Debt to GDP Ratio Reserve Currencies and Drachma 153 167 169 172 174 179 180 181 194 196 199 203 205 206 226 CATHERINE P. BRéGIANNI Research Director, Modern Greek History Research Centre Academy of Athens INTRODUCTION RESEARCHING THE ECONOMY THROUGH INNOVATIVE METHODOLOGIES FROM LOCAL TO GLOBAL, FROM GLOBAL TO LOCAL The present volume includes contributions on the agency of international organizations by invited researchers as well as combined results of research carried out within the framework of the Research Project “Transnational Monetary and Economic Alternatives in Interwar Politics. The 1930s Greek Crisis in the European ContextContext” [TransMonEA] held in the Academy of Athens and funded by the Hellenic Foundation for Research and Innovation. Some of this research has already been disseminated through seminars held by the Research Project1 as well as through the conference Acteurs du développement économique et financier entre global et local. Un aperçu par le biais des réseaux personnels, durant l'entre-deux-guerres et au-delà2 that was co-organized with the Research Center D&S (university of Paris I Pantheon Sorbonne, IRD) –partner of the same Project– and the conference Monetary Integration and Disintegration in the Interwar Europe: The Impact of the Great Depression from Institutional Agency to Local Conditions, held in the Academy of Athens.3 The contribution of Jürgen Nautz and partially the contributions of Michalis Sarras and Catherine Brégianni. Cf. for further details about the relative seminars, https://transmonea.academyofathens.gr/index.php/en/dissemination/seminars/first-thematiccircle & https://transmonea.academyofathens.gr/index.php/en/dissemination/seminars/secondthematic-circle 1 2 The contributions of Aykiz Dogan, Roser Cussó and Dimitris Apostolopoulos. The contribution of Lefteris Tsoulfidis and partially the contribution of Antonis Antoniou. See for the mentioned scientific events: https://transmonea.academyofathens.gr/index.php/ 3 16 Catherine P. Brégianni Thus, this edition owes a lot not only to the authors but also to all scholars who, in their capacity as speakers or audience members in the conferences and seminars held in the framework of the Research Project, supported this effort to provide a more complex and elaborate analysis of the historical reality.* This analysis encompasses research on sources and often reviews the conceptual categories governing their interpretation. As it is clear from the contributions in this edition, the interaction between the global and the local spheres, i.e., the integration of national case studies into global capital flows, is at the forefront. The role of the national integration into the structure of global financial trends is also prominent, as it is the opposite multi-polarizing direction. In current scientific debates, historiography is often presented as a discipline that does not pursue objectivity and is therefore not interested in the method used to approach it. The narrative form is often privileged. In social sciences, where objectivity is acknowledged to be “constructed”, scientific work is nonetheless undertaken to develop sound theories and concepts. Thus, even if there is no such a thing as a one and only reality, there are variations of “objective reality” depending on the subject of each event, be it social or political. Social scientists hence do propose, “objective” accounts on the formulation of their research hypotheses and results. With this approach in mind, there is a new kind of objectivity before the interested observer, which is constructed by researchers’ choices, but at the same time founded through the use of scientific methods. It is then necessary to handle historiographical issues scientifically and not simply provide a narrative of them. This “new sort of objectivity” is apparently not new. In fact, over the past few decades, this concept was employed in international historiography as a methodological response to the post-modern approach that was prevalent until the 1990s and to some extent until today.4 Documental and archival sources renewed analysis and criticism play a crucial role in this intellectual challenge. Indeed, when the light of research falls on the interpretation of the sources or on the actors and practices, then the social and historical subjects are better identified. This means that analysis is not replaced by “unique individuals” or by “exclusive narratives”. As an approach from the point of view of the economic structures, the political and social contexts are thus taken into account in conjunction with the agency of en/dissemination/conferences * Furthermore, I am especially grateful to Ada Katsila, Elsie Gkaliata, MSc. Giannis Papapostolou, Dr. Michalis Sarras for their assistance in editing this volume. Theofanis Salappas provided technical support to the implementation of the dissemination activities. 4 Cf. Roger Chartier, Au bord de la falaise. L'histoire entre certitudes et inquiétude, Paris, Albin Michel, 1998, passim. Introduction - Researching the Economy through Innovative Methodologies 17 institutions. Indeed, the research hypothesis concerning the decision-making networks of the international financial institutions broadens the perspective through the analysis of the social actors at the local level and uses a multiscale approach. It also analyses the intertwining between the economic structures and the function of institutions, which should be investigated, as to the extent that these interconnections have provoked deep changes and had economic and social effects in the local level.5 This kind of objectivity is illustrated as well by the economic data analysis, even if (or purely because) the interpretation of serial data is also subject to different versions of reality or each researcher’s selection of questions6 regarding quantitative data. Of course, the selection of the working hypotheses by the historian is affected by elements of the present, which are shaped on the basis of specific criteria; those are strongly correlated to the historian’s social status. They are also subjected to the “authority” of time. Historians may govern time, but they are also its captives. The thorough representation of historical understanding along with the causality between historical events depend on the questions raised by historians toward their sources. Quantitative data analysis falls within this approach. The selection of research hypothesis is, therefore, crucial for the analysis of economic or statistical data as it can greatly impact the conclusions drawn regarding the economy in question. Despite these restrictions regarding quantitative data approaches, economic history can help one find elements of objectivity that lead to a more realistic analysis of the social conditions of the era under examination. Currency is a relatively objective parameter, especially for examining earlier eras when money was not only a unit of account, but also had intrinsic value, meaning a content in precious metal with an institutionally defined value. For instance, if the Greek or German currency depreciation during the 1920s and 1930s is not interpreted properly, instruments that would otherwise help the historian interpret the constant political crises or society’s mistrust of the state governments during the interwar period will be missing. Those were the major methodological principles of TransMonEA Sessions in two international conferences: Financial Expertise and Monetary Order as Societal and Individual Experience. Global Actors and Local Players (XIXe c.-XXe c.), organized by C. Brégianni, XIX World Economic History Congress, WEHC - Paris School of Economics, 2022 & The Great Depression and the Rural World in South-Eastern Europe; Evaluating and Representing the Agrarian Change, Sessions A & B, organized by C. Brégianni, International Conference Rural History 2022, university of uppsala. 5 As Raymond Aron wrote, historian choses freely his questions as regards historical analysis. Raymond Aron, Dimensions de la conscience historique, Paris, Plon, 1961, p. 19. 6 18 Catherine P. Brégianni Perhaps this aspect of objectivity regarding the use of historical interpretations made economic history less popular in the 1990s, when the selective “end of history” became prominent. On a historiographical level, this trend was made obvious with the linguistic turn7 in history and its focus on synchronic anthropological or purely cultural approaches. Such turn confirmed that the further globalization expands, the more human knowledge about things becomes fragmented since not accompanied by the analysis of social change and content. However, the global financial crisis of 2008 has once again partially sparked the interest of social scientists and historians in economic history.8 The crisis is still in progress despite its more complex nature in light of the global health crisis, the ongoing geopolitical crisis and the related policies adopted to manage them. It has become obvious that innovative research on economic crises of the past and particularly on the Great Depression could cull relevant results and shed light on the current crisis. Indeed, comparisons between the Great Depression and the financial crisis of 2008 are a risky undertaking as the mechanisms of globalized money and capital flows are currently much more specialized and sophisticated than they were in the interwar years.9 However, the renewed interest in the Great Depression is consolidating an interesting field which favors new approaches to earlier phenomena, such as that based on asymmetrical economic development or on the role of international instruments such as global statistics. One could also argue that the pandemic has led to increased interest in the founding, expansion, and processing of international relations while demonstrating the need for more comprehensive policies addressing global and globalized issues. Such phenomena have occurred with accelerating frequency, all the while they have been and will be called “work in progress”. An example of political control of the social and economic sphere as regards the health issues is that in the interwar years, various health committees developed global policies within the framework of international organizations as a result of the demographic changes caused by the First World War. After the World War II, these committees turned into international health institutions. Meaning the valorization of the text as the real content of the historical reality. According to this approach, language not only refers to the historical reality, but also it creates it. 7 Cf. Barry Eichengreen, “Economic History and Economic Policy”, The Journal of Economic History, 72/2 (2012), pp. 289-307. 8 9 Cf. Dani Rodrik, The Globalization Paradox. Why Global Markets, States, and Democracy Can't Coexist, OUP, 2012, passim. Introduction - Researching the Economy through Innovative Methodologies 19 The operation of these international institutions in the interwar years paved the way for the postwar world10 as for the first time there were internationally quantifiable criteria defining the level of prosperity of the population, leading as well to the development of statistics and statistical tools in the operations of the league of Nations.11 In particular, the connection between the progress of humankind and the economy as well as the development of market mechanisms required a relevant techno-economic apparatus on a global and transnational levels; these requirements led to the establishment of a series of committees focused on economics, such as the Economic Committee, the Committee of Statistical Experts, the International Loan Contracts Committee and first and foremost, the Financial Committee. The analysis of the knowledge production by these entities implies a macro -history of the basic concepts under examination (like the qualities of money, credit and debt in longue durée),12 or rather a symbolic archive of economic technical knowledge. As noted above, it is the market economy, especially in its advanced phases, that generates the dissemination of financial expertise and the attempted unification of monetary circuits in order to sustain free trade and transnational entrepreneurial activity. The institutionalization of monetary zones and the resulting globalization of monetary systems (such as the Gold Exchange Standard) was also expressed through ideological procedures such as the standardization of the purely numismatic models, i.e., the uniform visual nature of money or the diffusion of consumer standards.13 Nevertheless, the transfer of financial expertise is also a common practice that generates technical and institutional innovation at a local level, through the agency of international organizations. An eloquent example of the interaction between the global and the local is the agency of the Financial Committee, being an executive and advisory body of the League of Nations. In fact, the Committee implemented decisions made during International 10 Cf. the contributions of S. Rizas, D. Apostolopoulos and S. Selva in this volume. Cf. on the role of statistics within the framework of globalization, in R. Cussó’s contribution below. 11 Cf. the contribution of A. Antoniou, in this volume. E. Prunaux, “Economic actors in Revolutionary and Post-Revolutionary Periods: Measuring the economic and monetary integration of France at the beginning of the 19th century”, paper presented in the Session Financial Expertise and Monetary Order as Societal and Individual Experience. Global Actors and Local Players (XIXe c.-XXe c.), op. cit. 12 C. Brégianni, “Monetary Mechanisms and Numismatic Representations in the Era of the First Globalization: The Greek paradigm of the 19th Century”, in G. Depeyrot, C. Brégianni, M. Kovalchuk (eds.), Three Conferences on International Monetary History, Moneta, Wetteren, 2013, pp. 3-42. 13 20 Catherine P. Brégianni Monetary Conferences in the 1920s and early 1930s regarding the regulation of the international monetary and banking system, and the global economy in general. According to the founding decision, the institutional role of the Financial Committee was the provision of expertise and consultancy not only for the bodies of the League of Nations but also for individual governments, if applicable. This one of the responsibilities in the case of Greece or Bulgaria, for instance. As far as Greece was concerned, the Financial Committee was an important agent in shaping its central economic policy from 1924 to 1931. This was mostly due to the two international loans contracted with the Greek State under the auspices of the league of Nations. These loans were aimed at the settlement of refugees and the completion of the public works in progress. Furthermore, the specific terms for the issuance of the above-mentioned loans were subject to negotiations with the Financial Committee. In these negotiations representatives of the Greek government also participated, considered in the framework of the present type of analysis as local actors. On the one hand, the comparative approach of this volume is also essential for the transition of research topics from the local to the global. This shift is facilitated through the research of document archival sources (correspondence, agendas, minutes) of international conferences and transnational special meetings during the interwar and postwar eras. These sources record the transition from the economic liberalism of the 1920s and the regulation of the economic and mostly monetary collaboration during these years by a transnational network, to the economic protectionism of the 1930s in light of the global recession. Financial tools related to globalization have been developed in the postwar years, as it is demonstrated by the relevant contributions in this volume. On the other hand, the effects of the implementation of global policies on the management or rather the administration of the economy on a local level are also studied through microanalysis: The function of international organizations can be elucidated by means of microanalysis. These organizations have provided technical economic assistance and have acted as generators of local phenomena, institutions, and economic behaviors. As far as the study of local phenomena on a social and economic level is concerned, it should be noted that local or regional history emerges as a valuable tool for the analysis of the ways and extent of implementation of globally induced national policies at a micro-level. In other words, the analysis of local institutions may help researchers assess whether a central policy has been efficient by observing the manner whereby local communities and their economic behavior were adapted to the economic changes and to the evolution of the market. Introduction - Researching the Economy through Innovative Methodologies 21 The settlement of refugee populations arriving in Greece before and mainly after the Lausanne Treaty (1923) is an eloquent example of the interdependence between global regulations and national policy but also of their effect on local societies. The settlement of the refugee population was required after the forced population exchange pursuant to international treaties as per the league of Nations policies regarding geopolitical stabilization after the First World War. Such settlement was implemented in the Greek urban and rural territories, based on resolutions at a global level, in which representatives of the Greek government were also involved. The national legislature, until the dissolution of the International Refugee Settlement Commission in 1930, had conformed with these decisions. Sources analysis also illustrates the limits of decision-making processes on the national level, as in the case of refugee settlement, Greek governmental decisions almost exclusively invoked internal issues. Thus, the interaction between the international framework, national policies, and local phenomena is discernible in the case of refugee settlement in the interwar years.14 In fact, this aspect constitutes an ongoing research topic concerning especially the refugee settlement in Greek rural areas. The innovative challenge is to extend the existing working hypotheses to the analysis of the multiscale functioning of the institutions in order to locate the intersections between local and global levels: a research perspective followed also in the structure of the three parts of this volume, meaning the presentation of the contributions beginning with those investigating local (i.e. national) case studies in interaction with the international institutions to those examining the global context. Last but not least, one should peruse the vocabulary of historians in order to approach the institutional interface in the effort to evaluate the interaction between global and local phenomena. On the one hand, often the importance of geopolitics is considered to be paramount. On the other hand, the autonomous role of social actors in the study of social and economic phenomena can be overestimated; in fact, it is no substitute for the role of the historical subject and its structural trend. Rather, actor analysis enhances it as it highlights the restrictions in the action taken by the individual, which were imposed by central power. This is even more pronounced if economic institutions would be categorized as agents of power. Such analysis also allows for understanding the precise practices that constitute the often Cf. as an example, for the interaction between global economic phenomena and the implementation of local policies, C. Brégianni, « Crise agraire et mutations agricoles. La dépression internationale de l'entre-deux-guerres et l'économie rurale grecque (1928-1935) », Histoire & Sociétés Rurales, 51/1 (2019), pp. 125-157. 14 22 Catherine P. Brégianni anonymous “central power”. The latter is embodied in a series of microdecisions taken by specific actors. In this vein, the means for the implementation of transnational economic and social policies on a national or local level are also investigated. These mechanisms have a material and technical nature, i.e., they refer to the diffusion of credit, the function and nature of money in the real economy, and the structural changes applied by the economic modernization’s processes. The scope of the actor’s analysis is then to verify the objective conditions of innovation which economic institutions attempt to create. Within this framework, it is essential to upgrade in the longue durée mechanisms such as: the emergence of personal networks developed within international institutions (since expertise is the principal apparatus for the diffusion of the economic innovation), the role of intermediary actors, and the function of the monetary phenomena (monetization, credit, and debt, as already mentioned). Then, an attempt is made to rethink history in order to specify the concept of innovation upon social actors and its enhancement, especially during crisis periods. The methodological framework that highlights the essential role of sources is at the forefront. Thus, the adaptation of research to an already existing interpretive scheme or model is avoided, as it would include potential anachronisms regarding the conceptualization of historical events (i.e., the interpretation of the past through the lens of goals and ideas of the present). Part I Financial “engineering” during the Interwar Period The League of Nations as Generator of Techno-economic Innovation 1 CATHERINE P. BRéGIANNI FORCED POPULATION EXCHANGE, SPATIAL CONCEPTIONS AND ΤΗΕ AGENCY OF INTERNATIONAL INSTITUTIONS LEAGUE OF NATIONS, REFUGEE SETTLEMENT COMMISSION AND BANKING NETWORKS IN NORTHERN GREECE DURING THE INTERWAR PERIOD Introduction It is generally accepted that war does not only result in territorial expansion or, on the contrary, geographical restriction for the defeated, but it also creates new demographic conditions and eventually innovative economic structures. This is precisely what happened during the forced exchange of populations between the former Ottoman Empire and Greece after the Greek defeat on the Asia Minor front. In 1923, the Treaty of Lausanne, applying the criterion of religion, as well as the principle of the ethnic clarity of nation-states which was envisaged by the league of Nations as the pillar of lasting peace after the Great War, forced the Orthodox subjects of the former Ottoman Empire –with the exception of the Christians living in Istanbul– to leave the Turkish territory and the Muslim population of Greece –apart from the Muslims living in Western Thrace– to settle in Turkey. In Greece, this demographic upheaval was dealt with through the settlement of refugees in Greek cities and the planned settlement in rural areas. It is important to note that during this interwar demographic crisis, international institutions, especially the League of Nations, played a primordial role, intervening directly in Greece and, indirectly, in Turkey.1 Indeed, both the involvement of the international institutions2 and the population exchange emerged new economic structures and generated 1 Cf. the contribution of Aykiz Dogan in this volume. The role of the LoN as generator of financial modernization in national level, is a work in progress, and it is linked to the global monetary policies applied by the international institutions. Cf. C. Brégianni, “Global Institutions, Interwar Refugee Crises and the Great Depression as a Turning Point: the Financial Committee of the league of Nations and the Creation of the Bank of Greece”. 2 26 Catherine P. Brégianni socio-economic networks articulated around the settled population. This is precisely the paradigm that will be examined (using microanalytic tools in associating them to the analysis of central policies) in this study, namely the formation of economic networks in the regions of Hellenic Macedonia and Western Thrace, which is where most Christian refugees were settled, when it came to rural settlement of population. Within the framework of this contextualization, it should be noted that the forced exchange of populations after the Treaty of Lausanne reversed the ethnic composition of Hellenic Macedonia (cf. Appendix, table 8). This region had been annexed to Greece after the Balkan Wars (1912-1914), but the composition of its population was multinational. The refugees who settled in Northern Greece stabilized its purely national character, one of the axes of the homogenization of the nation-state being agrarian policy and the proliferation of economic institutions. As implied above, the ethnic cleansing of the territories that had been part to the former Ottoman Empire was also a principle stated by the League of Nations just after the First World War. This study provides evidence on the financial engineering provoked by the demographic engineering in the aftermath of WWI, and its ultimate fragmenta in local economic institutions, destined to homogenize population. I. Methodology: Historiographical Aspects Regarding Greek Personal and Technical Networks Within the framework of a systemic historiographical approach, the network as an analytical tool3 was introduced in Greek historical studies more than three decades ago. The emphasis was mainly on the creation of personal networks and their functioning with regard to the creation of market mechanisms. Numerous studies have addressed the question of the formation of Greek Diaspora networks during the eighteenth and nineteenth centuries; Members of the Diaspora, scattered primarily around the Mediterranean and Black Seas, were mainly engaged in commercial activities. This led to the creation of a uniform network whose nodal points, main ramifications, sub-networks and national antagonists can be distinguished in the context of market evolution and the formation of an economic spirit.4 The activity of these networks has been analyzed from For the general methodology that caracterise network analysis cf. M. Gribaudi, Espaces, temporalités, stratifications, Paris, éditions de l’EHESS, 1998, pp. 8-29. 3 4 In Economic History, social coherence is already accentuated as a factor securing the local Forced Population Exchange, Spatial Conceptions, International Institutions 27 the point of view of their local influence, but also from the point of view of their incorporation into inter-European commercial and entrepreneurial structures.5 Finally, the blossoming of this scientific production led to new historiographical approaches to the phenomenon of the Greek Diaspora.6 The creation of the Greek State in 1828 and the internal structuring of power have been approached from the point of view of political networks, allowing for a reinterpretation of the pattern of authority exercised by the center over the rural periphery.7 The methodological path of political networks also made use of social networks. Historical8 and sociological analyses have put into perspective the formation of social power from personal networks in order to describe the different realities experienced by individuals. On the other hand, the expansion of market mechanisms in Greece during the nineteenth and twentieth centuries has been analyzed in the context of entrepreneurial networks, which corresponds to a global vision of economic activity. Thus, the economic sphere was sometimes perceived through the arrangement of these networks, which was interpreted as the institutions, especially in the rural areas. Cf. I. Henriksen, M. Hviid, P. Sharp, “Law and Peace: Contracts and the Success of the Danish Dairy Cooperatives”, The Journal of Economic History, 72/1 (2012), pp. 197-224. Ol. Katsiardi-Herring, “The Greek Diaspora: Its Geography and Typology”, in Sp. I Asdrachas (ed.), Greek Economic History, IV-XVIIIe c., Athens, PIOP, 2003, pp. 237-247, in Greek [engl. translation Sp. I. Asdrachas, with N. E. Karapidakis, Ol. Katsiardi-Hering, E. D. Liata, A. Mattheou, M. Sivignon, Tr. Stoianovich, Greek Economic History, IV-XVIIIe c., Athens, 2003, Vol. I, 795 p.]. In this perspective, cf. also, I. Baghdiantz McCabe, G. Harlaftis, I. Pepelasis Minoglou (eds.), Diaspora Entrepreneurial Networks: Four Centuries of History, Berg Publishers, 2005. 5 Cf. for examble Chr. Chatziiosif, “Commercial Communities and Independent Greece”, Politis, 62 (1983), pp. 28-34, in Greek. Chr. Exerzoglou, “Greek Historiography and the Diaspora. Capital Problems of Method and Interpretation”, Sychrona Themata, 35/36/37 (1988), pp. 152-160, in Greek. A. Mandilara, “Greek Diaspora and Historiographical Diaspora. Itineraries, Impasses, New Interpretations”, Mnimon, 22 (2000), pp. 152-160, in Greek. M. Ch. Chatziantoniou, “Creating the Pre-Industrial Ottoman-Greek Merchant: Sources, Methods and Interpretations”, in L. Baruh-Tanatar, V. Kechriotis (eds.), Economy and Society on Both Shores of the Aegean, Athens, Alpha Bank Historical Archives, 2010, pp. 311-335. 6 In this perspective, cf. G. B. Dertilis, « Terre, paysans et pouvoir économique (Grèce, XVIII-XXe siècle) », Annales ESC, 47/2 (1992), pp. 273-291. Idem, « Terre, paysans et pouvoir politique (Grèce, XVIII-XXe siècle) », Annales ESC, 48/1 (1993), pp. 85-107. 7 The case of the Ionian State under British Rule (1814-1864) is indicative for the reproduction of political power through social/political networking as the colonial authority is established via the senior administration. C. Brégianni, Ionian State (1814-1864). Institutions and Social Organization, Athens, Academy of Athens, 2017, in Greek. For another perspective that could referred also to the internal structuration of power, cf. Ath. Gekkas, The Commercial Bourgeoisie of the Ionian Islands under British Rule 1830-1864, PhD diss., University of Essex, 2004. 8 28 Catherine P. Brégianni result or, on the contrary, the presupposition of market expansion.9 It is obvious that national networks, whose formation follows the evolution of the domestic market, are linked to international networks, while formal economic institutions often play the role of intermediary between “local” networks and international economic order.10 Since networks are primarily geographical arrangements, they organize space according to centralized priorities. In that respect, a concrete characteristic of networks is to “order” space through dissimilar but connected cores. From this perspective, the expansion of any economy can be described by the expansion of its technical networks, either at the local or national level. It is useful here to further examine this point before proceeding to the more concrete interpretation of technical networks, by examining the historiographical aspect of the topic, as far as Greek studies are concerned. Despite the fact that the interaction between economic expansion and technical networks –as a presupposition of technological development– has already been discussed, researchers have not explored this thematic axis as much as they have personal networks. The main focus has been on the characteristics and expansion of transportation networks, which aim at unifying the national market.11 It is worth mentioning here that the proliferation of technical networks in the nineteenth and twentieth centuries has been historically analyzed, especially from the point of view, on the one hand, of the importation of technological know-how and, on the other hand, of the diffusion of new technologies by engineers (French, but also Italian or English engineers) who came to work in the Greek public works, often executed by foreign corporations.12 This interpretation M. Dritsas, “Networks of Bankers and Industrialists in Greece in Interwar Period”, in A. Theichova, T. R. Gourvish, A. Pogany (eds.), Universal Banking in Twentieth Century Europe, London, E. Elgar, 1994, pp. 229-245. M. Dritsas, P. Eigner, J. Ottosson, “ ‘Big Business’ Networks in three Interwar Economies: Austria, Greece and Sweden”, Financial History Review, 3 (1996), pp. 175-195. 9 Such a case can be found in the role of the creditors of the Greek State at the ending XIXe c.; their activity describes the conditions of the early globalization. In fact, the domestic network of creditors played an intermediary role between the state and the international network of capital market, while the National Bank of Greece was an equilibrium point for the functioning of the system. Cf. G. B. Dertilis, « Dette publique et dépenses militaires : la Grèce et la question d’Orient », in La dette publique dans l’histoire, J. Andreau, G. Béaur, J.-Y. Grenier (eds.), Paris, Comité pour l’Histoire économique et Financière de la France, 2006, p. 420. 10 11 M. Sinarellis, Roads and in Greece, 1830-1880, Athens, PTIETVA, 1989, in Greek. Cf. among others, G. Antoniou, Greek Engineers: Institutions and Ideas, 1900-1940, PhD diss., Athens Polytechnical School, 2004, in Greek. E. Kremyda, “Greek Engineers towards the end of the 19th Century: Intermediaries and Networks for the Diffusion of New Technologies during 12 Forced Population Exchange, Spatial Conceptions, International Institutions 29 takes into account the creation of Greek infrastructures by private foreign investment –notably French investment during the nineteenth century– and the dependence of the diffusion of technological progress on imported know-how. The indisputable relationship between the country's economic development and the expansion of its infrastructure13 has given rise to a considerable number of publications on various forms of technological tenders. Therefore, in addition to archival documents, parliamentary sources, and relevant descriptions found in the literature of the period, current research has at its disposal a number of sources on, for example, the Athens water supply14 or the maritime15 and road16 transportation infrastructures. The question of modernization in nineteenth-century Greece was often linked, by the political elites, to the development of the railways, which were perceived not only as a sine qua non condition for the industrialization of the country, but above all as an indispensable means for the economic and political unification of the national territory.17 Consequently, an important number of studies produced during the first decades of the twentieth century refer to the economic and technical conditions governing the construction of the main railway lines.18 Indeed, the development of the Greek railway network constitutes the most explored thematic axis in the history of Greek technical networks19 and one that still attracts the interest of historians, engineers, architects and geographers. the Era of Industrialization”, Mnimon, 25 (2003), pp. 35-52, in Greek. Cf. the special thematic “Roads and Railways in Greece, XIX-XXe c.”, introduced by C. Brégianni, Neohellenica Historica, Academy of Athens, 3 (2013), in Greek. 13 Cf. for exemple, I. A. Isigonis, “About the Water Supply in Athens”, Archimidis, 10/11 (1899), pp. 180-185, in Greek. P. Kalligas, Water Supply in the Athens Basin, Athens, 1917, in Greek. 14 15 D. Pipas, “The Port Works in Greece”, Technika Chronika, 185 (1939), pp. 361-376, in Greek. For a recent evaluation of this type of sources, cf. L. Sapounaki-Drakaki (ed.), The Greek City in Historical Perspective, Athens, Dionikos, 2005, in Greek. 16 17 Cf. C. Brégianni, « Réseaux techniques et modernisation. Le cas des chemins de fer thessaliens, vers la fin du XIXe siècle », Cahiers de la Méditerranée, 78 (2009), pp. 291-306. For example, G. P. Vougioukas, “The Greek railways, from their origins to today”, Technica Chronika, 75 (1935), pp. 116-117, in Greek. Idem, “Railways”, Great Greek Encyclopedia, vol. I, Athens, Pyrsos, 1934, pp. 170-176, in Greek. 18 L. Papagiannakis, Greek Railways, 1882-1910. Geopolitical, Economic, Social Dimensions, Athens, MIET, 1982, in Greek. Β. Gounaris, Steam over Macedonia, 1870-1912. Socioeconomic Change and the Railway Factor, New York, East European Monographs,1993. M. Sinarellis, “Traditional Networks of Communication and Modernity”, in Th. Kalafatis, E. Prontzas (eds.), Economic History of the Greek State, Athens, PIOP, 2011, vol. 1, pp. 467-500, in Greek. 19 30 Catherine P. Brégianni II. Space and Technical Networks This brief presentation of certain thematic axes of Greek historiography related to the analysis of networks, be they personal or technical in the broad sense of the term, reflects a more or less systemic use of the methodological tool represented by the concept of the network. However, as far as personal networks are concerned, it is not the systematization of the network that matters most, but the information that the network disseminates, which emphasizes its internal hierarchical structuring. This same tool can be used in the analysis of several layers of the historical conjuncture and, in this way, can help elucidate the interactions between economic, “technological” and social realities. First of all, the network is an arrangement of geographical territories, which means that its basic content is its technical aspect: the way a society organizes its environment reflects its dominant ideology, the components of the social community, the choice of symbols that can create a language readable by all of its members. The territorial aspect is now perceived as an analytical instrument or as a metaphor for modernity: from this standpoint, regional studies analyze local economies and societies as open systems influenced by varied and often contradictory elements. Thus, in a historical perspective of area studies –connected to the predominant question of market expansion– several factors should be taken into account, such as pre-existing forms of labor division, the influence of social mentalities, the institutional framework as a guarantee of social stability, and the historical conjuncture. Secondly, from this standpoint, the historical analysis of technical networks encompasses both the social perception and the individual experience of space, namely the way in which individuals apprehend and perceived geographical units.20 Moreover, technical networks embrace the notion of location since they define urban boundaries and therefore create, via their urban concentration, a boundary between the city and the countryside. The construction of technical networks gives shape to the concept of a spatial unit that can expand infinitely, since technical infrastructures can be eternally reproduced. In this vein, technical networks can be analyzed by taking into consideration the interaction between their centers and their peripheral sections. Networks, while serving economic development, dominate the urban space and subsequently proliferate on a global scale. They thus radically 20 For the introverted experience of space, cf. G. Simmel, Philosophie de la modernité, French trad., Paris, Payot, 1989. Forced Population Exchange, Spatial Conceptions, International Institutions 31 transform the individual experience of space and time and, in turn, carry economic and social consequences.21 From this perspective, the network can be seen as an indispensable condition for urbanization. The role of technical networks becomes clear: technological progress, concretized by this type of network, is only a repercussion, a material appearance, of political and economic modernization.22 Consequently, the economic networks that relate to the market layout also constitute technical networks, since they refer to the monetary circulation by accelerating it in terms of space.23 This analogy can be clarified by the factors that characterize any economic network: it organizes geographic space, it is always defined by a hierarchical structuring, it is also built around central cores and it is divided into peripheral branches. Even more important for the exploration of this parallelism is the fact that economic networks are an indispensable factor of urbanization, since the city is organized around the influx of capital, its movements, and its accumulation. In this way, an economic network is a technical network that, at the same time, produces social networks. For geographers, market evolution has been based on conquering new territories: the formation of networks, which ensure the circulation of people, goods and capital within space and time,24 plays an important role in the market expansion and the territorial stabilization of financial institutions. The research hypotheses mentioned above –and especially the relationship between the development of economic institutions and market stabilization– will be tested through the example of the organization of the network of the Agricultural Bank of Greece [ABG] in the 1930s, i.e. by the extension of market economy on rural areas. III. Organization of Space and Social Characteristics of Banking Mechanisms To speak of an economic institution is to speak of its presence in space, that is to say of its material structuring. This image is necessarily linked to the particular objectives of the organization or company and is adapted to the strategy followed, within the framework of its development. It can Cf. D. Harvey, The Condition of Postmodernity. An Enquiry into the Origins of Cultural Change, Oxford, Blackwell, 1997. 21 From a different point of view, technology gave birth to the promise of a better society. Cf. M. Riot-Sarcey, T. Bouchet, A. Picon, Dictionnaire des utopies, Paris, Larousse, 2002, p. 216. 22 Cf. D. Harvey, Géographie et capital. Vers un matérialisme historico-géographique, French trad., prefaced by T. Labica, Paris, 2010, p. 69. 23 24 Ibid, p. 75. 32 Catherine P. Brégianni describe a dynamic expansion of any firm (through an extended network) or, conversely, it can highlight a progressive and centered extension of the cycle of its activities (through the creation of peripheral channels). However, referring to the “outside” of a firm always reflects economic discourse, in the broadest sense of the term. In the study of the history of an economic body, the criterion of its geographical expansion is even more significant, as it dilated within the limited space of a city or a region or, on the contrary, disseminates in the country as a whole: the construction of the network of branches of a company is linked to the organization of space, but it also evokes economic pretensions. In this sense, the presence of a firm that tends to cover the national territory designates an institution participating in the flow of capital and seeking to exploit all of its probable sources. The interaction, therefore, between the economic environment and the dynamism of any organization is described through the expansion of its network, its growth and its multiplication. These are some of the questions arising from a comprehensive work on the mechanisms of agricultural credit and the make-up of the ABG, which was founded in 1929.25 The creation of the Bank corresponds to the institutionalization and expansion of agricultural credit, which had been carried out until 1929 by the National Bank, and it reflects changes in the national rural economy.26 Indeed, the foundation of the ABG is part of the modernization of the Greek banking system, which the League of Nations (LoN) required in 1927 as part of the regularization of state public finances and the securing of monetary stability.27 The intervention of the loN ended the multivalent nature of the National Bank, which was a commercial bank and also had the privilege to issue banknotes. The reform of the banking system led to the foundation of the Bank of Greece (1928),28 of the Mortgage Credit C. Brégianni, Les banques, l’agriculture et l'État. Stratégies de crédit et politique agraire en Grèce de 1861 à 1940, prefaced by Sp. I. Asdrachas, Lille, Septentrion, 2002. 25 Institutional change is also perceived as a reflection of the economic change, cf. D. North, Institutions, Institutional Change and Economic Performance, Cambridge University Press, 1990, p. 3 et seqq. 26 Cf. inter alia D. Laqua (ed.), Internationalism Reconfigured. Transnational Ideas and Movement between the World Wars, London, Tauris, 2011, pp. 1-14 & 91-135. P. Calvin, Securing the World Economy. The Reinvention of the League of Nations, 1920-1946, Oxford University Press, 2013. 27 The specialization of the Greek banking system’s functions was at the origin of the NGB’s insecurity, which intended to maintain its enlarged banking activities. Cf. M. Dritsas, Industry and Banks in Greece in the Interwar Period, Athens, MIET, 1990, pp. 240-241, in Greek. In parallel, Bank of Greece had an autonomous character, and it was independent from the state, according to the resolution of the Genoa Conference; the Conference imposed this commitment as regards the cooperation between central banks. Cf. B. Blancheton, « Fonctions et structures 28 Forced Population Exchange, Spatial Conceptions, International Institutions 33 Bank and of the Agricultural Bank of Greece [henceforth ABG], the latter being financed by state capital and by part of the international loan contracted under the aegis of the League of Nations in Geneva in 1927 (Table 1).29 Table 1. Capital of the ABG at its Foundation (1929), in drachmas30 State’s funding 950,000,000 (500,000,000 from the international loan of 1928) Capital of the public rural banks 90,000,000 Emission of the Bank of Greece’s actions 40,000,000 Rural subventions 20,000,000 Credits of the National Bank of Greece Total 850,000,000 1,950,000,000 Moreover, the creation of a specialized bank dedicated to agricultural credit did not only reflect the political intentions linked to the monetarization of rural production: according to its statutes, the new bank was meant to finance the agrarian reform set up in the 1920s, as well as the rural settlement of refugees from Asia Minor. Thus, agrarian reform, agricultural credit and the management of the rural population through a cooperative structure31 created the different points of a same linear expansion. Its statutes (1929) granted the ABG the management of debts arising from the financing of the rural settlement of refugees, for which the National Bank was previously responsible,32 in addition to the liquidation of debts arising from this rural de la Banque de France durant l’entre-deux-guerres », in Ol. Feiertag, M. Margairaz (eds.), Gouverner une banque centrale. Du XVIIe siècle à nos jours, Paris, A. Michel, 2010, pp. 196-197. Cf. also Archives de la Banque de France, Archives privées de C. Rist, d. 102, 1903-1933. Cf. Archives de la Banque de France, 1370199703, Grèce, 1898-1962, Emprunts extérieurs, 1928. 29 30 Source of table 1: X. Zolotas, Agricultural Policy, Athens, Tzakas & Delegrammatikas, 1934, p. 176, in Greek. Cf. K. Papageorgiou, “Usage and Misusage of Co-operatives. The Example of Greece”, in H. Gardikas-Katsiadakis, C. Brégianni, (eds.), Agricultural Co-operatives in South and Central Europe, 19th-20th century: A Comparative Approach, introduced by C. Brégianni, Athens, Academy of Athens, 2013. 31 Regarding the loans granted to refugees up to 1927, cf. M. Dritsas, “The National Bank and the Refugees”, Historica, 4 (1985), pp. 313-326, in Greek. For refugee agricultural loans, cf. ibid, pp. 320-321. 32 34 Catherine P. Brégianni settlement of refugees and, in general, from the agrarian reform.33 Finally, in 1931, the Agricultural Bank was entrusted with the task of collecting debts owed to the Refugee Settlement Commission [Office autonome pour l’établissement des réfugiés] (created upon decisions of the LoN), debts arising from the overall settlement, both agricultural and urban, of refugees:34 thus, after the dissolution of the Refugee Settlement Commission in 1930, the debts created by the rural and the urban settlement of refugees were transferred to the AGB. Furthermore, the supervision of agricultural cooperatives was entirely transferred from the Ministry of Agriculture to the ABG, which during the late 1920s and the 1930s would play a dynamic role in the monetarization of the rural economy and the commercialization of agrarian production. Consequently, the new bank took over the overall management of the rural economy. In brief, the institutionalization of agricultural credit reflected the progressive centralization of agrarian policy; indeed, a first approach to agrarian reform was formulated at the time of the interim government of Thessaloniki in 1917,35 which aimed to create egalitarian rural property,36 structured around compulsory land co-ownership cooperatives.37 In the 1930s, this approach applied by the modernizing government of the Liberal Law 4332 “on the ratification of the agreement between the Greek State and the National Bank concerning the creation and functioning of the Agricultural Bank”, OG 283, 16-8-1929. 33 34 According to the law 5151/1931. Cf. also M. Notaras, Rural Settlement of Refugees, Athens, 1934, p. 250, in Greek. 35 In May 1917, five compulsory decrees –promulgated by the Interim Government of Salonica– indicated the forced expropriation of the big rural estates and their concession to indigenous landless cultivators to form small properties. The law of December 1917, which extended to the national territory the principles of this agrarian legislation promulgated by the provisional government of Thessaloniki, submitted to land reparcelling any domain whose extent exceeds 100 hectares. Law 1072, OG 305, 29-12-1917. However, due to the political disorder, this legislation could not be applied until 1923 and the arrival in Greece of the refugees. For an opposite example, regarding the notion of non-egalitarian politics in the US during the 1920s, cf. P. Krugman, The Conscience of a Liberal, New York - London, 2007, pp. 17-21. 36 37 According to the article 1 of the decree-law “on compulsory cooperatives for the management of co-ownership and collective fodder” [OG 196, 19-7-1923]: “the persons who have already obtained the right of collective co-ownership and they are not yet registered as cooperative members (representing thus a minority of the collective ownerships) …, they are obligatorily registered as cooperative members”. All the quotas in Greek are translated by the author of this study. Regarding the issue of cooperative compulsory co-ownership, cf. also the Decrees “on the concession of state lands to farmers so as to form small estates”, 22-5-1917, “on the ratification of the Geneva Protocol concerning the resettlement of refugees in Greece and the founding of the Autonomous Office for the Settlement of Refugees, etc.”, OG 289, 13-10-1923, the Law “on the modification of the Law 602 on cooperatives”, OG 322, 17-9-1931. Forced Population Exchange, Spatial Conceptions, International Institutions 35 (1928-1932) and its PM E. Venizelos, had given way to an agricultural model based on intensive family farming, which would naturally have to be financed by the banking sector.38 The most important element to be mentioned here is the fact that the reform stabilized land property rights as the main characteristic of the agricultural class,39 by creating small rural estates (Table 2). The data below show that an absolute majority of Greek farmers owned less than 3 hectares: if we take into consideration that 10 hectares are necessary for a family to sell surpluses on the markets,40 one would conclude that the properties resulting from the reform could only subsist thanks to agricultural credit, whether it be official or not. Table 2. Cultivated Land in Greece (census of 1929)41 Extension of cultures 1 to 10 stremmes* Number of cultivators 358,718 Percentage 37.63% 11 to 20 stremmes 207,065 21.7% 21 to 30 stremmes 127,553 13.38% 31 to 50 stremmes 137,018 14.37% 51 to 70 stremmes 52,493 5.50% 71 to 100 stremmes 32,357 3.40% 101 to 200 stremmes 27,013 2.83% 201 to 500 stremmes 8,297 0.87% 501 to 1000 stremmes 1,415 0.15% 1,001 to 2,000 stremmes 588 0.06% More than 2,001 stremmes 850 0.09% 953,367 100% Total * stremma = 1/10 of the hectare Cf. for the change of the cultivated products, after the 1930s agrarian crisis, C. Brégianni, « Crise agraire et mutations agricoles. La dépression internationale de l’entre-deux-guerres et l’économie rurale grecque (1928-1935) », Histoire & Sociétés Rurales, 51/1 (2019), pp. 125-157. DOI : 10.3917/hsr.051.0125. 38 39 According to the terminology of the political discourse of liberal political origin, during the late 1920s. 40 Among other studies, H. Benenzon, La vie en Picardie au XVIIIe siècle. Du café dans les campagnes, 2012, p. 165. Source of table 2: Statistique Générale de la Grèce, Recencement agricole et d'élévage de la Grèce. Année 1929, Athènes, Imprimerie Nationale, 1934, p. ιδ'. 41 36 Catherine P. Brégianni The case of the reform of the interwar period confirms that it is not agrarian reform itself that is the critical point, but rather the credit system that supports it.42 This scheme excluded finally the cooperative management of rural estates, whether from the distribution of former Ottoman lands or from the expropriation of large Greek land holdings, and it definitively turned the cooperative movement into a consumer of credit,43 gradually transforming into a centralized structure, designed to administer and control the rural population.44 Thus, the principle of mutual responsibility of the cooperative members can also be understood as a mechanism for the proliferation of credit. As a result of this model, by the end of the 1930s, the agricultural sector was over-indebted, with arrears due to the state, to the ABG and to non-official credit networks: according to the 1936 inventory of agricultural debt, debts represented 62% of agricultural income at the national level: they are still debts to private creditors, to the Greek State, and to the Agricultural Bank, including debts to the former Refugee Settlement Commission undertaken after 1930 by the ABG. This percentage varies depending on the department, with the Peloponnese and mainland Greece having the highest level of indebtedness, respectively 75% and 80% on local farming income.45 The dystopia created by the centralized credit model through state interventionism became not only an economic but also a political metaphor and, indeed, ended up reversing the original plans for a social economy, as G. Postel-Vinay, La terre et l’argent. L’agriculture et le crédit en France du XVIIIe au début du XXe siècle, Paris, Albin Michel, 1998, p. 281. 42 Cf. on this question C. Brégianni, “Cooperative Networks in the Management of the Agricultural Credit. Utopia, Ideological Perception or Instrument of Agrarian Policy?”, Greek Rural Economy during the Venizelos Period, eds. D. Panagiotopoulos, P. Sotiropoulos, Athens, Conference Proceedings, University of Agronomy - National Research Foundation “Eleftherios Venizelos”, 2007, in Greek. 43 44 Cf. M. Gerakaris, “State and Cooperatives”, Bulletin of the ABG, I/1 (1936), pp. 8-9, in Greek. C. Brégianni, “Some Help to the People and to the Markets: Greek Agricultural Cooperatives as an Institutional Intervention (1914-1936)”, 15th Annual European Business History Association Conference, Athens, 24-26 August, 2011, Session Cooperative Business and Structure in Historical Perspective, organized by C. Brégianni and C. Roman Cervantes [https://transmonea.academyofathens.gr/index.php/en/publications/working-papers-pptpresentations/188-new-4]. Idem, “Banking System and Agricultural Co-operatives in Greece (1914-1936): Institutional Renovation or Economic Decline?” in Gardikas-Katsiadakis, Brégianni, Agricultural co-operatives in South and Central Europe, 19th-20th century: a Comparative Approach, op. cit. Cf. B. Alivizatos, “The Settlement of Agricultural Debts”, Bulletin de of the ABG, III/3 (1938), pp. 144-146, in Greek. For the debt of Greek agriculture in the late 1930s, cf. C. Brégianni, Les banques, l’agriculture et l'État, op. cit., pp. 294-313. 45 Forced Population Exchange, Spatial Conceptions, International Institutions 37 they had been conceived by the initiators of rural modernization, such as the “Social Democrat” Alexandros Papanastasiou. Based on the quantitative elements, which in fact give concrete expression to the policy, which was applied, one can see that, since its first year of operations, the Agricultural Bank had been placing all of its capital in investments, mainly in short-term loans46 (Tables 3, 4). The increase in agricultural credits followed a stable evolution during these first years, an activity that is articulated around the progressively greater administrative and organizational centralization of the Bank. The tables show that these loans are, first of all, short-term loans (or crop loans) and, secondly, loans against the pledge of agricultural products. Toward the end of the period under review, the increase in the latter provided a kind of security for bank investments. Indeed, the gradual evolution of agricultural credit describes the security of its investments as a priority for the Bank. In addition, it should always be taken into account that loans against product pledge are also a form of crop loans: therefore, the latter constituted almost all of the credit granted, leaving little space for productive investments. In addition, it is important to note that the overall increase of the rural credits is “illusory”, as total agricultural loans are in market drachmas and, thus, not reflecting the significative devaluation of drachma from 1932 onwards.47 Table 3. Short Term Agricultural Credits from the ABG (in market drachmas) An Credits to Private Borrowers 1930 259,442,738.85 1931 322,431,119 1932 316,246,535.65 Number of Private Borrowers Credits To Cooperators 85,955 638,055,651.35 138,089 609,896,245.1 102,671 Number of Cooperators Borrowed Total Credits Total Number of Borrowers 200,538 897,498,390.2 286,493 207,835 932,327,364.1 345,924 519,160,560.5 145,452 835,407,095.70 248,123 314,201,619.2 108,951 568,908,966.45 129,189 883,110,585.65 238,090 1934 347,939,246.65 108,814 540,183,155.05 133,147 888,122,401.70 241,961 1935 464,904,799.25 129,448 645,929,233.7 145,903 1,110,834,032.95 275,351 882,904,998.4 1,511,460,585.25 1933 1936 628,555,586.85 This corresponds to the short-term loans for a cultivation period of nine months. According to the banking archives, from 1923 to 1929, i.e. during the period when agricultural credit was the responsibility of the National Bank, these loans could be extended unofficially up to 11 months. 46 47 Cf. C. Brégianni, « Crise agraire et mutations agricoles », op. cit., pp. 150-151and infra. 38 Catherine P. Brégianni Table 4. Agricultural Loans under Rural Collateral from the Agricultural Bank (in market drachmas)48 Year Credits to Private Borrowers Number of Private Borrowers Credits To Cooperators Number of Cooperators Borrowed Total Number of Borrowers 1930 107,086,519.70 16,994 284,520,385.30 41,017 391,606,905 1931 90,973,817.10 20,803 294,623,919.40 70,157 385,597,736.50 1932 61,431,836.50 1933 138,503,294.15 19,582 335,941,524.40 38,990 474,444,818.55 1934 125,685,831.80 19,945 870,444,216.10 28,473 996,130,047.90 1935 255,905,387.55 27,894 470,157,462.50 39,696 726,062,850.05 1936 527,993,227.55 56,901 697,596,510.60 50,270 1,225,589,738.15 208,197,123.85 269,628,960.35 In order to understand both the diffusion of agricultural credit and its social impact, it is significant to juxtapose some general information about the Greek rural population according to the 1928 census (Table 5). However, the above cited data show that the diffusion of agricultural credit, and therefore its social impact, was not as excessive as stated by the the official sources: the credits granted were, all in all, absorbed by a limited number of farmers (individuals or members of cooperatives). Source of tables 3 & 4: BAG, Annual Reports, 1930, 1931, 1932, 1933, 1934, 1935, 1936, Athens, ABG, 1931-1937 in Greek. Cited in C. Brégianni, Les banques, l’agriculture et l'État., op. cit., p. 209. Processed data for the period 1936-1939 are available, ibid, p. 277, table 1. 48 Forced Population Exchange, Spatial Conceptions, International Institutions 39 Table 5. Population in Greece49 Population (total) 6,204,684 urban Population 2,064,700 Semi-urban Population (2,001 up to 5,000 inhabitants) 571,700 Rural Population (Villages up to 2,000 habitants) 3,568,253 Workforce (total) 2,415,078 Population older than 10 years. Among them, 1.6 millions of feminin population. Workforce in agriculture Workforce in stock raising 1,286,163 167,062 In order to better understand agricultural credit as a factor of stability in the rural economy, we must take also into consideration the agrarian crisis that in Greece manifested itself in 1930, as it did in other agricultural countries, even before being overshadowed by the effects of the global economic and financial crisis in Europe. The main characteristics of this agrarian crisis can be summarized as a very steep decrease in the prices of agricultural products –which also had immediate financial consequences, given that the trade of agricultural products played the most important role for Greek exports–, a decrease in the value of agricultural production and a slight but significant decrease in its volume, already noted in 1929. At the level of the family economy, it translated to the selfconsumption,50 the extension of domestic cattle breeding, and an increase in the cultivation of wheat and vegetables, to the detriment of commercialized products, so much that even the official documents of the ABG describe instances of famine in the countryside.51 In terms of agrarian policy, the crisis imposed the redefinition Source of table 5: B. Alivizatos, “Rural Greece and its Evolution”, Bulletin of the Agricultural Bank of Greece, IV (1939), pp. 291-380, pp. 291-380, in Greek & Statistique Générale de la Grèce, Annuaire Statistique de la Grèce, vol. I, 1930, Athens, National Printing House, Athens [1931], p. 34 & 82, bilingual ed. [here in the Greek part]. 49 One could assume that the severity of the agrarian crisis has strengthened a more communal dimension of the rural society, since the central policies of integrating the agricultural economy into market mechanisms seems to weaken under the pressure of international economic conditions. Cf. G. Béaur, J. Goy, « Introduction », in G. Béaur, C. Dessureault, J. Goy (eds.), Familles, terre, marches. Logiques économiques et strategies dans les milieux ruraux (XVIIe-XXe siècles), Rennes, Presses Universitaires de Rennes, 2004, p. 10. 50 51 Agricultural Bank of Greece [ABG], Report for the year 1931, Athens, BAG, 1932, p. 3, in 40 Catherine P. Brégianni of its objectives, forcing Eleftherios Venizelos Liberal government (19281932) to put in place measures of a much more protectionist nature. In fact, the crisis marked the transition from the protection of agriculture to state’s central economic role in the rural world. This led state agencies, created to direct agricultural production, to enact policies, such as the concentration of products at guaranteed prices, the specific protection of wheat and the effort to systematize intensive farming, among others. Since agricultural credit is an instrument for the application of agrarian policy, it is clear that the increase in the sums earmarked for short-term credit, the persistence of that type of credit throughout the period under review, as well as the opening of the Bank to individual borrowers, can be linked to the immediate need to finance the family economy in rural areas. In addition, loans against the pledge of agricultural products support the security of bank investments, but also support state protectionism aimed at boosting production during the crisis period. In this framework, we can also add the distribution by the Bank of basic commodities to the rural population, a procedure that took place throughout the decade. Precisions on the Economic Context: Notes on the Costs of Settling the Refugees As a consequence of the AGB’s different functions, it is remarked an hierarchization of the banking activities in the different prefectures. So, the most important role that the ABG played in the regions of the Hellenic Macedonia and Thrace was the repayment of debts resulting from the settlement of refugees. As already mentioned, the rural settlement of the refugees was ensured by the Hellenic Republic and by international funds. The 1924 refugee loan was concluded with the aim of facilitating their settlement and of financing the Refugee Settlement Commission, created under the aegis of the League of Nations: the Greek State transferred urban and rural property in the form of urban real estate and agricultural land worth approximately 16 million pounds sterling.52 In order to support the activity of the Settlement Commission, in 1924, the Greek State concluded an international loan for a nominal amount of £12,300,000 at an interest rate of 7%. In addition, the so-called “productive loan” issued in London in 1928 with the authorization of the LoN, following a round of negotiations in Greek. Decree “on the ratification of two conventions dating from December 4 and 16, 1924 contracted between the Greek Republic, the Hambros Bank Ltd, the National Bank of Greece and the Spire Company, on the contraction of the ‘refugees’ loan”, OG 118 / 05.12.1925. 52 Forced Population Exchange, Spatial Conceptions, International Institutions 41 Geneva, was intended to finance the completion of the settlement of refugees. This loan, with an actual capital of £9,000,000, was issued by Hambro's Bank and also included an advance from the u.S. government to the Settlement Commission, precisely for the purpose of achieving the settlement of refugees.53 In order to quantitatively assess the enormous effort made by the state in the 1920s regarding refugees, researchers can examine the statistics of the Greek institutions involved, as well as data from the League of Nations and the Commission. The total number of refugees settled in Greece, before and after the population exchange according to the Treaty of Lausanne,54 was estimated by the 1928 general census at about 1,222,000 individuals, one million of whom came to Greece after the fall of the Asia Minor front.55 Other sources cite the figure of 1.5 million refugees.56 The 1928 general census estimate would therefore be much lower than the actual number of refugees.57 According to the refugee population recorded in the 1928 census, the primary sector employed a total of approximately 255,000 people – both men and women.58 Although the number of women employed in rural areas was reported in that census, it was likely underestimated: it probably included more than the 97,000 women who reported working in agriculture and livestock. 53 Decree “on the publication of two agreements signed in London on January 30, 1928 on the contraction of the 1928 loan at a rate of 6% (monetary stabilization and refugee settlement loan)”, OG 49 / 31.03.1928, article 1. 54 A voluntary exchange of population, between Greece and Bulgaria, was authorized by the Treaty of Neuilly (1919). 55 Statistique Générale de la Grèce, Annuaire statistique 1930, National Printing House, Athens [1931], p. 39, bilingual ed. [here in the Greek part]. A. A. Pallis, « Les effets de la guerre sur la population de la Grèce », in A. Andréadès et al., Les effets économiques et sociaux de la Guerre en Grèce, [coll. Histoire économique et Sociale de la Guerre Mondiale], Presses Universitaires de France - Yale University Press, Paris - New Haven, 1928, p 136-150. 56 Cf. also E. Kontogiorgi, Population Exchange in Greek Macedonia. The Rural Settlement of Refugees 1922-1930, Oxford Historical Monographs, Oxford, Clarendon Press, 2006, passim. Eventually, one could presume that the estimation about 1.2 million refugees does not take into consideration the voluntary exchange of population upon the Neuilly Treaty. 57 Statistique Générale de la Grèce, Annuaire Statistique 1930, op. cit., p. 83. For the rural settlement in the Greek Macedonia, cf. E. Kontogiorgi, Population Exchange, op. cit., pp. 156157. Important parameters of the refugee settlement in local level are examined in E. Prontzas, Economic Nationalism. Study on the Modern Greek History, Thessaloniki, University Studio Press, 1999, pp. 131-152, in Greek. 58 42 Catherine P. Brégianni A total of 143,531 families settled in rural areas through the Refugee Settlement Commission and 2,167 households through the activity of the Greek State.59 If each family had an average of four members –as defined by the Statistical Service–60 the rural settlement of refugees may have included approximatively a total of 583,000 people. It must be added here that the number of about 143,000 refugee families established in the countryside by the Commission was also cited by the League of Nations (1927): although, by the international institution it was calculated a rate of 5% for the refugee population who were likely to leave the rural areas after their establishment.61 The total number of the refugee families established in the countryside given by the LoN is identical to the information given by Emmanuel Tsoudéros, who calculates 147,215 families.62 It should be noted here that a considerable number of refugees of urban origin were settled in rural areas, which illustrates the remarkable need for public investment in the agricultural sector and, obviously, in supplying necessary provisions. In particular, the region of the Hellenic Macedonia saw, at the end of 1929, the settlement of about 339,000 people, or 87,170 families.63 That region received approximately 60% of the rural refugee settlement. Of the total cost of settling refugees in rural areas, the sums spent by the Refugee Settlement Commission until the end of 1929 were estimated at 10,242,601 pounds sterling,64 not including the value of real estate and rural land granted by the Greek State or that of exchanged Ottoman property. Similarly, the Governor of the Bank of Greece and future PM, Emmanuel Tsouderos, cites the sum of £27,297,014 spent globally on the rural and the urban settlement, an expenditure paid for from both Greek and international funds.65 For the region of Hellenic Macedonia in particular, according to the Statistical Service, 7,000,000 pounds sterling were spent for the accommodation of refugees settled in the countryside, for agricultural Statistique Générale de la Grèce, Annuaire Statistique 1930, Athènes, Imprimerie Nationale 1931, pp. 104-105. 59 60 Ibid., p. 83. Cf. Archives de la Banque de France, 13 70 199703, D. 2, Emprunt de stabilisation et d'établissement des réfugiés de 1928, Dix-neuvième rapport de l'Office autonome pour l'établissement des réfugiés, Athènes 22/08/1928, p. 7 8). 61 E. Tsoudéros, L'indemnisation des refugies grecs, Librairie du Recueil Sirey, Paris, 1928, p. 25 [extrait de la Revue d'Économie Politique, 1 (1928)], p. 26. 62 63 Statistique Générale de la Grèce, Annuaire Statistique 1930, op. cit., p. 104. 64 Ibid, p. 161. 65 E. Tsoudéros, L'indemnisation, op. cit., p. 25. Forced Population Exchange, Spatial Conceptions, International Institutions 43 loans and for the supply of livestock and agricultural tools.66 Consequently, the rural settlement of refugees in Hellenic Macedonia absorbed about 70% of the total amount spent on refugees settled in the countryside. These costs should also include the capital paid by the Greek State for the agrarian reform and land distribution to landless local farmers and for the supply of equipment and capital for newly created agricultural properties.67 As already mentioned, all debts arising from the urban and rural settlement of refugees were permanently transferred to the Agricultural Bank of Greece, after the dissolution of the Refugee Commission in 1930. According to the ABG, the total debt caused solely by the rural settlement amounted to 2.442 billion drachmas in 1933, a sum that must be divided by 167,089, the number of rural heads of families.68 Thus, in comparison to the data cited by Statistical Service of Greece, the Agricultural Bank refers a larger number of refugees established in rural areas. As the statistical data of the ABG were recorded in 1933, five years later than those of the Statistical Service, this evaluation seems acceptable. A large part of this amount, 1.784 billion drachmas, were debts of the rural settlement in the region of the Hellenic Macedonia. Consequently, approximately 70% of the refugee debt due to rural settlement was incurred in Macedonia.69 According to the census of agricultural debts carried out in 1936 by the ABG, Hellenic Macedonia was burdened by a debt caused by the rural settlement of refugees amounting that same year to a total of 1.263 billion drachmas.70 It is observed that the large sums –compared to the rest of Greece– of the rural debt of refugees in the region of the Hellenic Macedonia required the establishment of a banking network in situ, so that the debt repayment could be closely monitored, but also to ensure the supply of material to the small rural properties of those refugees. In addition, the strategy of an expanded ABG presence in Macedonia coincided with a banking policy of reducing interest rates on short- and medium-term agricultural loans by two percentage points, a policy which remained in effect throughout the 1930s in both Macedonia and Thrace. Thus, in these regions, rural loan rates generally varied from 5 to 7.5%, depending on whether the borrowers 66 Statistique Générale de la Grèce, Annuaire statistique 1930, op. cit., p. 161. Cf. C. Brégianni, « Réformes agraires et changement rural en Grèce, du XIXe siècle à l'entredeux-guerres », Neoellinica Historica, 4 (2016), pp. 247-284. 67 68 Ibid. According to the estimations of B. Alivizatos, “The Settlement of Agricultural Debts”, op. cit., pp. 123-129. 69 70 Ibid, p. 129. 44 Catherine P. Brégianni were individual farmers or members of agricultural cooperatives. During the same period, the interest rates on rural deposits were also slightly higher in Macedonia and Thrace than in the rest of Greece.71 Nevertheless, for the better understanding of the settlement’s costs and the resulting rural indebtedness it must be taken into account the fact that the drachma lost, in comparison with the year of the monetary stabilization (1928) 35% of its value in relation to sterling in 1933 and approximately 30% in 1934. The indicators in relation to 1936 are identical, given that the fixing that same year of the drachma’s floating parity with sterling also represents a devaluation of the Greek national currency of around 30%, compared to its official parity in 1928.72 IV. Network Morphology The Geography of the Banking Establishments73 The foundation of the Agricultural Bank, which played the role of intermediary between the political-economic environment and the rural population, rested on the multiplication of multipurpose and unbalanced networks representing this interactive function. Starting from the appearance, the “external” of the AGB, the research hypotheses are then multifaceted. If one adopts a symbolic language, the banking network represents a very structured “appearance”, which submitted itself to the demands and necessities of agrarian policy, to the possibilities of the local economy but also to social demands. Having taken into account the essential differentiation of these factors, this study will not try to assimilate them, but rather to use them as indicators, in order to “build” the banking network through its interference with the social environment. The network, both an imprecise metaphor consecrated by usage and a real tool for analysis, refers to diverse realities such as configurations of a general technical function, mechanisms for the flow of commodities, money, etc., or geographical arrangements of distinct but reciprocal units.74 Nevertheless, 71 Cf. ABG, Report on the activity of the first ten years, Athens, ABG, 1940, p. 128, in Greek. For the monetary factor in the 20s and 30s Greece, cf. C. Brégianni, « Crise agraire et mutations agricoles », op. cit., pp. 150-151 & idem, “Financial and Monetary Consequences of the Greek Participation in the World War I”, in Sp. Belegratis, S. Rizas (eds.), 100 years from the End of the World War I, Athens, Academy of Athens - Association of National Defence Officers, 2020, in Greek, pp. 183-220, here 194-200. 72 73 This term is used here in order to describe the total of the ABG’s locations. 74 Y. Grafmeyer, Les gens de la Banque, Paris, PUF (coll. sociologies), 1992, p. 120. Forced Population Exchange, Spatial Conceptions, International Institutions 45 any network generally gives a picture of a continuous and homogeneous arrangement, but networks evoke also complexity, since they are composed of very diverse elements. When they are created, two types of structures appear, which combine themselves to make circulation possible: first, the central points that make up the nodes, are arranged to form a whole.75 Thus, these centers serve the whole network and are the support of any other point. Secondly, the network is made up of linear points and the connecting lines between them. Finally, in a network one could identify pragmatic statements in which the visible and material text that human society articulates about itself, and about the physical world can be found.76 Given that a network is principally a geographical construction, it integrates multiple functions; it therefore assigns a language of its own to geographical space. This spatial organization transforms space into a tool, a codification in which the human determination is inscribed. One can, thus, perceive the concept of the network as an ordering of signs that come together to make it legible and comprehensible to the user.77 In the case of an economic network, such as a banking network, the internal relationships that govern it are much more complex, despite a structure which is similar to that of other types of networks. As any economic phenomenon, the constitution of a network of banking establishments78 reflects the strategy of the banking institution with regard to its geographic expansion;79 it is then subject to the evolution of the enveloping economy and to the priorities given to the development of precise geographical area. However, the textuality of the network is also formed at the crossroads of necessities, by following them. In the case under consideration, the adaptation of banking functions to the economic needs of the population settled by the agrarian reform and the refugee rural settlement is evident. Nevertheless, any bank, as an economic institution, introduces an additional dimension into the articulation of its network: that of a profound transformation that tends to encompass geographical areas. M.-F. Rouge, « L’organisation de l’espace et les réseaux », Hommage à Lucien Febvre. Eventail de l’histoire vivante, Paris, A. Colin, 1953, t. I, pp. 401-405. 75 P. Forget, G. Polycarpe, Le réseau et l’infini. Essai d’anthropologie philosophique et stratégique, Paris, Economica, 1997, pp. 7-9. 76 77 Ibid. 78 For the use of the term, cf. infra. In relation to the importance given to the construction of the banking network and its contribution to the evolution of the banking institutions, cf. J. L. Hébert, « D’établissement de bienfaisance à un réseau d’établissement de crédit de plein exercice », R. Dartevelle, L. Américi (eds.), Deux siècles d’une entreprise citoyenne. La mémoire de l’épargne au service des hommes et de l’économie régionale, Paris, éd. de l’Aube, 1997, pp. 25-26. 79 46 Catherine P. Brégianni Thus, a banking network contains the issuers of credit (the administration), the relays (branches, agencies, etc.), the connectors (the employees) and the connected (the clients of the banking institution). This outline sheds light on the intermediate function of money, which, through its circulation, connects any point of departure with any point of arrival.80 If one applies these hypotheses to the Agricultural Bank, it becomes possible to identify how the Bank adapted its development to the conditions of agricultural credit and how it anticipated the necessities of the rural economy, given that, as already mentioned, its most concrete representation can be seen during the interwar period in Northern Greece. Not unlike technical services, an economic network also embodies the planning of rural space, by making apparent the control exerted over economic activity and by channeling resources to agriculture.81 Moreover, the deployment of an economic network in the rural world also refers to the lessening of inequalities between it and the urban world. The political narrative of an egalitarian, or quasi-egalitarian, rural society created by agrarian reform clearly crystallizes a political manifestation. Towards the end of the period under examination, the almost material presence of the Bank in each town in the Greek periphery materializes statements about the protection of agriculture and is an indication of the state's interest in the rural population. These “technical” aspects of the network gradually create social relationships: the presence of a banking institution refers not only to its clients, but also to the farmers who are excluded from loans. On the other hand, the body of employees are intermediaries between the Bank and the rural population. Thus, apart from the precise function of the banking network, drifting, parallel or antagonistic networks must also be examined. At the end of the 1930s, the Agricultural Bank occupied a considerable place in the Greek banking system, a place directly linked to the spread of its banking network. Thus, at the beginning of the 1940s, the ABG had 110 branches and agencies82 covering the entire country. In ten years, it had succeeded in creating a nationwide network with access to the country's main towns. The very existence of a considerable number of banking establishments G. Simmel, Philosophie de l’argent, trad. de l’allemand par S. Cornille et P. Ivernel, Paris, PUF (coll. sociologies), 1987, p. 266. 80 Regarding the problems related to the rural development, cf. B. Kayser, « Nécessité et difficultés de l’aménagement de l’espace rural », Aménagement du territoire et développement régional, Grenoble, Institut d’études Politiques, 1970, t. III, pp. 63-89. Especially in relation to the organization of economic infrastructure, cf. ibid., p. 68. 81 Number obtained by the registration of administrative circulars of the ABG, announcing the creation of new branches. Cf. appendices. 82 Forced Population Exchange, Spatial Conceptions, International Institutions 47 symbolizes the intertwining of the urban with the rural space, since this multiplication of banking activity shows how the credit issuer and the Bank’s customer were brought closer.83 Among other factors, the extension of a network of branches, particularly for the exercise of agricultural credit, meant that the banking sector as well as the state mechanism supervising it were looking for inactive capital, previously immobilized in the form of farmers' reserves. In sum, the Bank uses the metaphor of the network to emphasize its role of a proxy between an economic function and the territory.84 It is, therefore, a network as technical as it is social. However, it was not the Agricultural Bank that introduced the rural population to systemic savings. The National Bank, apart from its agricultural loans granted until 1929, had also attracted farmers' savings. As archival documents show,85 a fairly considerable percentage of these rural deposits belonged to young unmarried women who were preparing their dowries. Despite the farmers' initiation into the savings mindset through the National Bank, it is evident that the Agricultural Bank, which was directly aimed at the rural world, was more likely to attract their savings than a commercial bank. To achieve this goal, the ABG's interest rates were slightly higher for rural savers compared to the rates reserved for urban dwellers.86 The expansion of the branch network was, for the ABG, not only linked to seeking inactive capital, but also naturally related to the Bank’s vocation of financing agricultural production by granting loans. Thus, studying the growth of the ABG's network in Greece can highlight not only the priorities of agricultural policy, but also the ability of each region to adapt to the structures of the monetirized market. The articulation of these different aspects (that is, agrarian policy on the one hand and the evolution of the banking network on the other) can be explained in a simple and significant way: the organization of space follows a policy of economic planning, provided that state intervention in economic life is an acceptable practice.87 G. Normand, Histoire des Maisons à Succursales en France, Paris, éd. de l’union des entreprises modernes, 1936, t. I, pp. 7-8. 83 J.-M. Offner, D. Pumain (eds.), Réseaux et territoires. Significations croisées, préf. de Cl. Raffestin, La Tour d’Aigues, éd. de l’Aube, 1996, p. 175. 84 85 Historical Archives of the National Bank of Greece [henceforth HANBG], Series: Agricultural Credit, File: Registers of Regional Branches. Thus, the rural accounts rate for sight and term deposits are 0.5 percentage points higher than that for city dwellers, a situation which changed in 1937, when interest rates were equalized for all deposits. ABG, Report on the activity, op. cit., p. 151, in Greek. 86 Cf. J. Labasse, L’organisation de l’espace. Éléments de géographie volontaire, Paris, Hermann, 1966, p. 18. 87 48 Catherine P. Brégianni Moreover, this perspective on the evolution of a banking organization reveals the inequalities in the development of the periphery, by stating the importance of each region for the national economy and describing the disproportionate, or on the contrary equal, access of each region to monetary resources. Undoubtedly, the majority of economic networks represent an unequal geographical evolution: this disparity can be attributed to economic as well as political causes. In other words, the degree of participation of each region in the construction of the state mechanism and the central administration influences, in turn, its participation in public investment. Thus, a policy that aims to organize space can unify the territory, but it can also fragment it. These are the additional questions that will allow us to analyze the expansion of the Agricultural Bank's network. The requirements regarding the financing of the agrarian reform and of the newly settled population being the main concern, the network’s deployment around this objective led to a vast representation of the Bank in the regions newly annexed to the national territory, Hellenic Macedonia and Thrace. The table below (cf. also table 9 in Appendix) provides specific elements about the evolution of the network during the 1930s, the first ten years of the Bank's activity. The evolution of the network was not gradual, despite Governor Konstadinos Gontikas's statement in 1930, that the Bank intended to establish 10 to 15 branches per year.88 Indeed, for the first six years the Bank had no activity in this area (Table 6). Table 6. Foundation of the Bank’ Establishments per Year 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1 1 7 1 0 5 25 16 28 20 5 It was after 1935 that the network grew to cover the national territory. The slowdown at the beginning of the period can be explained by the institutional representation of the Bank by the local branches of the National Bank; nevertheless, it also reflects a conservative policy with regard to banking investments during a period of economic crisis. It seems that the repercussions in Greece of the Great Depression derailed the Bank's initial strategy of setting up branches. Moreover, it is to be expected, during a period of economic depression, that a banking institution’s short-term ABG, Report on the Activity, op. cit., p. 201. 88 Forced Population Exchange, Spatial Conceptions, International Institutions 49 activity would be limited.89 Thus, it was not until 1935, when the direct impact of the crisis diminished, that the ABG set up twenty-five new banking establishments, the majority of which were in Northern Greece. This reflects the gradual application of economic protectionism, as well as the expansion of the internal market. At the same time, the banking institution approached the refugees, the majority of whom had settled in this region. From 1935 onwards, new branches were created on a regular basis and, by the end of the period under examination, they were spread out all over the country. In this way, towards the end of the interwar period, the network of the ABG had constituted the pillar of its network until its dissolution in the 2000s. The elements in the table 9 (see Appendix) show that during the first years of the ABG's operations, the creation of its banking establishments –branches and agencies– was located in certain geographic centers, whose importance is not obvious in terms of their contribution to the country's agricultural productivity. Indeed, apart from the AGB headquarters in Athens and Thessaloniki, whose creation represents a sine qua non condition for the very existence of the Bank, the first branches were opened in the islands. Indeed, the pre-existence of the Autonomous Public Fund of Crete90 and the Agrarian Bank in the Hellenic Macedonia, as well as that of the Agricultural Bank of Mytilene, facilitated the creation of the first branches of the ABG. According to their statutes, these regional agricultural banks merged with the Agricultural Bank, which thus inherited their infrastructure. Also linked to institutional factors, the birth of the Agricultural Bank was conceived by the liberal government of Venizelos in 1928-1929, in the form of a reciprocal relationship with the National Bank. As far as its network was concerned, this reciprocity was translated into the possibility for the new banking institution to be represented in the provinces by the branches of the NBG. Thus, in each branch of the National Bank, ABG representations were created, whose head was the executive directing the affairs of the local National Bank. In addition, the directors of the local branches of the National Bank were authorized to act on behalf of the Agricultural Bank.91 This coexistence meant that farmers applying for a loan or wanting to make The Agricultural Bank is not the only one to be affected by the crisis in the banking domain. In France, in the early 1930s, the economic depression brought the building fever of the banks to a sudden end. Cf. J.-F. Pinchon (ed.), Les palais d’argent. L’architecture bancaire en France de 1850 à 1930, Paris, éd. de la Réunion des Musées Nationaux, 1992, p. 12. 89 Cf. for the Creta Autonomous Public Fund, E. Burnova, « évolution des systèmes de crédit en Méditerranée : le cas de la Crète, 1870-1914 », Histoire et Mesure, 10/1.2 (1995), special vol. Économie et sociétés grecques, XIX-XXe s., pp. 25-45. 90 91 ABG, Administrative circular n° 2, December 1929. 50 Catherine P. Brégianni a deposit had to apply to the branch of the National Bank; the latter, acting as the representative of the Agricultural Bank, was subject to the obligation to keep different accounting records in the name of the Agricultural Bank for these bank transactions. Formally, the representations of the ABG, were required to inform Athens headquarters about the short-term loans contracted as well as on the service of the rural debts.92 With regard to the final decision on whether or not to grant a loan, the texts are not perfectly clear: according to the administrative circulars of the Agricultural Bank, the final decision on the granting of short-term loans was made by the directors of the National Bank. On the contrary, with regard to long or medium-term loans, it was the ABG’s technical department in Athens that decided whether or not to grant the loan. In any case, the flow of information was not guaranteed and many problems immediately arose precisely because of this coexistence of banking organizations.93 The influx of documents and bureaucratic functions point to the formation of a technical sub-network, formed by the representations of the Agricultural Bank at the branches of the National Bank: this sub-network symbolizes the hierarchical structure of the Greek banking system during the interwar period and particularly the monopole of the National Bank. The frameworks and practices that supplied the new banking institutions arose from within the National Bank, not only for the Agricultural Bank but also for the central Bank of Greece. However, the administrators of the ABG favored the creation of their own premises to avoid the less profitable representations at the branches of the National Bank. Moreover, the government of Venizélos (during its 1928-1932 mandate) began, a few months after the foundation of the Agricultural Bank's in 1929, to consider its operation independently from the NBG. It has already been noted that the arrival of the Great Depression in Greece interrupted this organizational evolution. It was in 1936 that the Bank began testing the global conversion of its representations in the National Bank into branches directly owned by the Agricultural Bank. The development of the Bank's network thus reflects the increase in the number of its branches and agencies. The transfer of agricultural credit activities from the ABG's representation within the National Bank to its own branch was carried out according to a precise ABG, Administrative circular n° 161, 3 October 1930. Cf. also HANBG, Series: Direction of Agricultural Credit, sub-series: Branches, file 2: Representation of the ABG in Egion, accounting report of 13 November 1937. 92 Cf. the administrative circulars of the Agricultural Bank (1930-1931), where it is described the policy of the Directors of the National Bank local branches to withhold by the sum loaned to a farmer in the name of the Agricultural Bank, his debts coming from a loan previously contracted with the National Bank. 93 Forced Population Exchange, Spatial Conceptions, International Institutions 51 procedure described in detail by administrative circulars.94 In conclusion, the analysis reveal that the Agricultural Bank was gradually released from the patronage of the National Bank, which illustrates the strengthening of its ability to exist independently. The autonomous existence of a bank, specialized in agricultural credit, proves its dynamism within the Greek banking sector, and the expectation that it was able to integrate the system quite forcefully.95 Consequently, the royalist dictatorship of Ioannis Métaxas (imposed in August 1936) was the one to follow a tactic that favored the foundation of branches, a strategy that was integrated into the general framework of protecting the agricultural sector; indeed, the protection of agriculture –as connected to internal market but also to export trade– was a main pillar of the dictatorial policies until 1940. According to official data, 62 branches and agencies of the Agricultural Bank were founded during the Metaxas regime (1936-1940), which represents more than 50% of the national network.96 Indeed, during this period, the links between the diffusion of agricultural credit and the national economy developed: the authoritarian regime aimed to strengthen agricultural production and this objective was pursued through the structures of agricultural credit. Moreover, this includes the proclamations about the extension of the cooperative movement;97 a political aim that cannot be considered independently of the political control exerted upon rural population but also of the perspective of banking operations now being carried out throughout the country. In addition, the development of the Agricultural Bank's network aimed at supporting the proclaimed increase in the number of long and medium-term loans; those were granted after the in situ verification of the creditworthiness of the borrowing farmer, i.e., after several banking operations that presuppose the existence of a vast network. In the context of the analysis of the geographical distribution of the branches of the ABG, it should be mentioned that the location of these branches For this procedure cf. HANBG, Series: Direction of Agricultural Credit, D.: Elements on the Transfer of the Representations of the Agricultural Bank. In the document that accompanies the protocol concerning the transfer of the Representation to Almyros (Thessaly) to the ABG one can read: “We confirm that the transfer was carried out in a deeply friendly atmosphere, without the appearance of any problem” (document of April 9, 1938). The fact that this friendly spirit was underlined, proves that the relationship between the two banks was quite complex. 94 N. Inglesis, Guide to Public Limited Companies. t. II. Greek Banks, Part A. Reports, Athens, 1939, pp. 12-13, in Greek. 95 96 ABG, Report, op. cit. Cf. C. Brégianni, “La utopia rural de un régimen autoritario. La política cooperativista durante la dictadura de Metaxas (Grecia, 1936-1940)”, Historia Agraria, 42 (2007), pp. 327-351. 97 52 Catherine P. Brégianni conveys the possibilities of agricultural credit and appeals to the necessities of the agrarian economy. In general, the ABG was represented in all areas of the country (Table 7), but with an unbalanced presence.98 Its largest representation was located in Macedonia and in Thrace, namely in northern Greece where, in 1939, 37 of its 110 branches and agencies were located. This corresponds to the importance in this area of the growing of tobacco in particular, but also of wheat as well as the presence of arboriculture; this variation of cultivated products granted a predominant place to agriculture within the local economy. On the one hand, tobacco required extensive credit, a requirement that the Bank tended to cover by loans against the pledge of this product. On the other hand, the creation of the northern network is also connected to the discharge of the debts of the Greek refugees from the former Ottoman Empire, who had settled mainly in the Hellenic Macedonia and Thrace, as already mentioned. Since the Bank was in charge of servicing the refugees’ debts, which were caused by their rural settlement, this factor contributed to defining the development of its network. The financial aspect of the refugee rural settlement is related directly to the dilatation of the banking network in the Hellenic Macedonia, given that, before 1924, the Greek community was not the majority in the region99 (cf. Appendix, Table 8). 98 Although: « Le déséquilibre est sans doute le mot-clé qui éclaire la démarche intellectuelle de ceux qui sont chargé d’organiser un territoire » [J. Labasse, L’organisation de l’espace, op. cit., p. 377]. 99 A. A. Pallis, « Les effets de la guerre sur la population de la Grèce », in A. Andréadés, D. Charitakis et al., Les effets économiques et sociaux de la Guerre en Grèce, Paris - New Haven, PUF - Yale University Press, 1928, pp. 136-150. According to data cited in this study, in 1912 the percentage of the Greek population in Macedonia was limited to 42.6% of the total population, while in 1926 the Greeks stood at 88.3%. Cf. also, L. Korma (ed.), Aspects of refugee settlement in Greece, 1922-1930, Athens, Bank of Greece/Center of Culture and Documentation, 2021, “Collection of Statistical Data by A. A. Pallis”, in Greek: Digital annex, https://www. bankofgreece.gr/RelatedDocuments/apokatastasi_prosfygon_1922_parartima.pdf Forced Population Exchange, Spatial Conceptions, International Institutions 53 Table 7. Foundation of the Bank’ Establishments per Region and per Year100 Hellenic Macedonia & Thrace Thessaly Peloponnesus Epirus Continental Greece and Euboea 1929 1930 Crete Islands 4 1 1 1 1 1931 1 1932 1933 1 1934 3 1 1 1935 14 1 6 1936 7 1 3 1937 4 4 10 3 3 1938 6 1 2 2 4 1939 2 Total 37 1 2 1 2 23 2 5 2 9 1 2 3 1 7 14 8 12 The rural and urban settlement of such a large number of refugees, many of whom were of urban origin, required the intervention of the Greek government, with the help of international capital.101 The refugee families were settled on the lands abandoned by their former Ottoman owners in Macedonia and Thrace, but also on the large Greek land holdings that had been forcibly expropriated (including those in Thessaly).102 This also accelerated ownership for landless local farmers. As has already been noted, all the debts linked to the settlement, both rural and urban, of the refugees were transferred in 1930 to the Agricultural Bank after the dissolution of the Refugee Commission: in 1936, the total sum of these debts amounted to about 2.4 billion drachmas, owed by 167,079 indebted farmers, of which 1.5 billion corresponded to Hellenic Macedonia and Thrace.103 Thus, it can be noted that the rural settlement of the refugees, which took place mainly in these regions, required organizing a vast banking network in order to supervise the discharge of debts, but also to ensure the supply of rural equipment to the Source of the tables 6 & 7: Historical Archives of the Agricultural Bank of Greece / Cultural Foundation of the Piraeus Bank [henceforth HAABG/PIOP], Administrative Circulars, volumes of the years 1930-1939. 100 101 Cf. infra. 102 Cf. C. Brégianni, « Réformes agraires et changement rural », op. cit. 103 B. Alivizatos, “The settlement”, op. cit., p. 123, 129. 54 Catherine P. Brégianni recently created farms. Consequently, the intervention of the LoN through the Refugee Commission ended up creating new institutions at the local level and even changing the economic structures of the region. The other pole with a large number of branches and agencies was the Peloponnese, whose importance for the agricultural economy was based on the cultivation of marketed products and an uninterrupted participation in money market structures. Familiarization with credit, practiced since the nineteenth century, either in the form of usury or in the form of loans granted by the National Bank,104 had created favorable conditions for an easier integration of a vast banking network. Nevertheless, despite the proliferation of institutional credit during the interwar period, it seems that usury networks continued to occupy a very considerable place in the credit market.105 The fact that, in 1936, the total debts owed by Peloponnesian farmers to private creditors amounted to 1,500,000,000 drachmas, while those owed to the Agricultural Bank represented only one third of that sum,106 shows that the local population had only fairly limited access to the official credit market. In addition to economic consequences, this phenomenon had social repercussions, particularly on the structure of rural societies. In general, it can be noted that, in Macedonia as well as in the Peloponnese, the Bank created branches in towns or villages that were less important economically and demographically, whereas in other regions the common practice was to create the banking establishments in the capital of each prefecture or each sub-prefecture. The elements in Table 7 show the activities of the Agricultural Bank during the years 1935-1939 in these areas, as well as its policy of territorial expansion. Indeed, the banking network, being a technical structuring of space, crystallized these two types of rural development, which found their incarnation on the one hand in the Hellenic Macedonia and on the other hand in the Peloponnese. The small estates of the refugees recently settled in Macedonia and their Peloponnesian analogues –those formed towards the last quarter of the nineteenth century following the first agrarian reform of the 1870s and oriented towards the culture of commercialized products–, also represented two different stages of the process of nation building. For the agricultural credits in the 19th century Peloponnese, cf. Th. Kalafatis, Agricultural Credit and Economic Transformation in the Northern Peloponnese. Egialia, end of the 19th century, t. III, Credit System, Economy and Society, Athens, MIET, 1990, passim, in Greek. 104 105 Cf. C. Brégianni, “Economy and Society in the Southern Peloponnese. Agricultural Credit Networks during the 1930s”, in G. Karakatsianis (ed.), Southern Peloponnese, Athens, Alfeios, 2009, pp. 103-126, in Greek. 106 B. Alivizatos, “The Settlement”, op. cit., p. 129. Forced Population Exchange, Spatial Conceptions, International Institutions 55 At the end of the 1930s, the Agricultural Bank had a network of 110 banking establishments. During the same period, the National Bank, an organization whose foundation dated back about a century, totaled 98 branches.107 This mobilization of the ABG is linked to the need to ensure the widest possible distribution of agricultural credit in the rural areas, but it also reflects the dynamism of the newly created organization. The state character of the Bank, and therefore the support it enjoyed within the state mechanism, naturally contributed to its rapid geographic expansion. Moreover, it should be noted that, unlike the Agricultural Bank, which established its branches and agencies practically everywhere in the Greek countryside, the National Bank favored the establishment of branches in the main towns of each prefecture. The NBG, emphasizing its commercial and cosmopolitan character, aspired to continue extending its network beyond the Greek territory;108 At the same time, a glance at the National Bank's register of branches109 shows that it was an organization which had developed a dense network that ensured a significant presence in Athens, and especially in its commercial center. On the contrary, the Agricultural Bank had only one Athenian banking establishment, that of its central headquarters. One could thus observe two very different types of development, corresponding to the diversified activity that each bank adopted: agricultural credit focuses on the rural clientele that the Agricultural Bank targeted, by creating banking establishments all over the countryside. For the National Bank and its much more specialized activities, what mattered most was the urban economy, while, in the nineteenth century, the structuring of its network developed around its issuing privilege. Indeed, banking institutions may have different development and orientation strategies, in an otherwise identical economic conditions.110 Moreover, the differentiation of banking mechanisms and strategies was inscribed in the symbolic language Z. Synodinos, “Register of NBG Branches Founded per Year, 1842-1988”, Emis ké i Trapéza, 21 (1989), p. 53, in Greek. 107 For example, during the Asia Minor Expedition (1919-1922) which was conducted after an Allies mandate, the National Bank inaugurated a branch in Smyrna, with the objective of strengthening the Greek presence and financially supporting it. Such an activity shows the links between national policy and the NBG. Cf. Th. Vérémis, K. Kostis, National Bank in Asia Minor 1919-1922, Athens, MIET, 1984, chap. “The Economy of Smyrna and the Creation of the NBG Branch”, p. 54 et seqq., in Greek. 108 Z. Synodinos, loc. cit. For more information on the branches foundation funding policy by the National Bank cf. HABNG, Series: Archives of Technical Services, Personal Archives of I. M. Issigonis, Sub-series: Works in the Maison of the National Bank (constructions, repairs), 1926-1960. 109 110 Cf. J. Bouvier, Un siècle de banque française, les contraintes de l’État et les incertitudes des marchés, Paris, Hachette, 1973, p. 35. 56 Catherine P. Brégianni of their architectural representation. Thus, the public utility character of the Agricultural Bank, its financing by state and international capitals, but also the fact that its clientele belonged to the inferior strata of the population, required it to project a more modest external appearance. Therefore, the political choice concerning the growth of its network was accompanied by a strategy of building comfortable but simple bank buildings: Its Technical Department has drawn up an application project that adapts to the needs of the Bank and corresponds to the character of its activities. Thus, it was approved that the Bank should represent itself by simple but suitable buildings. The luxurious appearance of the Agricultural Bank's banking establishments should be excluded.111 Thus, the conventional architectural form purported to condense the social consensus existing around an economic institution. The National Bank followed a different architectural form. Despite the abolition of its issuing privilege in 1928, it continued to represent in the interwar period a very important pole of the Greek banking system, still linked to the state mechanism. Thus, the architectural character of the NBG during the 1920s and 1930s demonstrates an institution in full activity, whose voluminous buildings were meant to convey its financial prosperity; the neoclassical elements of its Athenian and provincial branches highlighted the historical continuity of the Bank.112 Indeed, the architectural language represented the different character of the two banks, which was also remarkable in the layout of their networks. In addition, it should be noted that the spread of ABG banking networks in the countryside led to a more intense control of the population, since the flow of information was ensured through banking channels. The most eloquent example on this point revolves around the collection of bank arrears. Indeed, as the agrarian crisis was amplifying the indebtedness of the countryside, farmers were often threatened with seizure or arrest. The intervention of the state apparatus with both banks, Agricultural and National, often seems to be in favor of the indebted in order to establish a certain social consensus, like in this document of the NGB Governor Ioannis Drosopoulos: “[it seems that] the Edessa Branch issued several arrest warrants against desperate farmers. Arrests will soon be made, affecting farmers and depriving them 111 ABG, Report, op. cit. Cf. C. Brégianni, “Images of Greek Banks in the Interwar Period”, Bulletin of the Hellenic Association of Banks, 2 (1999), pp. 83-86, in Greek. 112 Forced Population Exchange, Spatial Conceptions, International Institutions 57 of their daily bread”.113 And another comment of the local authorities in Kavala: “The Agricultural Bank has made several seizures in our region. A very large number of farmers had their draught animals seized…”.114 It is obvious that the administrative dependence of the Agricultural Bank on the National Bank, described above, had tightened how rural debt was being managed; this is evident not only from the archival documents of the NBG, but also from the continuity of banking practices implemented during the period when it was officially in charge of agricultural credit (1923-1929).115 The Types of Banking Establishments The ABG's administrative circulars concerning the founding of the branches, as well as the related documents of an administrative nature, reflect the diverse status of the banking establishments founded.116 In other words, the size of each new banking establishment is analogous to the economic importance of the town in which it is set up. Consequently, there are three different types of banking establishments: branches, built –generally but not always– in the capital of each prefecture; agencies, founded in less populated towns and in the capitals of sub-prefectures; and bureaus, established in smaller towns and villages. The administrative documents of the Bank show the dependence of the agencies and bureaus on the branch of each region (see the index in the Appendix), which was not always established in the administrative capital of the prefecture. In some cases, an agency was set up in the capital, while the main branch was located in the most important town in terms of the local agricultural economy.117 At the same time, the secondary tier of agencies and bureaus is reflected in the appointment of middle managers to administer them. According to the information provided in administrative circulars,118 only the branches were run by employees belonging to the upper echelon of ABG staff, while the agencies or bureaus HANBG, Series: Direction of Agricultural Credit, D.: Service of Agricultural Credit, the Governor Drosopoulos to the Agency of Edessa, 20-11-1930. 113 HANBG, Series: Direction of Agricultural Credit, D.: Correspondence with Various Ministries, Report from the Prefecture of Kavala to the Minister of Finance, 16-12-1932. 114 115 C. Brégianni, Les banques, l’agriculture et l'État, op. cit., pp. 98-108. HAABG/PIOP, Series: Archives des Branches, D.: Foundation of the Banking Establishments in Thrace, 1935-1938. 116 Cf. the case of the Agency of Kalamata (capital of the prefecture of Messenia) which depends on the ABG Branche in Messina, the agricultural centre of this periphery. 117 118 HAABG/PIOP, Series: Administration, Administrative Circulars of the BAG, concerning the foundation of the Banking Establishments, 1929-1939. 58 Catherine P. Brégianni were run by middle or even lower management. These cases demonstrate the limits to the hierarchical evolution of staff, by evoking –in the context of the top-down organization of a bureaucratic agency– the difficulties of crossing the line separating junior managers from senior management. Thus, the research pictures a hierarchical network, with the main intersections conveying the central directives of banking policy and ensuring the functioning of the entire network. Incidentally, the less important points served the purpose of facilitating communication between the administrative center and the linear segments of the network. Indeed, the dependence of the lesser agencies on a branch, which monitors all regional activities of the bank, facilitates the flow of information while allowing the control of employees by the central administration. Social Interaction: The Founding of Banking Establishments The procedure followed by the ABG to form its regional networks is well documented by the case of the foundation of the branches and agencies in Thrace.119 This involves the creation of branches in the towns of Didymotichon and Komotiní, and agencies in the towns of Alexandroupolis, Orestias and the small town of Sappes. These banking establishments constitute a peripheral unit of the Bank and form a sort of sub-network. The Orestias branch was administratively dependent on the Didymotichon branch; the Alexandroupolis and Sappes branches were dependent on the Komotini branch. According to archival documents, an inspector from the Agricultural Bank was in charge of the work needed for the creation of these banking establishments. The method followed was identical in all the cases studied. In all of the towns where there was a representative office of the Agricultural Bank at the local branch of the National Bank, the inspector became the person in charge, after having decreed and signed the protocol of handing over and reception of service with the director of the local National Bank. Then, he took charge of the creation of the new BAG establishment, referring directly to the Deputy Governor of the Bank, G. Trakakis.120 The first concern of the inspector was then to find a suitable building for the installation of each new branch. In the five cases studied, HAABG/PIOP, Series: Archives of the Branches, D.: Foundation of the Banking Establishments in Thrace, 1935-1938. 119 In addition, the individual factor demonstrates institutional succession: G. Trakakis, the first Deputy Governor of the Banque Agricole, was the former Director of the Credit Agricole Service at the National Bank (1923-1929), having energetically reacted in 1928 against the foundation of an autonomous Agricultural Bank. 120 Forced Population Exchange, Spatial Conceptions, International Institutions 59 the decisive factors for the choice of the building were its central location, its proximity to the National Bank, its comfortable rooms, the owner agreeing to assume the cost of the necessary modifications, including the electrical installation, and, of course, its price. In general, the administrative instruction that the operation of the provincial branches should be carried out with strict economy was taken into account.121 As far as rent was concerned, the instructions (written in the correspondence between Deputy Governor Trakakis and the inspector) were quite clear: the inspector should try to keep the rent as low as possible.122 The next step would be the choice of personnel.123 Requests for candidates were addressed to the inspector or the director of the central Branch in the region (Komotini). Subsequently, the inspector prepared a report to be sent to the Bank's administration, indicating the main information about the candidates: their level of education, family situation, standing in the local society and professional experience. It appears that the involvement of local authorities in the hiring of the ABG’s staff was not negligible. For example, the deputies of the region or the political associations would recommend a candidate, addressing the senior administration of the ABG directly. According to evidence provided by official correspondence between the Bank Inspector and Deputy Governor Trakakis,124 the final choice of staff was influenced by the recommendations of these regional political networks. The intervention of local political factors in the Bank's internal organization was linked to their interaction with the central political power and also their influence on the country's administrative mechanism. These interventions show that the elites (bureaucratic, political, or other) functioned as intermediaries with respect to the exercise of central power on the periphery. The network of an economic institution therefore further functions as a mechanism not only of economic but also of political integration, with respect to rural space. The Bank's strategy of rapidly deploying its network was thus based on the symbolic organizing of the rural population: 121 HAABG/PIOP, Administrative Circular no. 201, 6-12-1930. Cf. the guidelines of the central administration of the Bank during the establishment of the branch network in Thrace. HAABG/PIOP, Series: Archives of the Branches, D.: Foundation of the Banking Establishments in Thrace, 1935-1938. 122 For the criteria concerning the selection of the personnel of the Agricultural Bank, cf. C. Brégianni, Les mécanismes bancaires et l’État. Les cas de la Banque Agricole, Athens, Historical Archives of the Agricultural Bank of Greece, 1995, unpublished work, pp. 160-172. 123 Cf. for example, the letter from Deputy Governor G. Trakakis to the Inspector at Didymotichon, dated August 4, 1935, in which he requested the hiring of a typist from the region. 124 60 Catherine P. Brégianni We want our Bank, this home of the Farmer –as it was characterized by our Governor–, to be able to get its own house in every remote village, where the tired hands of the Greek farmer open the bowels of the earth so that he can reap its treasures. The domiciles of the Agricultural Bank will represent the constant symbols of the strength and prosperity of the farmers of the Greek land, who are also the creators of the Greek Homeland.125 A direct correlation is developed here between the Agricultural Bank, the farmers and the creation of the homeland: this junction is full of symbols, since it indicates both the predominant place of agriculture in the Greek economy and the role reserved for the ABG in the process of rural development, in both its economic and social dimensions. Finally, the fact that the modeling of the banking networks of the interwar period involved the direct linkage of the banks to the state mechanism shows that the former primary role of the banker had now been eclipsed by the dynamism of the economic institutions. V. Economic Networks and Social Networks The study of the morphological aspects of the banking network shows the dissimilarities at the local level: the agrarian reform created economic channels that absorbed bank capital in order to ensure the survival of farmers. At the same time, monetarization aimed at protecting rural commodities of high commercial value such as tobacco. In addition, the pre-existence of local agrarian banks in in the Hellenic Macedonia and in Crete had made it easier for the Agricultural Bank to form a new peripheral structure. At the same time, the nucleus of the small rural estate persisting in the Peloponnese also made that region prime for a high density of the banking network, and, in 1939, it concentrated 23 branches and agencies. The Bank's network can be then perceived as a structuring of sub-networks, formed not only at the junction of administrative priorities, but also according to economic objectives. As a first conceptualization, it can be noted that the organization of the rural or semi-rural space by the banking institution anticipated the modernization effort by channeling the financing of agriculture: the banking network in its function as a technical network followed the economic evolution, while simultaneously multiplying the consequences of monetarization. One must 125 “The Origins of the ABG Policy as regards the Foundation of its Banking Establishments”, Bulletin of the Agricultural Bank of Greece, IV/4 (1939), p. 488, in Greek. Forced Population Exchange, Spatial Conceptions, International Institutions 61 also add the complementary role that agricultural cooperatives played, by forming in turn a parallel technical network that was still dependent on the ABG. This articulation of networks reflects a uniform space of economic and social relations entirely dominated by the state:126 the latter is not only the symbolic reference for the rural world but also the creator of its economic conditions. These networks, which aimed at administering the agricultural economy and organizing the rural population, nevertheless had social impacts: they provoked a series of social repercussions, which is further evidence of their dynamism. The density of this administrative network refers to the centralization of the banking institution, and thus to the control exercised over the rural population. Moreover, the negative impact of the economic crisis had provoked political unrest in the countryside, which the political system of the interwar period tried to pacify through the implementation of monetarization and the consolidation of state mechanisms. Indeed, a technical network causes the creation or rather the concretization of a social network: as already mentioned, credit mechanisms led to the formation of a social group interacting with the rural population. These were the employees of the Bank. Staff performing parallel duties, such as agronomists from the Ministry of Agriculture and employees in agricultural cooperatives, were branches of the same network, with both social roles and technical functions. A priori, this social network was parallel to the technical network, in other words the official network, supervised by the state. However, the case of the foundation of the branches in Thrace, as well as research based on the personal files of employees and documents from the private archives of Governor Konstadinos Gontikas,127 show that the human factor, involved in the administration of the rural sector, did not always meet central directives. Individualism, political ideology and the subjective internalization of the bureaucratic plan intervened to create, in some cases, an antagonism towards the official aspect of agricultural credit. The centralization implemented in the creation of the Bank's network aimed, precisely, to annihilate these antagonisms, giving, according to the spirit of 126 M. Gribaudi, « Avant-propos », in M. Gribaudi, Espaces, temporalités, stratifications, op. cit., p. 33. This material concerns the elaboration of Governor Konstadinos Gontikas correspondence, during the months July 1931-July 1932. These archival series include letters addressed to Gontikas by its political friends and voters who demand their nomination in the Bank as employees. Gontikas was a former Minister of Education in the Venizelist liberal government from 1928 to 1930 and ABG Governor from 1930 to 1935. Cf. C. Brégianni, Les mécanismes bancaires et l’État, op. cit. 127 62 Catherine P. Brégianni the administrative circulars, a “pure”, moral and paternalistic aspect to the whole organization. In addition, the local political networks ensured the replication of the dominant ideology, consolidating its channeling towards the rural space by political clientelism. The ABG archives do not provide information on the profile of the other section of this social network, the farmers who were the customers of the Bank. Archival documents only provide the imaginary profile of the ideal farmer, according to the narrative of the Bank: Farmers should concentrate on their crops ... Farmers should refrain from playing cards, and they should also be indifferent to the speeches of certain threatening individuals ... Farmers should abstain from prodigality and useless expenses ... it should also be noted that beer and alcohol are not adapted to the personality of the honest farmer... 128 The institutionalization of agricultural credit in the late 1920s had, as already mentioned, a direct relationship with the rural settlement of refugees arriving from Asia Minor. Despite the fact that the documents examined are related to the establishment of branches in Thrace, an area where a large proportion of refugees settled, these sources do not mention the origin of those applying for loans from the Agricultural Bank.129 The link between the Agricultural Bank and the financing of the rural settlement of the refugees, could have brought the Bank closer to the settled population. Nevertheless, the Bank documents do not bear evidence to such a link, providing additional proof of the centralizing character of the created economic institutions, as well as pointing to the existence a parallel network created by the refugees, who tried to avoid direct contact with Greek state mechanisms. It was, perhaps, a complementary social network, on the periphery of official agricultural policy, reflecting the new situation in rural areas after the settlement of the refugees. In stark contrast to this network are the official banking structures: one can consider the National Bank as a technical network in opposition to that of the Agricultural Bank, the latter embodying a modernizing perception of the organization of the rural economic space. Although certain executives of the National Bank were entrusted with higher functions at the Agricultural Bank and that the latter was presented as the ABG, “The Agricultural Bank of Greece to Farmers, Agricultural Cooperatives and their Unions”, Athens, September 1929, p. 5, in Greek. 128 The private archives of Governor K. Gontikas, related to a considerable number of job seekers, demonstrate the origin of these candidates from the former Old Kingdom. Cf. HAABG/ PIOP, Private Archives of K. Gontikas, D. 51-63, 1930-1935. 129 Forced Population Exchange, Spatial Conceptions, International Institutions 63 successor of the NBG, one should not disregard the fact that the objections raised by its creation,130 reflect the dichotomy existing within the banking system. Although the “modernist” position of the banking sources was assumed, their multiplicity depicts a system of anti-networks that distances itself from the institutional organization of agricultural credit. As the opponents of the system, it can be considered the National Bank and, from a very different perspective, the part of the population that did not participate directly in the structures of the official agricultural credit as well as the usurers, who continued to perform the functions of unofficial credit. The morphological description of the banking network has made it possible to draw a picture of a technical network, divided into peripheral subnetworks, on which the “associated” network of agricultural cooperatives was based. The organization of space encompasses the concept of rural population organization, which refers to the creation of social networks, functioning either as subordinates or as opponents of the main network. It is, moreover, obvious that these functions can be intertwined. Consequently, the case of the Agricultural Bank under examination reflects the interference of social and economic, primary and secondary, networks, creating an abstraction on the mosaic of rural society. 130 Cf. C. Brégianni, Les banques, l’agriculture et l’État, op. cit., ch. III « Le cercle des agrariens grecs et la Banque Agricole ». 64 Catherine P. Brégianni Appendices Table 8.131 Population of the Hellenic Macedonia 1912 Number Percentage Greeks 513,000 42 Muslims (Turks, Albanians, Roma) 475,000 39 Bulgarians 119,000 9 98,000 8.2 1,205,000 100 Various (Jews, Vlachs, foreign citizens) Total Population of the Hellenic Macedonia 1926 Number Greeks Percentage 1,277,000 88.3 2,000 0.1 Bulgarians 77,000 5.3 Various (Jews, Vlachs, foreign citizens) 91,000 6.3 1,447,000 100 Muslims (Turks, Albanians, Roma) Total Source of the table 8: A. A. Pallis, « Les Effets de la guerre sur la population de la Grèce », in A. Andréadès et al., Les Effets Économiques et sociaux de la Guerre en Grèce, [coll. Histoire économique et Sociale de la Guerre Mondiale], Presses Universitaires de France - Yale University Press, Paris - New Haven, 1928, pp. 136-150. 131 Forced Population Exchange, Spatial Conceptions, International Institutions 65 Table 9. Network Formation of the Agricultural Bank of Greece, during the 1930s132 AN 132 CITY TYPE DEPENDANCE PREEXISTING ORGANIZATION 1929 Athens Central headquarters 1930 Chania, Crete Branche Crete Autonomous Fund of Public Interest 1930 Iraklion, Crete Branche Crete Autonomous Fund of Public Interest 1930 Rethymnon, Crete Branche Crete Autonomous Fund of Public Interest 1930 Agios Nikolaos, Crete Branche Crete Autonomous Fund of Public Interest 1930 Thessaloniki, Macedonia Branche 1930 Mytilene, Dodecanese Branche 1930 Ioannina, Epirus Branche 1931 Vamos, Crete Branche 1933 Larissa, Thessaly Branche 1934 Serres, Macedonia Branche 1934 Xanthie, Macedonia Branche 1934 Drama, Macedonia Branche 1934 Agrinion, Continental Greece Branche Agricultural Credit Bank of Mytilene Crete Autonomous Fund of Public Interest Representation of the NBG Source of the table 9: HAABG/PIOP, Administrative Circulars, volumes of 1930-1939. 66 Catherine P. Brégianni 1934 Karditsa, Thessaly Branche 1934 Xylocastro, Peloponnese Branche 1935 Kavala, Macedonia Agency 1935 Eleftheroupoli, Macedonia Branche 1935 Tripolis, Peloponnese Branche . 1935 Lamia, Continental Greece Branche Representation de la BNG 1935 Didymotichon, Thrace Branche Representation de la BNG 1935 Corfu, Ionian Island Branche Corfu Autonomous Organization of Agricultural Credit 1935 Argos, Peloponnese Branche Representation of the NBG in Nafplion 1935 Missolonghi, Continental Greece Bureau permanent 1935 Komotiní, Thrace Branche 1935 Soufli, Thrace Agency Branche of Didymoticho Representation of the NBG 1935 Siteia, Crete Agency Branche of Agios Nicolaos Representation of the NBG 1935 K. Nevrokopi, Macedonia Agency Branche of Drama 1935 Nikiforos, Macedonia Agency Branche of Drama 1935 Oréstias, Thrace Agency Branche of Didymoticho 1935 Megalopolis, Peloponnese Agency Branche of Tripoli 1935 Prosotsani, Macedonia Agency Branche of Drama Representation of the NBG Agency of Kavala Representation of the NBG Branche of Agrinion Representation of the NBG Forced Population Exchange, Spatial Conceptions, International Institutions 1935 Sicyon, Peloponnese Agency 1935 Paramithia, Epirus Agency 1935 Néa Zihni, Macedonia Agency Branche of Didymoticho 1935 Alexandoupolis, Thrace Agency Branche of Komotiní 1935 Trikala, Thessaly Branche 1935 Pyrgos, Peloponnese Branche 1935 Néa Moudania, Macedonia Agency Branche of Thessaloniki 1935 Sapés,Thrace Agency Branche of Komotiní 1935 Polygyros, Macedonia Agency Branche of Thessaloniki 1936 Messina, Peloponnese Branche 1936 Chrissoupouli, Macedonia Agency 1936 Sidirokastro, Macedonia 1936 Thives, Continental Greece Agency 1936 Istiaia, Euboea Agency 1936 Ellassona, Thessaly Agency 1936 Leivadia, Continental Greece Branche 1936 Lagadas, Macedonia Agency 1936 Kozani, Macedonia Branche 1936 Nafplion, Peloponnese Agency 1936 Nigrita, Macedonia 67 Branche of Xylocastron Representation of the NBG in Corfu Representation of the NBG Agency of Kavala Agency Branche of Serres Branche of larissa Branche of Thessaloniki Branche of Argos Agency Branche of Serres 68 Catherine P. Brégianni 1936 Chios, Dodecanese Agency 1936 Eleftheroupoli, Macedonia Agency Branche of Kozani 1936 Kalamata, Peloponnese Agency Branche of Messina 1936 Lixouri, Cephalonia Agency Central headquarters 1936 Kavala, Macedonia Branche 1937 Delvinaki, Epirus Agency Branche of Ioannina 1937 Ierapétra, Crete Agency Branche of Agios Nicolaos 1937 Megara, Greece Continental Agency Credit Direction, Athens central headquarters 1937 Patras, Peloponnese Branche 1937 Adritsaina, Peloponnese Agency Branche of Tripolis 1937 Kalabaka, Thessaly Agency Branche of Trikala 1937 Pylos, Peloponnese Agency 1937 Vérroia, Macedonia Branche 1937 Moirai, Crete Agency 1937 Argostoli, Cephalonia Agency Representation of the NBG 1937 Chalcis, Euboea Agency Representation of the NBG 1937 Edessa, Macedonia Agency 1937 Arta, Epirus Agency 1937 Amalias, Peloponnese Branche 1937 Meligalas, Peloponnese Bureau ABG Agency in Kavala Representation of the NBG Representation of the NBG Representation of the NBG Branche of Iraklion Branche of Verria Representation of the NBG Representation of the NBG Branche of Messina Forced Population Exchange, Spatial Conceptions, International Institutions 69 1937 Zakynthos, Ionian Island Agency 1937 Karpenisi, Greece Continental Agency Representation of NBG 1937 Kyparissia, Peloponnese Branche Representation of NBG 1937 Sparta, Peloponnese Bureau Representation of the NBG 1937 Katérini, Macedonia Agency 1937 Preveza, Epirus Branche Representation of the NBG 1937 Kalavryta, Peloponnese Agency Representation of the NBG 1937 Volos, Thessaly Branche Representation of the NBG 1937 Egion, Peloponnese Branche Representation of the NBG 1937 Yiannitsa, Macedonia Agency 1937 Pharsale, Thessaly Agency 1937 Tyrnavos, Thessaly Agency Branche of larissa 1937 Krésténa, Peloponnese Agency Branche of Pyrgos 1938 Lefkas, Ionian Island Agency Representation of the NBG 1938 Syros, Cyclades Agency Representation of the NBG 1938 Kastoria, Macedonia Agency 1938 Ghythio, Peloponnese Agency 1938 Argos Orestikon, Macedonia Bureau Agency of Kastoria 1938 Igoumenitsa, Epirus Agence Branche of Corfu 1938 Konitsa, Epirus Bureau Branche of Ioannina Representation of the NBG Representation of the NBG 70 Catherine P. Brégianni 1938 Florina, Macedonia Agency Representation of the NBG 1938 Kymi, Euboea Agency Representation of the NBG 1938 Amphissa, Continental Greece Agency Representation of the NBG 1938 Almyros, Thessaly Agency Representation of the NBG 1938 Kilkis, Macedonia Agency Representation of the NBG 1938 Arnéa, Macedonia Agency 1938 Nafpactos, Continental Greece Agency 1938 Piraeus Department 1938 Samos, Dodecanese Agency 1938 Gargaliani, Peloponnese Agency 1938 Naxos, Cyclades Agency 1938 Lemnos, Dodecanese Agency 1938 Samothrace, island in Thrace Bureau Agency of Alexandroupolis 1939 Ptolemais, Macedonia Agency Branche of Kozani 1939 Grevena, Macedonia Agency 1939 Poros, island of the Saronis Golf Agency 1939 Scala Laconia, Peloponnese Agency 1939 Filiatra, Peloponnese Agency Branche of Thessaloniki Representation of the NBG Representation of the NBG Branche of Kyparissia Representation of the NBG Representation of the NBG of Amyndaio 2 AYKIZ DOGAN UMR Développement et Sociétés, IEDES University of Paris I Panthéon-Sorbonne MODERN STATE BUILDING AND TRANSNATIONAL EXPERTISE THE LEAGUE OF NATIONS ADVISING FOR TURKEY’S STATISTICAL INTERNATIONALIZATION (1926-1927) Introduction According to many historians and sociologists of quantification, as a knowledge instrument and “state science”, statistics characterize the construction of modern states.1 The studies on the development of statistical institutions and policies in modern state-building have been mostly centered on the experience of Western Europe and other Western countries. The same applies to the literature on the “statistical internationalism”2 and international spaces of expertise in which conventions of quantification were negotiated for the uniformization of methods and comparability of data since the end of the 19th century and especially after the construction of the League of Nations. The question of the implications of international statistical activity and expertise for state building in other parts of the world is still not fully Cf. for instance M. Armatte, « Une discipline dans tous ses états : la statistique à travers ses traités (1800-1914) », Revue de synthèse, 112/2 (1991), pp. 161-206. H. Le Bras, Naissance de la mortalité. L’origine politique de la statistique et de la démographie, Paris, Gallimard-Seuil (Hautes études), 2000. A. Desrosières, The Politics of Large Numbers: A History of Statistical Reasoning, transl. C. Naish, Cambridge, Harvard University Press, 1998. P. Lascoumes, « La Gouvernementalité : de la critique de l’état aux technologies du pouvoir », Le Portique. Revue de philosophie et de sciences humaines, 13-14 (2004). T. M. Porter, Trust in Numbers: The Pursuit of Objectivity in Science and Public Life, Princeton University Press, 1995. A. J. Tooze, Statistics and the German State, 1900-1945: The Making of Modern Economic Knowledge, Cambridge University Press, 2001. S. Woolf, “Statistics and the Modern State”, Comparative Studies in Society and History, 31/3 (1989), pp. 588-604. 1 2 E. Brian, « Statistique administrative et internationalisme statistique pendant la seconde moitié du XIXe siècle », Histoire & Mesure, 4/3-4 (1989), pp. 201-224. 72 Aykiz Dogan explored. Previous studies suggest that the experience of non-European countries might inform about not only on how expertise circulated between states in process of nation building but also on the multilevel (international and national) interactions and power relations in the implementation of international policies.3 This chapter examines the League’s effort to establish cooperation with the newly created statistical office in Turkey and to affiliate this office with the international quantification program which established its headquarters in Geneva after WWI.4 It will be argued that both this cooperation and the internationalization of Turkish statistics owed their inception to international experts. International expertise indeed played an important role in the modernization of the statistical machinery that the new Turkish state inherited from the previous Ottoman Empire. During its last century, the Empire had invested in reforming its quantification policies according to changing social, political and economic conditions as well as international developments in statistical methods, policies and institutions.5 Especially from the second half of the 19th century, Russian, French and American experts were hired to lead the statistical administration and departments.6 3 A. Dogan, « L’étatisation turque dans l’entre-deux-guerres et ses acteurs : construire un ordre mondial par l’expertise », PhD diss., University of Paris I Panthéon-Sorbonne, 2022. Idem, “Modernising Turkey with Statistics: Implementing ISI Expertise in the Turkish Statistical Reform during the late 1920s”, European Review of History (2023, forthcoming). Idem, “Knowledge Transaction and State Making from Ottoman Empire to the Turkish Republic”, European Journal of Turkish Studies, 32 (2021), http://journals.openedition.org/ejts/7454 A shorter version of this article was presented as: A. Dogan, « Les experts transnationaux et l’internationalisation des statistiques économiques de la Turquie (1926-7) », Conference Acteurs du développement économique et financier entre global et local. Un aperçu par le biais des réseaux personnels, durant l'entre-deux-guerres et au-delà/Actors in Economic and Financial Development, between Global and Local. Through the Optic of Personal Networks, during the Interwar Period and beyond, TransMonEA project, Academy of Athens - HFRI and the UMR D&S/University of Paris I, 9th and 10th of October 2020. 4 H. İnalcık, “Did the Ottomans Use Statistical Methodology?”, in H. İnalcık, Ş. Pamuk (eds.), Data and Statistics in the Ottoman Empire, Ankara, State Institute of Statistics Prime Ministry Republic of Turkey, 2000, pp. 3-13. K. H. Karpat, “Ottoman Population Records and the Census of 1881/82-1893”, International Journal of Middle East Studies, 9/2 (1978), pp. 237-274. Ö. L. Barkan, « Essai sur les données statistiques des registres de recensement dans l’empire ottoman aux XVe et XVIe siècles », Journal of the Economic and Social History of the Orient, 1/1 (1957), p. 9. C. Behar, The Population of the Ottoman Empire and Turkey, 1500-1927, Ankara, State Institute of Statistics, 1996. E. Z. Karal, First Population Census in the Ottoman Empire 1831, Ankara, TC Başvekâlet İstatistik Umum Müdürlüğü, 1943, in Turkish. 5 Z. Toprak, “Quantification in the Ottoman State or the Birth of Modern Statistics”, in H. İnalcık, Ş. Pamuk (eds.), Data and Statistics, op. cit., pp. 95-112, in Turkish. S. J. Shaw, “The Ottoman Census System and Population, 1831-1914”, International Journal of Middle East 6 Modern State Building and Transnational Expertise 73 The Ottomans participated in the emerging “statistical internationalism” in Europe from its peripheries taking part in various international conferences, organizations and conventions regarding quantification.7 The Turkish nation state was constructed on this Ottoman heritage. After the Lausanne treaty which provided international recognition to the political independence of the new Turkish state and the proclamation of the Republic in 1923, the nationalist Government invested in a statistical reform and hired the Belgian statistical expert, Camille Jacquart. The Belgian demographer went to Ankara in 1926 to lead the newly established Central Statistical Office.8 The director of the statistical administration at the Belgian Ministry of Interior, Jacquart was an actor of the international field in which the post war international order and the authority of the emerging league of Nations in international statistical activity were negotiated. He played a key role in constructing the Turkish statistical office in dialogue with the major international authorities in quantification such as the League and the International Statistical Institute (ISI). This chapter demonstrates his role in establishing cooperation with the Economic and Financial Section of the league (EFS) within the framework of the international program which laid the foundations of what Martin Bemmann calls, the system of “world economic statistics”.9 This case study provides insights on the implications of international quantification policies in the implementation of state statistics in a nascent nation-state. It sheds light on the role of transnational experts such as Jacquart in the co-construction of national and international statistical systems. It discusses the strategies of the international bureaucracy and experts in setting a course for national bureaucracies. The negotiations for cooperation with the Turkish office reveals how the EFS went beyond its official capacity which did not permit having relations with non-member Studies, 9/3 (1978), p. 330. K. H. Karpat, Ottoman Population, 1830-1914: Demographic and Social Characteristics, University of Wisconsin Press, 1985. It was for instance among the seventeen signatories of the Meter Convention in 1875 which put in place an international system of units and an international bureaucracy. BIPM, Bureau International des poids et mesures, “Member States”, https://www.bipm.org/en/about-us/ member-states/tr/ 7 8 Republic of Turkey Prime Ministry Archives (BCA), 030.18.1.1_14-40-16. M. Bemmann, “How and Why the League of Nations Became the Centre of World Economic Statistics”, in A. E. S. Aurora, Y. Santos (eds.), A Century of Internationalisms. The Promise and Legacies of the League of Nations, Routledge, 2022. Idem, “Weltwirtschaftsstatistik. Internationale Wirtschaftsstatistik und die Geschichte der Globalisierung, 1850-1950”, Habilitation thesis (unpublished manuscript), Freiburg, 2020. 9 74 Aykiz Dogan states and contributed to the statistical internationalization of the new Turkish state which had yet no affiliation with the League when the EFS initiated the process in 1926.10 While acknowledging the interdependence between the EFS and the governing organs of the league (the Council and the Assembly), this study provides further evidence validating Clavin and Wessels observation on the relative autonomy of this international bureaucracy.11 This case study hence informs on the interwar “technical internationalism”12 which established the structures of a global endeavor before the transition to the post WWII order and institutions which took over the league. It also highlights some neglected aspects of the Kemalist Government’s strategies for a “symmetrical internationalization”.13 The article begins by introducing the negotiation tables in which the authority of the league in international statistical activity and in particular the EFS statistical program were debated based on league publications and conference proceedings. A second section briefly informs as to the context of Jacquart’s mission in Turkey during the first years of nation-state building. The following sections focus on the first correspondences between the EFS and Jacquart at the head of the Turkish Office to explore how cooperation between these two institutions was negotiated between December 1926 and February 1927. The original letters found in the League archives in Geneva which served as the primary sources of this study are published in the appendices.14 The article hence not only provides insights regarding the Turkey entered the League on July 18, 1932, becoming its 56th member and on 17 September 1934 was elected as a non-permanent member of the Council. M. O. Hudson, “Admission of Turkey to Membership in the League of Nations”, The American Journal of International Law, 26/4 (1932), pp. 813-814. 10 11 P. Clavin, J. W. Wessels, “Transnationalism and the League of Nations: Understanding the Work of its Economic and Financial Organisation”, Contemporary European History, 14/4 (2005), p. 465. D. Speich-Chassé, “Technical Internationalism and Global Social Change: A Critical Look at the Historiography of the United Nations”, in A. Mathias and T. Werron (eds.), What in the World?: Understanding Global Social Change, Policy Press, 2020, pp. 243-63. 12 13 Liebisch-Gümüş defines the foreign policy of the Kemalist Government for participating in multilateral, cross-border schemes of cooperation and international organizations on an equal footing with other participants as “symmetrical internationalization” strategies. C. LiebischGümüş, “Intersecting Asymmetries: The Internationalization of Turkey in the 1920s and the Limits of the Postcolonial Approach”, Acta Universitatis Carolinae Studia Territorialia, 19/1 (2019), pp. 13-41. These first correspondences between the EFS and the Turkish Statistical Office are found in two different folders in the League archives. The first one is the folder “Monthly Bulletin” in the Section 10 EFS repertories (1919-1927), R351 12361. The second folder is the “Application for League Documents” of Section 49 (1923-1927) R1792 57662. Some additional documents 14 Modern State Building and Transnational Expertise 75 processes of international cooperation and internationalization of national data through the intermediation of international experts but also provides original documentation. I. The Allied Meetings as Negotiation Tables for Framing “International Co-operation in Statistics” Established at the end of the World War I as a first political international organization (IO) aiming to achieve global status, the League sought to acquire a dominant position among other international bodies. The Article 24 of its Covenant placed all “international bureaux and all commissions for the regulation of matters of international interest hereafter constituted” under its direction. The article also proposed the same for those “already established by general treaties if the parties to such treaties consent[ed]”.15 The League aspired to a hegemonic position in international quantification taking over most of the ideas and responsibilities envisaged by other IOs invested in statistical activity. Statistical work was not the only sector of international action that the league attempted to centralize under its auspices, but one of importance. It was considered essential for the activities and objectives of the League, for instance, to establish a liberal international trade system.16 As one of its officers, Alexander Loveday, later summarized in an article entitled “The League of Nations and International Trade Statistics”, the EFS organized a meeting of statisticians in London, August 1919, during the construction of the league.17 The purpose of this “informal meeting” was “to consider in a general manner the way in which the new league organization could best assist in the development of international cooperation in statistics and to discuss the relation of the league with the various existing found in other repertories are used, such as “External Fonds”, as well as other historical sources. United Nations, “The Peace Treaty of Versailles, signed June 28, 1919. Part I: The Covenant of the League of Nations”, https://www.ungeneva.org/en/library-archives/league-of-nations/covenant 15 16 R. Cussó, « L’activité statistique de l’Organisation économique et financière de la Société des Nations : Un nouveau lien entre pouvoir et quantification », Histoire & Mesure, XXVII/2 (2012), pp. 107-36 & p. 119. Idem, “Building a Global Representation of Trade Through International Quantification: The League of Nations’ Unification of Methods in Economic Statistics”, The International History Review, 42/4 (2020), pp. 714-736. See also the chapter by R. Cussó in this book. “Soon after the formation of the preliminary organizating skeleton of the Secretariat of the League of Nations, it was decided to hold an informal meeting of statisticians”. A. Loveday, “The League of Nations and International Trade Statistics”, The Annals of the American Academy of Political and Social Science, 94 (1921), p. 156. 17 76 Aykiz Dogan international institutions which dealt with this subject”.18 The idea of assisting existing organizations was likewise stated in the “Explanatory statement” of this meeting.19 The meeting brought together a male elite20 of allied powers representing the ISI, International Institute of Agriculture (henceforth IIA) and the League –that is the Secretariat, EFS, and the Labor Section (henceforth ILO)– as well as British and French statistical bureaus. These representatives participated without being officially mandated by their respective institutions due to the informal character of the meeting since “[t]he League and its organisation [were] not yet formally established” at the time.21 Apart from the Japanese Nitobe Inazo, who participated as one of the under-secretaries general of the League, the participants were all from Allied powers of Europe, from France, Italy, Belgium and mostly from Great Britain. They held multiple roles in international and national institutions and transnational networks of the allied powers. The chair of the meeting, the British economist and officer Arthur Salter22 raised two international problems: there were “important gaps in the existing organisation” and “the whole field of international statistics [was] not covered”, therefore measures “to fill up the existing gaps” were needed “to avoid overlapping”.23 British participants –mostly political bureaucratic actors some of whom were related to the League or representing other IOs– predominated both in number and voice. They supported the idea of centralizing international statistical work under the auspices of the league. One of the architects of the League, the British diplomat and politician, Robert Cecil underlined for instance, “the importance of statistics in the sphere of international administration”. A representative of the ISI, Athelstane Baines (a former senior British civil servant in Indian Civil Service and a member of the Royal Statistical Society and American Statistical Association among others): 18 Ibid., p. 156. The “Explanatory statement” of this meeting was documented in the proceedings which were published by the League. According to this statement, the meeting was organized to discuss how “the league organisation could assist the development of international cooperation in statistical work”. League of Nations, “Conference on International Co-operation in Statistics”, August 14th and 15th, 1919, London, Printed for The League of Nations by Harrison & Sons, St. Martin's Lane, London, W.C., p. 3. 19 Among the 24 participants, only two were female: Mdlle. Quanjer, accompanying M. Methorst and the British secretary, Miss M. W. Maxwell. 20 21 League of Nations, “Conference on International Co-operation in Statistics”, op. cit. Salter was Secretary of the Allied Supreme Economic Council and first unofficial director of the EFS. LONSEA. “Arthur Salter”, http://www.lonsea.de/pub/person/5102 22 23 League of Nations, “Conference on International Co-operation”, op. cit., p. 8. Modern State Building and Transnational Expertise 77 […] emphasised the necessity for co-ordination, not only as between the different International Bureaux and Institutes working under the auspices of the League, but the still more important work of co-ordination and critical survey of the statistical work of the various Governments by some central statistical authority.24 The British economist, Assistant Secretary of Statistics Department of the Board of Trade, A. W. Flux presented a prototype of a “new monthly Bulletin”, “designed to summarise the economic position of certain principal countries” suggesting that it should be undertaken by a central international organization.25 This proposition was based on earlier international initiatives such as the decisions of the Brussels International Convention (which, signed in 1913, had established an International Bureau of Trade Statistics) and the Supreme Economic Council, which was the source of the prototype prepared and presented by Flux.26 There were also Americans who although not participating in person, intervened indirectly as “a report of a conversation with Mr. Hoover, transmitted by Mr. Fosdick, was read at the Conference”. The American lawyer and public administrator, Raymond Fosdick was at that time a deputy secretary of the league before joining the Rockefeller Foundation in the coming years. As for the future President of the USA Herbert Hoover, he was heading the American Relief Administration and serving as an adviser to President Wilson notably during the Paris Peace Conference and the constitution of the League. According to the American report, Hoover […] emphasized the need for a uniform system of price index numbers and suggested that the organization of the League of Nations might also be utilized to secure the prompt collection and circulation (in some cases by cable) of economic statistics, particularly as to raw materials, which are not adequately dealt with by existing institutions.27 24 Ibid., p. 9-10. 25 Ibid., p. 8. Ibid. p. 8. For a detailed analysis regarding earlier initiatives and the role of the Supreme Economic Council of the Allied powers in the preparation of the pilot issue of the monthly bulletin, cf. M. Bemmann, “When the World Economy Came into Being: The Supreme Economic Council and the Establishment of ‘World Economic Statistics’ ”, in E. Conze, et al. (eds.), The Paris Peace Conference of 1919 and the Challenge of a New World Order, Oxford, Berghahn, 2023 [forthcoming]. 26 27 League of Nations, “Conference on International Co-operation”, op. cit., p. 10. 78 Aykiz Dogan The British and American side at this time advocated entrusting economic statistics to the League. This proposal raised questions about the activity of another IO in Brussels which was publishing trade statistics but was not invited to the meeting. The idea of centralizing international statistical activity at least by a coordinating authority (which would be integrated to the League according to the Article 24 of its Covenant) encountered resistance. The competition between the ISI and the IIA made a consensus even more difficult. Their international bureaucracies sought to affiliate themselves with the League, albeit with special autonomy based on the example of the International Labor Office. While both called for “decentralization” to structure the league as a political entity composed of independent technical sections benefiting from its resources, their position-takings differed according to their structures and resources. The IIA represented itself as “a living example of effective and useful permanent collaboration between Governments” that supplied data for its publications (a monthly bulletin and a yearbook) of agricultural statistics.28 It sought to affiliate itself with the League as an autonomous agriculture section. Italian delegates of the IIA favored the formation of a coordinating authority under the auspices of the league. They underlined indeed the difficulty “to persuade the National Governments to unify their system of collecting and preparing statistics” suggesting that the League could “exercise […] moral authority in the field of statistics” so as “to provide a more adequate basis of comparison”.29 On the other hand, the ISI, “founded in 1885 as a consequence of the International Congresses held periodically since 1855”, was presented by Lucien March as “a private association composed of official heads of statistical bureaux and of unofficial statisticians, economists, etc.”.30 Supported by March, who participated in the meeting as the director of the “Statistique Générale de la France” while also being a member of the ISI, the ISI delegates tried to affiliate its Bureau at the Hague with the League as the official responsible for international demographic statistics. They opposed granting any binding power to any decision-making body that was to be formed and sought to include private actors in it. This position-taking might be seen as the French one. March indeed insisted on the importance of “private exchanges” and argued that it was “necessary to include non-official representatives” based 28 Ibid., p. 5. 29 Ibid., pp. 5-6. 30 Ibid., p. 6. Modern State Building and Transnational Expertise 79 on the tripartite model of the IlO.31 This proposition met with resistance especially from the IIA delegates who called into question the quality of data provided by non-state organizations (“these organisations are too often prejudiced and self-interested”).32 Even though a sort of division of statistical work took shape between the present IOs, the crucial question of who would coordinate all these economic, demographic, agricultural and labor statistics remained unresolved. The “appointment of an International Advisory Council on statistics”33 proposed by the EFS as an agenda of the Conference and supported by the British delegates was generally accepted. The conflict of interest between the participants hindered consensus however on how to organize this council, who to appoint and with what powers. It was then decided that the league would appoint a committee “to make suggestions” and “prepare a Report”.34 The resulting expert committee included exclusively male representatives also from two other IOs specialized in commercial statistics. This time not only British and French but also Spanish, Canadian and Italian national statistical institutions as well as a Japanese diplomatic officer were invited. Again, the transnational connections between the European majority were remarkable, linking various national and international institutions both in political, bureaucratic and scientific fields.35 For instance, the ISI was represented by its Vice-President Delatour and the secretary H. W. Methorst, and not by its President, Luigi Bodio, who was also invited, albeit as the President of the Italian Supreme Council of Statistics. The secondary affiliations of these actors highlighted their multiple positions and networks and the porosity between various national and international power-knowledge fields concentrated in Europe. For instance, Delatour was a member of the Société d'économie politique in France, Methorst was a Director at the Dutch Central Statistical Bureau, and Bodio was involved in politics as an Italian Senator. 31 Ibid., p. 5, 10. The General Secretary of the IIA, “Signor Dragoni, replying to a suggestion made by M. Varlez, expressed the opinion that statistics furnished by unofficial, or trade union organisations are of great importance, but are not to be placed on the same level with statistics compiled by official institutes. The Industrial and Employers’ Organisations supply the raw material of statistics for the use of the official bodies, but these organisations are too often prejudiced and self-interested, and regard statistics more as a means than an end”. Ibid., p 14. 32 33 Ibid., p. 41. 34 Ibid., p. 18. The full list is available in League’s archive documents in the folder R290 80 678 “Minutes of the International Statistical Conference held in Paris on October 11th, 1920” of the EFS files (Section 10). 35 80 Aykiz Dogan A senior officer at the Ministry of Interior of Belgium, Camille Jacquart, who would lead the statistical reform in Turkey, was a member of the ISI, while he was representing the International Bureau of Commercial Statistics. The secretariat of the League was represented by A. Loveday, who also participated in the previous conference, and by another British economist, W. layton. With new actors included the question of autonomy of the existing IOs and national statistical bureaus with respect to the league became an even greater concern. Against the minority position of the League, the British and Canadian delegates in favor of establishing “within the organization of the League a statistical section”, the majority position was opposed to the idea of entrusting the league with any power beyond simple coordination. It recommended forming a permanent “International Commission of Statistics” composed of experts from the existing IOs to advise the league Council regarding the statistics it needed.36 In spite of this first resistance, the League went well beyond simple coordination. Especially the EFS created its own economic statistics program undertaking also the monthly bulletin project as of 1920.37 It organized furthermore other international conferences, which allowed it to better frame, legitimize and consolidate the scope and instruments of its action. It started sending questionnaires to various states requesting economic data in preparation for an International Financial Conference.38 Held in Brussels in 1920 (September 24-October 8), this Conference was organized in response to calls from professionals of the finance sector in Europe for measures to regulate trade and finance destabilized by the war.39 upon the recommendation of forming a body “of bankers and businessmen” which would “frame measures to give effect to certain decisions of the Conference”, the Council resolved to form a Financial and Economic Committee around the EFS.40 As the collected data would now also serve to make research and 36 Minutes of the International Statistical Conference held in Paris on October 11th, 1920, League Archives R290 80 10678 (Section 10). R. H. Coats, “Report of the International Statistical Commission Appointed by the Council of the League of Nations”, Quarterly Publications of the American Statistical Association, 17 (1921). For more context, see also R. Cussó, « L’activité statistique », op. cit. A. Dogan, « L’étatisation turque », op. cit., pp. 356-59. 37 Cf. R. Cussó, « L’activité statistique », op. cit., p. 123. 38 Ibid. For more context, cf. Y. Decorzant, « La Société des Nations et l’apparition d'un nouveau réseau d’expertise économique et financière (1914-1923) », Critique internationale, 52/3 (2011), pp. 35-50. 39 40 Cf. the “Resolution of the Council of the League of Nations of October 25th, 1920”, whereby Modern State Building and Transnational Expertise 81 policy recommendations on economic and financial matters, the re-surging necessity to unify and standardize national statistics was addressed again in the Genoa Conference of 1922.41 The Conference resolutions granted the league the responsibility of world economic statistics involving also the elaboration of “common principles” expected to “serve as a basis for the organization of [states’ statistical] departments”.42 The international action of EFS hence developed in collaboration with various private, state and international actors and built its legitimacy through conferences, conventions and other strategies. The League furthermore found the opportunity of affirming its “specialized organizations” while intervening in the Austrian financial crisis with a stabilization program. It was in this set of circumstances that the Economic and Financial Organization (EFO) was institutionalized in 1923.43 According to its official definition, the EFS was responsible for providing “the secretariat and permanent experts of the ‘Economic and Financial a ‘provisional Financial and Economic Committee’ was set up. The Council, by a resolution of September 10th, 1923, deleted the word ‘provisional’. The Economic Committee was later separated from the Financial Committee. League of Nations, The Committees of the League of Nations. Classified List and Essential Facts, Geneva, 1945, p. 37. The question on the standardization of statistical data was in fact formulated and treated since the very first International Congress of Statistics in Brussels in 1853. R. Cussó, « La quantification internationale à la lumière de la SSP et des Congrès internationaux de statistique : continuités et ruptures », Journ@l Électronique d’Histoire des Probabilités et de la Statistique, 6/2 (2010). On the Genoa Conference and the emergence of a global regulation of the monetary system during the Interwar period, cf. C. Brégianni, “Interwar International Institutions, Great Depression and Greece: monetary ad peripheral dimensions of the global economic crisis”, in A. Kakridis, S. Rizas (eds.), Great Depression and Greece: Economic, institutional and social dimensions, Athens, Bank of Greece, 2021, pp. 135-165, here 137-139, in Greek. Idem, “A Regulatory Role of Money in the Interwar Period and Beyond. Global Actors and Local Players, from Institutional and Historical Respective”, paper presented in the Conference Monetary Integration and Disintegration in the Interwar Europe: The Impact of the Great Depression from Institutional Agency to Local Conditions, TransMonEA Research Project, Academy of Athens HFRI (1 & 2 November 2021). 41 “Report to the Council by the Economic Committee of the Provisional Economic and Financial Committee on their Session held in Geneva from June 8th to 10th, 1922”, Geneva, July 4th 1922. Archive document no. C-437-1922-II-C_BI. For an evaluation cf. F. D’Onofrio, “Agricultural numbers: the statistics of the International Institute of Agriculture in the Interwar period”, Agricultural History Review, 65/2 (2017), 277-296. 42 Patricia Clavin demonstrates how the Provisional Committee became the Economic and Financial Organization (EFO) in 1923 on the occasion of the League intervening in Austria with a financial stabilization program. P. Clavin, Securing the World Economy: The Reinvention of the League of Nations, 1920-1946, Oxford University Press, 2013, pp. 25-33. 43 82 Aykiz Dogan Organization’ of the League of Nations” and “should not be regarded as a de facto autonomous body, such as the ILO or the Hague Court, not even as an internal ‘organization’ that can have relations with non-member states”.44 Yet, it established relations with Turkey long before its official membership of the League in 1932. In this respect, the EFS established informally “a significant degree of autonomy” as underlined by Clavin and Wessels,45 while being accountable to the Secretary-General and governing organs of the League (the Council and the Assembly were composed of government representatives). Besides the Monthly Bulletin, the EFS produced other series as well. It published the first volume of Balances of Payments in 192446 and of the Statistical Yearbook (of 1926) in 1927.47 The section underwent several transformations during the 1930s, but in its new forms continued organizing conferences and publishing international statistics such as Money and Banking, the Review of World Trade or the World Economic Survey. Its relationship to various states thus involved a universal mission but no universal membership (admission was subject to a selective process by the League Assembly). It served as a laboratory for the elaboration and implementation of new methods and policies in international quantification which were later enhanced and reinforced by new supranational actors. The united Nations took over most of its work48 and it also inspired statistical activities of other international organizations such as the World Bank or the International Monetary Fund. II. Importing International Expertise in the Reorganization of State Statistics in Turkey Turkey was not one of the twenty-five countries that responded to the EFS unification program in 1924,49 but it was represented both in the World Economic Conference of 1927 and the International Conference relating to 44 Original in French. Répertoire, « Fonds du secrétariat, Section(s) économique et financière », http://libraryresources.unog.ch/ld.php?content_id=19934149. All the quotes from the original documents in French, were translated by the author. 45 P. Clavin, J. W. Wessels, “Transnationalism and the League”, op. cit. League of Nations, Memorandum on Balance of Payments and Foreign Trade Balances. 19101923, Geneva, Paris, Presses Universitaires de France, 1924. 46 League of Nations, EFS, International Statistical Yearbook 1926, Geneva, Publications of the League, 1927. 47 For an overview of these transformations cf. P. Clavin, J. W. Wessels. “Transnationalism”, op. cit. 48 49 R. Cussó, “Building a Global Representation of Trade”, op. cit. Modern State Building and Transnational Expertise 83 Economic Statistics in 1928 (both organized by the EFS).50 The Statistical Yearbook which was first published as a document of the World Economic Conference of 192751 included estimates or old data for Turkey mostly reported by other IOs such as the ISI and IIA which compiled statistics from the Ottoman state.52 The results of the first census of the Turkish Republic in 1927 were integrated into the Yearbooks starting from the following year and gradually into various tables of the Monthly Bulletin of Statistics and other league publications during the 1930s. One could reasonably wonder as to what change took place between 1924 and 1927. During this time span Turkey somehow became part of the international endeavor on statistics led by the EFS of the league. In fact, Turkey was for a good while part of the “statistical internationalism” which emerged during the 19th century. The Ottoman Empire was represented in these spaces as “Turkey”, a founding member among others of the International Institute of Agriculture (IIA) and a member of the International Statistical Institute (ISI).53 The Ottoman state participated in negotiations of international norms and applied international expertise in its quantification policies to produce national statistics based on census-taking and administrative registries – two sources of public statistics according to Desrosières.54 The Ottoman State first started to publish foreign trade statistics at the end of the 1870s and compiled other census results in the form of yearbooks in the 1890s as in other census-taking countries.55 During the transition to the nation-state Turkey did not sign the resulting convention. Section économique et financière, « Actes de la Conférence économique internationale tenue à Genève du 4 au 23 mai 1927 », C.356. M.129.1927. League archives, R2702 10B 3911 5066, Conférence de Statistique 1928, Représentation de la Turquie. League of Nations, Proceedings of the International Conference Relating to Economic Statistics, Geneva, November 26th to December 14th, 1928, C.163.M.64.1929. II. 50 League of Nations, EFS, International Statistical Yearbook 1926, Geneva, Publications of the League, 1927. 51 52 Turkey figured in various tables of the Statistical Yearbooks of 1926 and 1927 with previous data or estimates. For example, on the 1927 Yearbook, Turkey appeared in 29 of a total of 103 tables. League of Nations, EFS, International Statistical Yearbook 1927, Geneva, Publications of the League, 1928. R. D. Volta, « L’institut international d’agriculture. Proposé par S. M. Le Roi d’Italie », Revue d’économie Politique, 19/7 (1905), pp. 597-621. G. J. Stemerdink (ed.), Members of the International Statistical Institute. A Cumulative List for the Period 1885-2002, Voorburg, International Statistical Institute, 2003. 53 54 A. Desrosières, « Décrire l’état ou explorer la société : les deux sources de la statistique publique », Genèses, 58/1 (2005). 55 T. Güran, “The First Ottoman Statistical Yearbook Dated 1897”, in H. İnalcık, Ş. Pamuk (eds.), Data and Statistics, op. cit., pp. 165-179. K. H. Karpat, Ottoman Population, op. cit. 84 Aykiz Dogan in the early 20th century, the state took further the earlier experimentations of statistical centralization. The central bureau established during WWI by the German statistician, Professor Würzburger in Istanbul56 probably served as a prototype for the construction of a new central statistical office in the new capital Ankara after the creation of a new Turkish state. Despite the remarkable continuities in state bureaucracy, the military elite which founded a new parliamentary government in Ankara during the armed struggle against the Allied occupation at the end of WWI adopted a narrative of rupture. As many scholars remarked, statistics proved to be a site of political struggle not only during the fall of the Ottoman Empire, but also during the negotiation of the new Turkish State.57 The leaders of the new state soon invested in a large-scale statistical reform to respond to the necessities of nation building and to demonstrate the modernity of the new national bureaucracy, as other young governments formed at the end of the world war.58 In fact, as national experts of that time such as Celal Aybar, who contributed to this reform, as well as historians later asserted, the Ottoman statistical system suffered from financial difficulties since the loss of sovereignty over public finances after the declaration of a moratorium on debt payments in 1876.59 For example, the Turkish economic historian Korkut Boratav argued that: “The dependent and semi-colonial status of the Ottoman Empire had resulted in relatively developed statistical systems on external trade and foreign debts, whereas elementary quantitative information on the state of the nation was lacking”.60 Shortly after the proclamation of the Republic in 1923 following the lausanne treaty which provided international recognition to the new Turkish M. Djélal, « La Statistique en Turquie », Progress in Public Administration, 6.4 (1933), pp. 425-433. 56 F. Dündar, « Compter, classer, contrôler », Turcica, 37 (2005), pp. 187-220. K. H. Karpat, Ottoman Population, op. cit. S. J. Shaw, “The Ottoman Census”, op. cit. Z. Toprak, “Quantification in the Ottoman State”, op. cit. M. Zamir, “Population Statistics of the Ottoman Empire in 1914 and 1919”, Middle Eastern Studies, 17.1 (1981), pp. 85-106. 57 58 Bemmann observes that many governments adopted the mantra repeatedly put forward by “Western” observers that one could recognize the “modernity” of a country by the state of its official statistics, among other elements. M. Bemmann, “Weltwirtschaftsstatistik”, op. cit., pp. 372-373. The Ottoman Public Debt Administration, a transnational bureaucracy, whose foreign members were chosen by the creditor banks and bondholders took over the administration of around one third of state revenues. A. Dogan, « L’étatisation turque dans l’entre-deux-guerres et ses acteurs », op. cit. 59 60 K. Boratav, “Kemalist Economic Policies and Etatism”, in A. Kazancıgil, E. Özbudun (eds.), Atatürk: Founder of a Modern State, Hamden, Archon Books, 1981, p. 166. Modern State Building and Transnational Expertise 85 state as a sovereign political entity after decades of war and struggle for independence, the nationalist Government invested in a statistical reform. Following the negotiations with the Belgian Government in 1924, it was decided to entrust this mission to the director of the statistical administration at the Belgian Ministry of Interior, Camille Jacquart. Upon the official invitation in 1925 by the Turkish Government, this Belgian demographer came in 1926 to lead a new Central Statistical Office in Ankara.61 The Office was established in early 1926 as one of the first institutions founded in the Republican period and Jacquart was appointed as its first director.62 Doctor of law, Jacquart (1867-1931) started his career in journalism (1889-98), then worked at the Administration of Statistics and Electoral Affairs of the Ministry of the Interior as a civil servant (1898-1913), a director (1913-1919) and then as the director-general (1919-1929). While working in public administration, he served as an expert and a technical advisor for the Government in conducting studies and other missions. He also taught statistics and commercial law in Belgian higher education institutions.63 He contributed to the literature on statistical sciences through his numerous publications. He was also a prominent international figure. He was a member of the International Statistical Institute (ISI) and the International Institute of Commerce at Brussels. He represented the latter in the International Statistical Commission (see previous section) and played an active role in the preparation of the Conference for International Cooperation in Statistics in 1920 and its various initiatives (1919-1920).64 He participated in international activities of the League Health Committee (1925).65 After three years in Turkey, he returned to Belgium as Secretary General of the Belgian Ministry of the Interior at the end of 1929. He came back to Ankara upon a request by the Turkish government in October 1930 to supervise the 61 Republic of Turkey Prime Ministry Archives (hereafter BCA), 030.18.1.1_14-40-16. The Decree was promulgated in the Official Gazette (no. 388) of 2nd June 1926 (p. 2). Jacquart took office at the end of March 1926 (BCA 30.10.0.0_12-71-47). The construction of Turkish Statistical Office by Jacquart is not much studied except. A. Dogan, « L’étatisation turque dans l’entre-deux-guerres et ses acteurs », op. cit. & S. Yildirim, “Belgian demographer and statistician Camille Jacquart and the construction of modern statistics in Turkey”, Modern Türklük Araştırmaları Dergisi, 7/1 (2010), pp. 8-36, in Turkish. 62 A. Dufrasne, « Camille Jacquart », in Académie Royale de Belgique (ed.), Biographie nationale, t. 39, Bruxelles, 1976, pp. 471-478. TUIK, “Former Presidents”, http://www.turkstat.gov.tr/UstMenu.do?metod=eskibaskan 63 64 League Archives, Section 10 (1919-1927), “International Statistics”, R290 80 678. League Archives. Comité d’Hygiène, Le Communiqué au Conseil et aux Membres de la Société, 1925, C-647-M-236-1925-III. 65 86 Aykiz Dogan preparations for a second general census. He passed away a few months after his return to Belgium.66 Jacquart found in Turkey the opportunity to experiment with the statistical centralization model, which prevailed especially after the war and which he defended already in Belgium.67 He conducted the first population, agriculture and industrial census of the Turkish Republic according to ISI conventions.68 He played a key role in the circulation of statistical norms, knowledge and know-how at the intersection of international expert spaces, Turkish and Belgian state fields. Concrete exchanges with the EFS started only after Jacquart took office as the director of the newly established Central Statistical Office in 1926. III. An Invitation for Technical Cooperation with Regard to Turkish Data: Expert Connections and Concepts of a World Economy Jacquart’s background and network connections which probably played a role in his recruitment by the Turkish Office, obviously contributed to building dialogue with the League bureaucracy. In fact, the EFS addressed all of its letters directly to Jacquart and not to the Turkish Office. Their first letter to “Monsieur Jacquart” dated December 14th, 1926, and was stamped by A. loveday as the Head of Economic Documentation Service.69 Alexander Loveday (1888-1962) was a British academic and civil servant who worked at the War Office before joining the Economic and Financial Section (EFS) of the League. He occupied senior positions at the section, from its establishment to its restructure and the final devolvement into the united Nations.70 His bureaucratic-scientific background and trajectory is For more details, cf. A. Dogan, « L’étatisation turque dans l’entre-deux-guerres et ses acteurs », op. cit. 66 Jacquart afterwards contributed to statistical centralization in Belgium as well. A. Dogan, « L’étatisation turque dans l’entre-deux-guerres et ses acteurs », op. cit. For an inquiry on the international diffusion of the centralization model and its different definitions, cf. J.-G. Prévost, J.-P. Beaud, Statistics, Public Debate and the State, 1800-1945: A Social, Political and Intellectual History on Numbers, Routledge, 2015. 67 68 A. Dogan, “Modernising Turkey with Statistics”, op. cit. League Archives (1919-1927). Economic and Financial Section (10). “Monthly Bulletin of Statistics”. R351 12361 56101. The study refers to the signing party as the author of the letter even though the corrected drafts found in the League archive folders indicate that it might well be secretaries or other officials who wrote the letters to be signed by a chief. See the Appendices (Letter 1) for the entire letter. Unless otherwise specified, following citations are from the same source and translated from the original in French by the author. 69 70 Born in Scotland, Loveday studied at Peterhouse College (University of Cambridge). He Modern State Building and Transnational Expertise 87 representative of the many British “international” officers and experts who largely populated the league bureaucracy71 as a consequence of the British economic power during the interwar period.72 loveday played an active role not only in negotiations with international actors (see the first section) but also with national offices for the implementation of the EFS program. His letter stated that: We regret that we are unable to publish statistics for Turkey and we are very keen to fill this gap in our statistics. I would therefore be very grateful if you could inform me if you can provide us with some of the information listed on a regular basis and thus cooperate in this endeavor. I would be extremely pleased if Turkey could be added to the list of countries for which economic information is published. Loveday began his letter stating that he “learned from Mr. Manrette, head of the Research Division at the International Labor Office” (ILO) that Jacquart was “in charge of the reorganization of statistics in Turkey”. The name of the French geographer and ILO officer, Fernand Maurette was misspelled in the letter. This international expert had met Jacquart during his mission between 1925 and 1926 to study labor legislation and work conditions in Turkey and to consolidate international cooperation between the IlO and Turkish authorities.73 loveday’s mention of him pointed out the connections lectured on political philosophy at Leipzig University, then economics at Cambridge. He worked for the War Office for four years before joining the EFS in 1919. He served as a chief (1929-1931), then the Director of Financial Section and Economic Intelligence Service (19311939), and the Economic, Financial and Transit Department (1939-1940). After the Second World War when the United Nations replaced the League, he worked for a short while as a member of the Institute for Advanced Study at Princeton, USA. In 1946, he became a Fellow of Nuffield College, Oxford, where he was appointed the third Warden in 1950. He retired in 1954. “From the Archive - Alexander Loveday”, Nuffield College Library's blog, May 23, 2014, https://nuffieldcollegelibrary.wordpress.com/2014/05/23/from-the-archive-alexanderloveday/ Cf. also, LONSEA, “Alexander Loveday”, http://www.lonsea.de/pub/person/5246 Clavin and Wessels underline the domination of British officers in the Financial Section and the importance of political stakes especially in times of the nomination of section directors. P. Clavin, J. W. Wessels, “Transnationalism and the League”, op. cit., pp. 472, 475-6. 71 72 This economic power would be destabilized during the 1930s. B. Eichengreen, Golden Fetters. The gold standard and the Great Depression 1919-1939, New York/Oxford, Oxford University Press, 1992. C. Brégianni, “Transnational Cooperation and Leading Ideologies in a Period of Economic Nationalism. A contradiction of the European Interwar?”, Neohellenica Historica, 1 (2010), pp. 37-58, in Greek. For more details about this mission, cf. M. Gülmez. 1919-2019 ILO-Türkiye İlişkilerinin Yüzyılı. Ankara, ILO Türkiye Ofisi, 2019, in Turkish. 73 88 Aykiz Dogan between the two interlocking international bureaucracies both invested in quantification under the League. The strong network logic between international experts structured their transnational space in such a manner that one’s position and investments served as resource for another. “Knowing your interest in statistical work”, Loveday stressed the point of asking for Jacquart’s “support with regard to the statistical data on Turkey”. Indeed, Loveday did not write to the Turkish Statistical Office, but specifically to Jacquart. The Belgian demographer’s background and network connections in the international space of expert-statisticians contributed to the establishment of a dialogue between the two institutions. Their previous collaboration provided a certain legitimacy to Loveday’s request when he introduced the statistical project and products of EFS and asked Jacquart to “cooperate in this endeavor”. Indeed, Jacquart was already engaged in the universalist vision behind this project. This invitation letter was both personalized and standard. loveday informed about the purpose and content of the two documents he sent as appendices. He presented the Monthly Bulletin of Statistics underlining that it was “published regularly every month since 1920”. The monthly questionnaire, which was the second document enclosed and presented in the letter, was more than a simple tool for gathering data. It defined the nomenclatures, units and concepts and described which data were relevant, in which method and by which units they should be represented. It was an instrument of giving direction to national statistical institutions and their quantification policies. Those institutions were supposed to fill the questionnaire according to instructions and send it back to the central Geneva Office “each month by telegram or letter”. Explaining standard procedures and demanding standardized data at a fixed date, the EFS’s invitation letter served itself as an instrument of its international policies aiming at the production of world economic statistics through harmonization of methods and data. The Monthly Bulletin evolved covering additional variables and details over time, but at the time it included “the monthly statistics on the production of coal, iron and steel, on the imports and exports, shipping movements, price fluctuations, gold reserves and currency circulation, exchange rates and discount rates, etc.”. These key variables that the EFS defined in the Bulletin and questionnaire related national statistics to each other. The EFS project promoted a specific concept of an interconnected world economy based on global commercial and financial circuits.74 As the letter emphasized For the statistical elaboration of concepts of “economy” in the interwar period, cf. A. J. Tooze, Statistics and the German State, op. cit. For a discussion on the “economy” as an invention of the 20th century built out of a series of competing projects and “new technologies 74 Modern State Building and Transnational Expertise 89 in a similar manner with the British officer who presented the project at the conference in 1919, the Bulletin purported to summarize “in a concise form the economic situation of most of the world’s major trading countries”, which made at the time a total of “about fifty countries”. These international products published in Geneva relied on the idea of a universal statistical language which enabled stratifying countries in a world market according to their resources and trade. By making comparisons possible they promoted not only competition and increased integration to world markets through open trade but also hierarchical classifications. The trade capacity of any given country as well as the ability to present it in quantitative terms were defined as a form of capital. These self-representations enabled a political and economic system of modern statehood. A hierarchical order appeared in consequence, with “most of the world’s major trading countries” already part of this community, alongside those who were not (yet) integrated and those for which “it has been only recently possible” to publish trade series. As example for the latter group, the letter of the EFS mentioned statistics of Palestine, Syria, Lebanon, and Iraq, while referring to Turkish statistics as a gap (namely a “lacune”) to be filled. Laying in a certain geographical area, these countries were not arbitrary examples. They were all part of what the “Turkish Empire” was once as the league called it in its Covenant and were subjected to the mandate system by the Article 22.75 The EFS based its reasoning on political and regional categories placing countries in a world order designed by international treaties and consolidated by numbers. IV. Commitment to a Universal Project: Ambitions and Deficiencies The response of Jacquart one month later confirmed his commitment to the statistical project of the league.76 It was implicit in the letter that making of organization, measurement, calculation, and representation”, cf. T. Mitchell, “Rethinking Economy”, Geoforum, 39/3 (2008), pp. 1116-1121. “Certain communities formerly belonging to the Turkish Empire have reached a stage of development where their existence as independent nations can be provisionally recognized subject to the rendering of administrative advice and assistance by a Mandatory until such time as they are able to stand alone”. League of Nations, “Covenant of the League of Nations”, 28.4.1919, available at: The Avalon Project, Lillian Goldman Law Library, http://avalon.law. yale.edu/20th_century/leagcov.asp 75 The letter was dated January 12th, 1927, but was recorded in the League registries on February 25, 1927, indicating a postal service delivery time of approximately one month. Unlike the EFS letters and Jacquart’s following typed responses, this letter was handwritten. League Archives, “Monthly Bulletin of Statistics”, R351 12361 56101. See the Appendices 76 90 Aykiz Dogan Turkish data international was part of his mission. In this regard, hiring an international expert such as Jacquart instead of a local statistician was a strategic choice in accordance with the aspirations of the Turkish Government to demonstrate the modernity of the new state to the international community. Not only his technical knowledge, but also his symbolic and social capital, in particular his reputation and connections in international expert networks, made it possible to lay the foundations of a statistical office in dialogue with major international actors. On the one hand Jacquart’s mission reinforced the symbolic capital of Turkey in the international arena; on the other, it highlighted its deficiencies. Replying to “Monsieur Loveday”, Jacquart confirmed that he was “in charge of the reorganization of Turkey’s statistics” which he presented as deficient and incomplete: for almost all the points listed in the monthly questionnaire which accompanied your letter, it is impossible under the present conditions of statistical work in Turkey to provide the requested statistical information. The only available data, the “monthly foreign trade statistics” were published “with delays of several months and still irregularly”. Highlighting these flaws with respect to the expectations of the EFS or international norms in general, was a means to emphasize the importance of his role in the Turkish statistical reform. “It is not a small task” (« Ce n’est pas une petite affaire »), he wrote, “and it will take some more efforts to establish regular monthly statistics”. From the point of view of the international expert, sharing statistics for international quantification purposes, such as the EFS projects, required a specific organization and discipline at national level. Collecting, recording, and reporting data regularly and systematically in a standardized format required resources, including qualified and trained staff, and the official adoption of standardized procedures. Turkey was somehow lagging behind in this type of statistical bureaucratization and it was the mission of the Belgian statistician to calibrate the statistical system of Turkey with the international system that the EFS and other organizations such as the ISI were trying to consolidate. Jacquart concluded his letter by emphasizing his commitment to internationalize Turkish statistics: “I shall not fail to report them to the League of Nations when possible, and I am also eager to see Turkey included in your Monthly Bulletin”. He also expressed his interest in (Letter 2) for the entire letter. Unless otherwise specified, following citations are from the same source and translated from the original in French by the author. Modern State Building and Transnational Expertise 91 the statistical products of the league: “I shall be glad to receive your monthly bulletin for my personal use and for the collections of the Central Statistical Office that I lead here”. Jacquart hence engaged the Office in the exchange of documentation with the league which was an important step in establishing cooperation between the two institutions. In fact, he did not wait for the EFS response to send another letter sharing official documents regarding the statistical reform in Turkey. V. Sharing State Documents: Turkey’s Statistical Reform and Claim for Modernity Before receiving loveday’s response on February 14th, Jacquart sent a second letter on February 8, 1927, and two legal documents which decreed the creation of the Central Statistical Office and announced the first general population census.77 These documents informed on the legal basis of national policies and institutions in Turkey regarding statistics. They also certified Jacquart’s official position and authority. While his first letter only mentioned his responsibility in the reorganization of Turkey’s statistics, in this short (four-sentence) letter, Jacquart emphasized that he was leading the Turkish Office and signed as “Director general”. The dialogue between the two bureaucracies –one national and the other international– relied on the transnational position of the Belgian statistician as public administrator in a third country and his ties with international actors. These ties were evident in his demand for the league publications “and particularly a statistical yearbook”. Although the EFS’s letter did not mention it, Jacquart knew that they were preparing to publish a first Statistical Yearbook for 1926.78 Furthermore, Jacquart did not address “Monsieur Loveday” as he did in his first letter, but “Monsieur le Directeur et cher Collègue”. Addressing him This letter was classified in the archive folder “Application for League documents”, Section 49 (1923-1927) R1792 57662. Unless otherwise specified, the following citations are from this same source. The annexed documents were typed in French, but unlike Jacquart’s letters, they contained orthographic and syntax errors. They were most probably composed and typed by a non-native French speaker, which does not necessarily mean that Jacquart did not have any role in their construction. Translation by the present author does not reflect most of these errors. Cf. the Appendices (Letter 3) for the entire letter. 77 “The first edition of the International Statistical Year-Book was published as one of the documents of the World Economic Conference in the spring of 1927 and contained data up to the end of the year 1925 or 1926” wrote Loveday in the preface of the second Yearbook. League of Nations, EFS, International Statistical Yearbook 1927, op. cit. 78 92 Aykiz Dogan as a “dear colleague”, he implied that they were indeed part of a common endeavor. As members of the same expert community, they undertook different missions and worked for separate institutions, but operated from a common epistemological foundation. They spoke the same language and acted upon common beliefs, even though they had different interests and resources. Probably Jacquart played an important role of intermediation in the quest of engaging the Office to cooperate with the EFS. The letter included state documents that Jacquart could not be able to share without the authorization of the leading governmental actors such as the Prime Minister or the President, Mustafa Kemal.79 Furthermore, Jacquart declared “I shall be very happy if consistent relations could establish between us” which confirmed the willingness for cooperation from the Turkish side. Whether Jacquart recommended sending official documents and asked the national leaders for their permission, or if it was their idea will remain an unanswered question for this study, but most probably Turkish actors contributed in or checked the letter. In fact, the attached Decree not only stipulated the duties and authorities of the Office but also their limits: while established as an autonomous unit granted with responsibilities regarding the elaboration of quantification policies, Jacquart’s Office was under the strict supervision of the Council of Ministers and its President (the Prime Minister).80 While the Office was entitled to make changes in methods, procedures and tools regarding all statistical work in state departments (except for the military) for a gradual uniformization and centralization, it required the approval of the executive branch.81 A second expert body, a Statistical Commission, composed of officials from various Ministries, was to advise the PM in his decisions regarding the Office policy proposals. Furthermore, while the Decree delegated the The leader of the independence war and the construction of Turkish nation state, Mustafa Kemal received Atatürk as surname upon a parliamentary decision following the promulgation of Surname Law in June 1934. Due to his military success against Greek occupation during the Greco-turkish war (1919-1922), Ismet Pasha received the surname Inönü. 79 80 This document was a (French) translation of the Decree no. 3517 of 25 April 1926 (published in the Official Gazette no. 388 on 2 June 1926) which founded the Central Statistical Office. 81 The 1924 constitution (in law until 1961 constitution) attributed legislative power to the Grand National Assembly (composed of only elected male members until 1934). As for executive power, the Assembly elected the President of the Republic as the “head of the State”. He designated the Prime Minister, that is the President of the Cabinet, who chose the Cabinet members likewise from among the deputies, by asking the Assembly a vote of confidence after obtaining the approval of the President of the Republic. Between March 1925 and November 1927, the Government was presided by Ismet Pasha, while since 1923 Mustafa Kemal was the President of the Republic. Modern State Building and Transnational Expertise 93 Office’s director to represent the Office externally, this capacity was also rather limited: “The director corresponds with the heads of the statistical offices of foreign countries for the exchange of documents and the gathering of information useful to the Ministries and the Service”. The Decree hence excluded international organizations as possible interlocutors. Furthermore, these types of correspondences were to “be submitted in advance to the President of the Council”. In other words, the latter and probably other high degree governmental actors of the executive branch, verified and perhaps even adjusted Jacquart’s letters. In fact, even though there were no documents regarding the exchanges with the EFS in Turkish State Archives, an archived file regarding the approval for the exchange of information with the Stockholm Statistics Administration in 1929 exemplifies the control process.82 Therefore, not only bureaucratic-scientific actors, who in Turkey’s case was a foreign international expert, but also elected state actors indirectly participated in the exchanges with the EFS. Hence both were involved in the technical cooperation which served as an instrument for the international policies of the league. The second attachment announced a general population census to be realized in the coming months of 1927:83 “The organization of this operation was entrusted to the newly created Central Statistical Office in Angora, which is headed by Mr. Camille Jacquart, a member of the International Institute of Statistics”. No other reference was made to Jacquart who was only represented by his affiliation to this specialized IO. The document rather focused on and translated segments from the Prime Minister’s speech during a meeting on 4th January that brought “together all the senior government staff; Ministers, deputies, senior officials” prior to “a trial census to be held in Ankara on 14th January”. The speech had two objectives: “to explain to them the importance of the proposed operation and to call on their assistance” and “to constitute the starting point for a propaganda in order to interest and initiate all classes of the population to the census”. This gathering was indeed arranged as part of the “propaganda” activities designed, as part of the census project, to avoid possible resistance.84 Internal letters between Jacquart (as the director of the Office) and governmental actors, shows that the Turkish Prime Minister wrote to the Minister of Foreign Affairs to ask for his opinion. BCA 30.10.0.0_24-135-1 (09.01.1929). 82 This second document was entitled « Turquie–Recensement de la population–Création d’un Office Central de Statistique ». 83 The related documents are published in L’Office Central de Statistique, Recensement général de la population au 28 octobre 1927, Fasicule III, Imprimerie bachvekalet mudevvenat, Ankara, 1929. Cf. A. Dogan, “Modernising Turkey with Statistics”, op. cit. Idem, « L’étatisation turque », 84 94 Aykiz Dogan The document cited the PM’s speech which insisted on “usefulness”, “accuracy”, “exactitude” and “necessity”: “the necessity of possessing statistics, that are accurate, clear and precise numerical records in all the fields which the action of the government must exercise”. The need was highlighted in various occasions: “We feel every day this need for information and documentation”. It indicated that, as a nation-state under construction, Turkey needed to quantify itself, to count and govern: “We want to establish the exact number of inhabitants”, said the President of the Council, “not one more not one less”. It was also in this meeting that “Ismet Pasha took the opportunity to develop a whole governmental program of reorganization of statistics in general and to outline the role of the newly created Central Office”. It was “set up to perfect the statistics” in their possession and to establish those they lacked, including “accurate and complete records of the population”. It was not only targeting the multitude on circumscribed state territory to define it as a population, an object of government, but also to rationalize, in other words to discipline, the bureaucratic field. Indeed, the Office was “also responsible for monitoring and coordinating the statistics currently produced by the ministerial departments, indicating the rational methods to be adopted in order to make them as accurate and as useful as possible”. It was “to institute a single center of management for the statistical work”, to ensure “the uniformity and the scientific and practical value of methods”. It would recruit and train its staff so that it could “prepare itself all the statistics of general interest” eventually taking over the work of other units as well: We will thus gradually replace the current dispersion of statistical work in the different ministerial departments, concentrating this work in an office where it will be entrusted to a specialized staff, having acquired by study and by practice the particular capacities required for the development of statistics. While statistical centralization had been attempted already during the late Ottoman period as an alternative to the competing decentralization models, this commitment to replace all dispersion was a response to the requisites of nation-state building to objectify and define a national population through quantified knowledge. The Turkish Government hence chose as many other young national governments, to adopt the centralization model which became op. cit., pp. 433-475. Z. Toprak, “The First Population Census in the Republican Ankara (Trial Census-1927)”, Ankara Dergisi, 1/2 (1991), pp. 57-66, in Turkish. Modern State Building and Transnational Expertise 95 internationally prevalent especially after the war.85 Its implementation in Turkey implied the concentration of statistical work in a professional unit equipped by specialized staff according to uniform methods, gradually taking charge of all state statistics. Even though the document carefully avoided referring to the Ottoman heritage, the statistics of this undisclosed past were implicitly characterized with deficiency.86 The document distinguished between “good statistics” and “tables established without reflection and without methods by persons who are not apt”. It insisted that “these tables are not statistics”, that “they lack two things: They do not represent the reality, because they are inaccurate and they are not usable because by analyzing them we perceive that they do not bring the light sought, but doubt and confusion”. Statistics on the other hand, required a certain expertise, “an aptitude”, “to bring out the exact meaning and scope, to measure their value and to draw conclusions with precision and clarity”. The document drew on a social science perspective circulating in international scientific fields. It employed concepts (e.g. faits sociaux) of the new science, sociology, which established the society as its object of scientific inquiry as in Durkheimian school, whose influence in the national construction of Turkey is underlined by scholars.87 While rejecting positivism as a devout Catholic, Jacquart was also a sociologist inspired by Quetelet’s quantitative approach to (what he called) “social physics”.88 The document aligned with Jacquart’s approach when describing statistics as a policy tool for a social project, meant to observe and transform social reality by state 85 For an inquiry on the diffusion of this model and its different definitions, cf. J.-G. Prévost, J.-P. Beaud, Statistics, Public Debate and the State, op. cit. 86 For a critic of reading non-western histories in terms of a lack or incompleteness cf. D. Chakrabarty, Provincializing Europe: Postcolonial Thought and Historical Difference, Princeton University Press, 2000. S. A. Arjomand, “À la recherce de la conscience collective: Durkheim’s Ideological Impact in Turkey and Iran”, American Sociologist, 17 (1982), pp. 94-102. T. S. Nefes, “Ziya Gökalp’s Adaptation of Emile Durkheim’s Sociology in his Formulation of the Modern Turkish Nation”, International Sociology, 28/3 (2013), pp. 335-350. H. O. Özavcı, “Differing Interpretations of ‘la conscience collective’ and ‘the individual’ in Turkey: émile Durkheim and the Intellectual Origins of the Republic”, Journal of the History of Ideas, 75/1 (2014), pp. 113-136. R. F. Spencer, “Culture Process and Intellectual Current: Durkheim and Atatürk”, American Anthropologist, 60/4 (1958), pp. 640-657. Ş. Turan. The Events, Intellectuals and Ideas that Influenced Atatürk’s Mindset, Ankara, Türk Tarih Kurumu Basımevi, 1982, in Turkish. 87 A detailed study on Jacquart’s role in Belgium’s first sociological association and his sociological work influenced by Quetelet’s “social physics” will be published separately. A. Dogan, “A Transnational Scientist of the Social: the Trajectory of the Belgian Statistician Camille Jacquart (1867-1931)”, Working Paper, UMR D&S, Université Paris I. 88 96 Aykiz Dogan action. This description was widely shared by official statisticians especially in Western Europe and was based, as underlined by T. Porter, on the alliance between bureaucratic power and science since the 19th century. The document incorporated the prevalent idea in these circles which associated statistical offices to observatories:89 It is by aspiring to these ideas that the Office could become a veritable observatory of social facts, always at the disposal of the Government to enlighten it on the situation of the country, on the economic and moral conditions of the population, and on the results obtained by institutions of all kinds operating in the general interest. Deeply hoping that these expectations would be realized and that the first important work undertaken by the Office, the general census of the population, would succeed fully with the assistance of the Ministry of the Interior, of all the authorities, and the population. The document put emphasis on the role of state officials (especially the Prime Minister) and institutions. On the contrary, there was, for instance, no mention of Jacquart’s speech in the meeting even though it was possibly partly cited.90 His leading role in the new statistical policies was not recognized.91 This agency was attributed to the Prime Minister and other state authorities. The document referred to the Belgian expert only once. Regarding his background as a demographer, bureaucrat in the Belgian Ministry of the Interior, or expert in various League committees, only his affiliation to the ISI was emphasized, which probably was a key factor in his recruitment. The employment of an internationally recognized European expert to head the process echoed the exhortations about the replacement of inaccurate registries by scientific statistical work, the insistence on precision, accuracy, and practical value. Proving the reliability of its statistics was a challenge for the new Turkish state which claimed by this text a commitment in international norms. This narration should be considered as part of its struggle to recoup its sovereignty over its numbers. 89 T. M. Porter, “Introduction: The Statistical Office as a Social Observatory”, Centaurus, 49/4 (2007), pp. 258-260. The document (in French) largely translated from the Turkish PM’s speech, but some parts were different. It has not been possible to compare with Jacquart’s speech, as it was not published, unlike the former which was included in the census publication: L’Office Central de Statistique, Recensement général de la population au 28 octobre 1927, Fasicule III, Imprimerie bachvekalet mudevvenat, Ankara, 1929. 90 91 For a study on Jacquart’s leading role in the population census of 1927, cf. A. Dogan, “Modernising Turkey with Statistics”, op. cit. Modern State Building and Transnational Expertise 97 By sending these documents the Turkish authorities informed the EFS that Jacquart would soon have key statistics to share but also publicized the statistical reform program and the official rationale that guided it. Although the involvement of Turkish authorities, in particular executive governmental actors, in the cooperation with the EFS was indirect, their consent and willingness for internationalizing national statistics was essential for the quantification program of the League which aimed to cover all states and regions of the world. VI. Transnational Actors and Instruments of Technical Assistance: Redefining Cooperation in Terms of Advising In the meantime, the EFS first responded to Jacquart’s earlier letter. Their reply (on February 12, 1927) focused on the external trade statistics that Jacquart had mentioned. “I was very pleased to hear that your Central Office already publishes foreign trade statistics for Turkey” wrote Loveday. He introduced the “Memorandum on Balance of Payments and Foreign Trade Balances”, which was an “annual publication”. Its latest edition covered “about 60 countries”, and for which they “would be extremely interested to receive statistics” from Turkey as well.92 like the Monthly Bulletin and Statistical Yearbook, this publication was not only an international product but also a policy tool structuring economic statistics. While the previous letters explained general procedures in a generic way, this letter provided customized advice based on Jacquart’s earlier response: “Given, moreover, that many countries only publish quarterly trade figures, I take the liberty of asking you to consider the possibility to communicate to us –at least for a while– only quarterly figures for the Monthly Bulletin of Statistics”. It also asked for “the complete collection of foreign trade statistics already published”. Adding other projects and providing specific recommendations, the EFS sought to extend the scope of cooperation once it was established. International quantification activities stimulated and guided national policies by defining standards, concepts, nomenclatures, key data, methods for collection and treatment as well as providing models and examples. Yet they depended largely on the ability and willingness, in other words, the “cooperation” of state actors who would invest in statistical work incorporating these norms. They used data from nongovernmental or private actors when 92 League Archives, R351 10 56101 12361, op. cit. Cf. the Appendices (Letter 4) for the entire letter. 98 Aykiz Dogan they could. For instance, the EFS asked for exchange rates of the Turkish lira from the Ottoman Bank (a private British-French joint venture which acted as the central bank of Turkey until 1932).93 International quantification however required the development of modern state statistics mobilizing the resources of a centralized power.94 In this respect, cooperation stood out as a key instrument of international policies and owed very much to the transnational circulation of experts such as Jacquart. “I was sure I could count on your interest in our compilation of statistics”, wrote Loveday. Even though the Turkish Office had not shared any statistics yet, technical cooperation was established on both sides. After receiving the state documents, the EFS wrote another letter on February 24, 1927: “I thank you very much for your collaboration with us in the exchange of statistical publications”.95 Note that the version found in the League archives might be a draft destined to be signed by loveday because it contained a handwritten note “for the” before the typed “Head of Economic Documentation Service” and was signed by another expert, A. Rosenborg. As such, it indicated the collective work within the secretariat in preparing letters as instruments of cooperation. But it also signaled a certain confusion. It referred to two letters. The first, dated 12th February, might be the letter signed by Loveday, which is analyzed above, but there was no other letter in the archive folder. Hence the second one that Rosenborg referenced as that of February 14th, could be a factual letter which was finally discarded (unless it was one of the nine lost documents mentioned in the Répertoire). Rosenborg was a Swedish economist who have joined the EFS a few years later than Loveday. As a League expert specialized in economic statistics and studies, Rosenborg (1893-1979) participated in missions to different countries (Albania, Baltic States or Greece). Later, he contributed to the creation of the united Nations’ “technical assistance program to developing countries” and continued to work in expert missions (Asia, Haiti, Indonesia, Guinea) also serving as a chief and director of economic development affairs.96 His trajectory points out the transformation of interwar cooperation League archives, External Fonds (London Office) of the Financial Section and Economic Intelligence Service, C1791 7 1(2)2734. 93 94 Cf. also M. Bemmann, “Comparing Economic Activities on a Global Level in the 1920s and 1930s: Motives and Consequences”, in W. Steinmetz (ed.), The Force of Comparison, NY, Oxford, Berghahn, 2019, pp. 242-65. 95 League Archives, R351 10 56101 12361, op. cit. Cf. the Appendices (Letter 5) for the entire letter. Born in Sweden, Johan Ansgar Esaias Rosenborg (1893-1979) was a graduate of Uppsala University and joined the League secretariat in 1921. He went to the United States in 1940 96 Modern State Building and Transnational Expertise 99 and expert missions into technical assistance programs for development. It demonstrates the continuities between advising missions to peripheral states that the League introduced as a means of diffusing hegemonic knowledge and norms and implementing international policies, hence the blue print of the post-war development establishment. Jacquart’s position was different than Loveday and Rosenborg. He was not an IO expert in an advising mission but was directly hired by a foreign government as a senior official for the constitution and administration of a state institution. Thus, in addition to a double presence in both national and international fields of quantification policies, his transnational expert position in Turkish bureaucracy distinguished him as the key actor in the implementation of a particular tool of state knowledge in Turkey. When adequately organized, this tool would serve as a technology of governance97 both in international and national fields of power. In fact, it was exactly what the EFS and the Turkish Government expected of him. A follow up letter dated October 31st, 1927, indicates that exchanges continued during the preparation of the league Yearbooks.98 “The Head of the Economic Information Service” asked to verify certain railroad statistics, in particular, three tables indicating “the length of the railroads as well as the importance of passenger and goods transport”. Beyond a simple verification, this letter insisted on the international comparability of national statistics: with the League economic and finance mission, headquartered at Princeton University during the war. He joined the united Nations (uN) secretariat in 1946. He served as interim executive secretary of the Economic and Commission for Asia and the Far East in 1947, and as a technical assistance official. He headed missions to different countries (Haiti in 1949, Indonesia in 1950) and represented the UN Technical Assistance Board in Indonesia in the mid-1950s, and the secretary general in Guinea, before retiring in 1959. “Ansgar Rosenborg, Was U.N. Official”, The Washington Post, 18.12.1979, https://www.washingtonpost.com/archive/local/1979/02/18/ansgar-rosenborg-was-unofficial/b2b58e13-1a1a-44b4-9113-43d639580a1f/ B. Englund, “Johan Ansgar Esaias Rosenborg”, Bygdeband, http://www.bygdeband.se/person/932407/sverige/vastmanlands-lan/heby/ostervala/ ostervala-hembygdsforening/johan-ansgar-esaias-rosenborg/ Cf. LONSEA, “Ansgar Rosenborg”, http://www.lonsea.de/pub/person/5563 For a study on how different quantification techniques such as statistical indicators became “a prominent feature of contemporary global governance” cf. K. E. Davis, B. Kingsbury, S. E. Merry, “Indicators as a Technology of Global Governance”, Law & Society Review, 46/1 (2012), pp. 71-104. 97 League archives, « Petit Annuaire statistique de la société/Annuaire statistique international », R443 48254 62811 (Section 10). Cf. Appendices (Letter 6) for the entire letter. 98 100 Aykiz Dogan The compilation of these tables was extremely difficult because it was found in the course of the survey, that the statistics published in the various countries were based on very different principles, and I am by no means sure that the results shown in the above tables are really satisfactory. The letter therefore reiterated the EFS agenda of harmonizing national statistics according to a single international convention. The EFS sought to identify methods of producing railroad statistics, and to implement standardization. By informing national offices of the problems and requesting information on specific issues, this letter portrayed the key steps in international cooperation for the legitimization and application of an international convention with specific instructions. According to the letter, “while waiting for the implementation of the arrangements envisaged by the Transit Section of the League”, the EFS sought “to obtain more comparable data for the next edition of the Statistical Yearbook”. For this purpose, it enclosed “a short note on the nature of the difficulties we [they] have encountered”, and asked Jacquart to inform about “the method employed in compiling the statistics for Turkey”. It specified which kind of data “would be particularly valuable” and requested them “even if incomplete”. Jacquart replied to this request on December 15th with a letter, typed with spelling mistakes, some of which were corrected by a black pen, and enclosing as an annex a “statement relating to the statistics of the railways of Turkey drawn up by the general administration of the railways of the Turkish Republic”.99 Jacquart hence had access to statistics established by another public administration than his Office. His mediation made it possible to internationalize these data according to the EFS instructions by adding precision in response to the specific questions about the national methods and nomenclatures used in producing these statistics. Jacquart explained the particularities of the railway system in Turkey and identified the data which were still missing. The Belgian expert did not agree with the application of some of the methods proposed by the EFS: “[...] the sidings, shunting lines and dead tracks are not included. In fact, we find it superfluous to provide this information to the public”. Jacquart ended his letter by announcing the preparation of “a statistical yearbook for Turkey”, and that he would therefore be able to “communicate within a few months detailed information on railroads and also on other matters”. The EFS officers, who replied to him “in the absence of Mr. Loveday”) to thank him for the statistical information, noted their “interest” upon 99 Ibid. Cf. the Appendices (Letter 7) for the entire letter. Modern State Building and Transnational Expertise 101 learning that a statistical yearbook was in preparation.100 Although archival records have not been found, it is highly likely that the Turkish Yearbooks were shared with the EFS ever since the first one was published in 1929. Indeed, the Office continued to send statistics as evidenced by the integration of Turkish data updated by the 1927 census into the League products starting with the 1928 Yearbook. Turkish data were gradually incorporated during the 1930s into the Monthly Bulletins and other publications such as International Trade Statistics. VII. Concluding Remarks The present study limited the analysis to a few correspondences and to a short increment of time. Further research is necessary to fully grasp the relationship between the two institutions in order to observe the dis/ continuities in different contexts. Comparative study including other countries would also allow for a longer macro perspective. That being said, the analyzed historical material showed that technical cooperation for the creation of an international system of economic statistics involved: i.) establishment of regular contacts with national statistical services; ii.) exchange of documents, information, methods and statistics; iii.) directions for the internationalization of national data according to uniform standards; and iv.) assembling and publishing the harmonized data in the form of international products (yearbooks, memoranda, monthly bulletins, etc.). This study highlighted the precursory role of the EFS in establishing the basis of an international system which would be further developed after WWII within the umbrella of united Nations. The EFS was established as a transnational agency at the confluence of two movements: a build-up in international statistical bodies starting from the late 19th century, and the efforts of the WWI winners to impose a common normative structure on statistics based on their national systems, rules and interests which were not entirely homogeneous in all interested nations. The EFS program which not only compiled and compared methods but also adjusted and harmonized available data was a precursor in establishing a more systematic international quantification activity than previous efforts at the turn of the century. This program had structural implications for both international and national systems by intervening in the way statistics were produced by national institutions. It is true that the EFS suggestions had no binding force and This reply dated December 22, 1927. Ibid. See the Appendices (Letter 8) for the original letter in French. 100 102 Aykiz Dogan the Turkish Office might have refused to respond to their demands. Yet, they defined the principles of international comparability and standardization and exercised a symbolic power urging states to become part of a common, yet arbitrary, order mainly negotiated between white male European elites of world war victors who pursued the engineering of a quantified world. Due to Jacquart’s efforts and the willingness of the Turkish government to give Turkey visibility in this emerging international system, technical cooperation was established, and concrete exchanges followed, contributing to a uniformization process. It was precisely this process which made possible the production of concrete international objects. The case of Turkey as a nascent state at the peripheries of Europe showed that the formation of this international system was facilitated by the circulation of transnational experts such as Jacquart. The implementation of international policies required active mediation by international experts who guided national policies. Further research is needed however to understand whether there was more cooperation or resistance on the part of national actors.101 In any case, the decision by the Turkish government to hire an international expert, instead of a Turkish statistician was a strategic choice. Not only Jacquart’s technical knowledge, but also his symbolic and social capital, in particular his notoriety, his relations in the networks of statistical expertise and his connections with IOs contributed to the legitimization policies of the government and reinforced the visibility and international opening of the new Turkey. This choice made it possible to establish the Turkish office in dialogue with the main international actors that produced international standards and policies of quantification. In conclusion, technical cooperation in the case of Turkey related to a very particular context: i) national policy, which, as part of the state building process, invested in a large scope statistical reform adopting the centralization model and employing a foreign expert renowned in the field of international quantification policies; ii) international policy, which as part of the globalization process and the formation of a political and economic world order, aimed at the construction of an international system of economic statistics through technical cooperation. Two major tendencies, centralization and uniformization shaped national and international quantification policies and the relationship between them. Both Jacquart and the EFS reinforced this process on a national, transnational and international level. 101 On this topic, cf. W. Kaiser, J. W. Schot, Writing the Rules for Europe: Experts, Cartels, and International Organizations, Springer, 2014. Modern State Building and Transnational Expertise 103 Appendices102 Letter 1. The first contact of the EFS with Jacquart was a two paged letter dated December 14th, 1926, stamped by Loveday (unsigned) as the Head of Economic Documentation Service.103 Cher Monsieur Jacquart, J’ai appris par M. Manrette, chef de la Division des Recherches au Bureau International du Travail, que vous êtes à Angora, chargé de la réorganisation de la statistique en Turquie. Connaissant l'intérêt que vous portez aux travaux de statistique, je me permets de m'adresser à vous en vous priant de bien vouloir nous prêter votre précieux concours en ce qui concerne les données statistiques sur la Turquie. J’ai l'honneur de signaler à votre attention une de nos publications périodiques, le « Bulletin mensuel de statistique » dont vous trouverez un exemplaire ci-joint. Ce Bulletin, qui est publié régulièrement tous les mois, depuis 1920, résume sous une forme concise la situation économique de la plupart des principaux pays commerçants du monde entier. Il contient, comme vous le remarquerez, les statistiques mensuelles relatives à la production du charbon, du fer et de l'acier, au commerce d'importation et d’exportation, au mouvement de la navigation, aux fluctuations des prix, aux réserves d'or et à la circulation fiduciaire, aux taux des changes et de l'escompte, etc. Les statistiques se rapportent à cinquante pays environ, dont la plupart nous adressent régulièrement chaque mois des renseignements, par télégramme ou par lettre. Je me permets de vous envoyer, ci-inclus, un exemplaire du questionnaire mensuel au moyen duquel les divers Gouvernements nous font parvenir leurs statistiques, qui sont coordonnées et publiées à Genève. Je prends la liberté d'attirer votre bien-vaillante attention sur le fait qu'il nous a été possible tout récemment de publier les séries relatives au commerce d'importation et d'exportation en valeurs pour la Palestine, la Syrie et le Liban, et que j'espère de pouvoir publier bientôt, également, des statistiques mensuelles pour l'Irak. Nous regrettons de ne pas être en mesure de publier des statistiques pour la Turquie et nous avons le plus vif désir de combler cette lacune de nos statistiques. Je vous serais donc très reconnaissant de bien vouloir m'informer si vous pouvez nous fournir régulièrement certains des renseignements indiqués et collaborer ainsi à cette entreprise. Je serais extrêmement heureux de pouvoir joindre la Turquie à la liste des pays au sujet desquels sont publiés des renseignements d'ordre économique. Veuillez agréer, cher Monsieur Jacquart, l'assurance de ma plus haute considération. 102 The translation of these documents in English are uploaded in https://transmonea. academyofathens.gr/index.php/en/publications/working-papers-ppt-presentations 103 League Archives (1919-1927). Economic and Financial Section (10). “Monthly Bulletin of Statistics”. R351 56101 12361. 104 Aykiz Dogan Chef du Service de documentation économique A. Loveday [stamped] Letter 2. Jacquart to Loveday, January 12, 1927104 Cher Monsieur Loveday En réponse à votre lettre du 14 décembre, j’ai l’honneur de vous faire savoir que pour presque tous les points contenus dans le questionnaire mensuel qui accompagnait votre lettre, il est impossible dans les conditions actuelles du travail statistique en Turquie de fournir les renseignements statistiques demandés. La Statistique mensuelle publiée commerce extérieur parait avec retards de plusieurs mois et encore irrégulièrement. Comme vous le savez, je suis chargé de la réorganisation des statistiques de la Turquie. Ce n’est pas une petite affaire et il faudra encore quelques efforts pour établir régulièrement des statistiques mensuelles. Je ne manquerai pas quand ce sera possible de communiquer à la Société des Nations, et je suis également désireux de voir la Turquie figurer dans votre Bulletin mensuel. Je serai heureux de recevoir votre bulletin mensuel pour mon instruction personnelle et pour les collections de l’Office central de Statistique que je dirige ici. Veuillez recevoir cher Monsieur avec mes meilleurs souvenirs l’assurance de mes considérations très distinguées. Camille Jacquart [signature] Letter 3. Jacquart to Loveday, February 8, 1927105 Monsieur le Directeur et cher Collègue ; J'ai l'honneur de vous adresser les documents ci-joints concernant la réorganisation de la statistique administrative en Turquie. Appelé par le gouvernement turc à diriger l’Office Central de Statistique à Angora, je serai très heureux si des rapports suivis pouvaient s'établir entre nous. En attendant que l'Office nouveau puisse vous offrir l'échange de ses publications avec celles de votre Bureau, je vous serai très reconnaissant si vous pouvez disposer en faveur de l'Office de l'une ou l'autre publication et notamment d'un Annuaire statistique. Je vous prie d'agréer, Monsieur le Directeur et cher Collègue, l’assurance de ma considération la plus distinguée. Le Directeur Général [signature] Annexed documents : 1) The Decree concerning the creation of a Central Office of Statistics: « Décret » 2) Document concerning the creation of a Central Office of Statistics and population 104 Ibid. 105 League Archives, “Application for League documents”, Section 49 (1923-1927) R1792 57662. Modern State Building and Transnational Expertise 105 census: « Turquie - Recensement de la population - Création d’un Office Central de Statistique » Letter 4. Loveday to Jacquart, February 12, 1927106 Cher Monsieur Jacquart ; J’ai l’honneur de vous accuser réception de votre lettre du 12 janvier et je vous remercie vivement des renseignements que vous avez eu l’obligeance de me faire parvenir sur la réorganisation des statistiques de la Turquie. Je comprends parfaitement la difficulté de nous envoyer, dès à présent, toutes les réponses au questionnaire mensuel ; il m'a été toutefois très agréable d'apprendre que votre Office central publie déjà des statistiques du commerce extérieur pour la Turquie. Je me permets pourtant d’attirer votre attention sur le fait qu'il serait pour nous extrêmement intéressant de recevoir les statistiques publiées par votre Office non seulement en tenant compte du Bulletin mensuel, mais également en vue de notre publication annuelle : « le Mémorandum sur les balances des paiements et sur les balances de commerce extérieur », dont l'édition 1925, contenant les renseignements pour environ 60 pays jusqu'à la fin de 1926, se trouve actuellement sous presse. Etant donné, en outre, que dans plusieurs pays on publie seulement des chiffres trimestriels du commerce extérieur, je prends la liberté de vous prier de bien vouloir examiner la possibilité de nous communiquer –au moins pendant une certaine période– seulement des chiffres trimestriels pour le service du Bulletin mensuel de statistique. J'étais sûr de pouvoir compter sur l'intérêt que vous portez à la compilation de nos statistiques et il m'a été très agréable de faire inscrire votre Office central dans la liste de distribution du « Bulletin mensuel de statistique ». J'espère qu’il vous sera possible de nous faire parvenir la collection complète de statistiques du commerce extérieur déjà publiées. Je tiens à vous remercier de votre aimable souvenir et je vous prie de bien vouloir agréer, cher Monsieur Jacquart, l’assurance de mes sentiments distingués. Le Chef du service de documentation économique A.L. Letter 5. Rosenborg to Jacquart, February 24, 1927107 Cher Monsieur Jacquart ; J'ai l'honneur de vous accuser réception de votre lettre du février et je tiens à vous assurer que j'ai pris connaissance avec beaucoup d’intérêt des documents sur la réorganisation de la statistique en Turquie que vous avez eu l'obligeance de me faire parvenir. 106 League Archives, R351 10 56101 12361, op. cit. 107 Ibid. 106 Aykiz Dogan En confirmant mes lettres des 14 décembre et 12 février, je vous remercie vivement de bien vouloir collaborer avec nous quant à l'échange de publications statistiques, vous verrez que dans la couverture au « Bulletin mensuel de statistique » sont toujours annoncées les publications les plus récentes de la Section et je ne marquerai pas de vous faire expédier celles qui vous intéressent le plus. Il me sera très agréable de vous envoyer, dès qu'il sera paru et conformément au désir exprimé dans votre lettre, un exemplaire de notre « Annuaire statistique »; il sera publié au cours du mois prochain. Je vous prie de bien vouloir agréer, cher Monsieur Jacquart, l'assurance de mes sentiments distingués. A. Rosenborg [manuscrit] (pour le) Chef du service de documentation économique Letter 6. EFS to Jacquart, October 31, 1927108 Genève, le 31 octobre 1927 Cher Monsieur Jacquart. J'ai l'honneur de vous communiquer, ci-joint, un relevé relatif aux statistiques des chemins de fer de la Turquie, et je vous serais très reconnaissant de bien vouloir faire vérifier et mettre à jour les chiffres. Ces statistiques serviront pour la prochaine édition de l'Annuaire statistique international. Dans la dernière édition, dont je vous envoie un exemplaire sous pli séparé, j'ai inséré trois tableaux concernant les chemins de fer (Nos 79, 80 et 81) et indiquant la longueur des voies ferrées ainsi que l'importance des transports de voyageurs et des marchandises. L'établissement de ces tableaux a été extrêmement difficile car on a constaté au cours de l’enquête, que les statistiques publiées dans les différents pays reposaient sur des principes très divers, et je ne suis nullement sûr que les résultats indiqués dans les tableaux susmentionnés soient vraiment satisfaisants. En attendant la mise à effet des arrangements envisagés par la Section du Transit de la Société des Nations, pour la réunion et l'échange de renseignements sur les diverses formes de transport, je désirerais vivement obtenir des donnes plus comparables pour la prochaine édition de l'Annuaire statistique. A cette fin, je joins à la présente communication une courte note sur la nature des difficultés auxquelles nous nous sommes heurtés, et je serais très heureux qu'il vous fût possible de me fournir des renseignements sur la méthode employée pour l'établissement des statistiques de la Turquie. J'ai indiqué à la fin de la note ci-jointe, les points au sujet desquels des renseignements de cet ordre seraient particulièrement précieux pour moi. Si des données suffisamment détaillées au sujet des chemins de fer de la Turquie ne sont pas encore disponibles, je laisse absolument à votre discrétion de m'envoyer telle ou telle donnée, même incomplète, si vous pensez qu'elle pourrait nous être utile. 108 League archives, « Petit Annuaire statistique de la société / Annuaire statistique international », R443 48254 62811 (Section 10). Modern State Building and Transnational Expertise 107 J'ose croire que ma demande ne vous paraîtra pas trop importune et avec mes remerciements anticipés les plus vifs, je vous prie d'agréer, Cher Monsieur, l’assurance de mes sentiments distingués. Le Chef du Service des renseignements économiques, Monsieur Camille JACQUART Directeur de l'Office Central de Statistique Présidence du Conseil, ANGORA (Turquie) Letter 7. Jacquart to Loveday, December 15, 1927109 Cher Monsieur Loveday Comme suite à votre lettre du 31 Octobre j'ai l'honneur de vous communiquer ci-joint un relevé relatif àla statistique des chemins- de fer de la Turquie dressé par l'administration générale des chemins de fer de la République Turque. Ce relevé indique les lignes exploités par l'état par la lettre E. Voici les observations qui accompagnent le relevé et qui répondent en grande parti aux observations contenues dans votre note annexe pour la statistique des chemins de fer. Ad. D Les longueurs des lignes renseignées dans le relevé que je vous envoie sont des longueurs réelles et consistent en même temps en longueurs d'exploitation. Comme la longueur virtuelle n’est pas en usage dans les Réseaux en Turquie, les fractions de longueur sont arrondies au nombre entier, pour servir de base à la taxation. Ad.F) Sauf les longueurs des embranchements, ouverts à la circulation des trains, qui figurent dans les chiffres indiqués dans notre relevé les autres longueurs, des lignes d'évitement, de manœuvres et des voies mortes n'y figurent point. D'ailleurs, nous trouvons superflu juste de fournir ces derniers renseignements à la publicité. Ad.G) En dehors des lignes de Banlieue qui sont à double voie, soit en Turquie d'Europe 22Km et en Turquie d'Asie 25 Km et Qui sont toutefois comptées dans notre relevé que comme simples voies, les autres lignes en Turquie consistent en des voies uniques. Comme nous n'avons aucun rapport avec des lignes de Tramway, nous ne pouvons vous fournir aucun renseignement là -dessus. AD. H. et I.) Les chiffres mentionnés dans notre relevé n'ont-rapport qu’aux lignes existantes à l'intérieur du littoral de la République Turque. Aucune mention n'est faite pour celles qui sont en dehors de ses frontières. Ad K.L.M.N.0.) Sur les réseaux des Chemins de fer d'État nous déterminons séparément : 1 )le nombre des voyageurs 2)" " " " Km. 109 Ibid. 108 Aykiz Dogan 3 ) les tonnages nets et brutes des trains 4 ) Les tonnes Kilométriques Comme je suis occupé en ce moment à la rédaction d'un annuaire statistique pour la Turquie, j'espère pouvoir vous communiquer d'ici à quelque mois des renseignements détaillés sur les chemins de fer et aussi sur d'autres matières qui peuvent vous intéresser. Veuillez agréez mon cher monsieur loveday l'assurance de ma considération distinguée et de mes sentiments dévoués Letter 8. EFS to Jacquart, December 22, 1927110 Monsieur, En l'absence de M. Loveday, j'ai l'honneur de vous accuser réception de votre lettre du 15 décembre, et de vous exprimer mes remerciements pour le Relevé relatif à la statistique des chemins de fer de la Turquie que vous avez bien voulu faire préparer. M. Loveday apprendre certainement avec beaucoup d'intérêt que vous préparez un Annuaire statistique pour la Turquie, et il sera très heureux de recevoir les renseignements détaillés relatifs aux chemins de fer et à d'autres questions, dont vous avez eu l'amabilité d'annoncer l'envoi pour dans quelques mois. Veuillez agréer, Monsieur, l’assurance de ma considération distinguée 110 Ibid. 3 MICHALIS SARRAS* Postdoctoral Researcher, TransMonEA Project Academy of Athens - HFRI CHALLENGING MODERNITY INTERNATIONAL AGRARIANISM IN EASTERN EUROPE DURING THE INTERWAR YEARS Introduction The International Agrarian Bureau (Mezinárodní agrární bureau) was founded in 1921 in Prague, by the Agrarian parties of Bulgaria, Czechoslovakia, the Kingdom of Yugoslavia and Poland, growing to 17 political parties in Eastern Europe by 1929.1 It was sometimes referred to as the first “Green Team Member of the Research Project “Transnational Monetary and Economic Alternatives in the Interwar Politics: The 1930s Greek Crisis in European Context”. The Research work was supported by the Hellenic Foundation Research and Innovation (H.F.R.I.) under the “First Call for H.F.R.I. Research Projects to support Faculty members and Researchers and the procurement of high-cost research equipment grant” (Project Number: 1310). A part of the present research was presented in the seminar “National and International Actors in the Economy of the Interwar South-eastern Europe”, November 26th, 2021, Seminar Series of the TransMonEA Research Project, 2nd Thematic cycle 2021-2022: The actors of the economy. Institutions and personal networks. Cf.: M. Sarras, “Global Institutions in the Interwar Balkans: League of Nations and Bulgaria”, 2021, TransMonEA Working Papers Series 8, Academy of Athens - HFRI, Scientific Responsible: C. Brégianni. 1 Between 1921 and May 1929 the following peasant parties adhered to the International Agrarian Bureau: The Estonian Farmer’s Party, the Peasant Agrarian Union of Finland, the Platterlandersbond of the Netherlands, the Peasant Party of the Canton of Argovie (Switzerland), the Rumanian National Peasant Party, the Bund der Landwirte (Sudeten German), the Serbian Agrarian Union, the Smallholders Party (Hungary), the Lithuanian Popular Peasants’ Union, the Lettish Peasant Party, the Croatian Peasant Party, the Peasant Party of the Canton of Bern (Switzerland), the Austrian Landbund fur Osterreich and the Slovenian Small Peasant’s Party. Cf. also G. Jackson, Comintern and Peasant in East Europe (1919-1930), New York, Columbia University Press,1966, p. 148. * 110 Michalis Sarras International”. Its objective was to coordinate the efforts of the European peasant parties whose political programs included parliamentary democracy and the defense of peasant interests. Another objective was to provide moral reinforcement to peasants everywhere by interaction/cooperation between the stronger and the weaker peasant political movements, thus creating a feeling of international solidarity. Solidarity and unity would give added force and prestige to local peasant political movements.2 Some of the most fundamental principles of the agrarian movement were: the necessity of preserving the institution of private property, the pursuit of low tariffs, the valorization of cooperative organization of agricultural enterprises, the need for social insurance, the need for technical education and the necessity for thorough agrarian reforms.3 The aim of this article is to shed light on the underlying structural particularities which impeded the economic collaboration of the Peasant States in Eastern Europe. European economic conditions will be carefully examined, especially as they took shape after WW I and the Great Depression. The political upheaval caused by the war or other circumstances will be less scrutinized, even though both obstructed the international advances of the Eastern European Agrarians toward economic collaboration and political alliance. I. The Politics and the Ideology of the International Agrarianism One of the leaders of the union of rural countries was the Agrarian Prime Minister of Bulgaria, Alexander Stamboliiski (1919-1923), who “is believed to be propounding a scheme for an entente between the peasant organizations of all the countries of Central and Eastern Europe, with the object of defending the rights of small agricultural proprietors against Bolshevism, on the one hand, and reactionary tendencies on the other -in short a Green International opposed to the extremes of both Whites and Reds”.4 Stamboliiski especially believed that if peasants of Eastern European countries united, they could end international rivalry. In most of those countries, peasants held the majority vote. His vision was a society in which no peasant owned too much or too little land. Individual proprietors were to help each other through the 2 Ibid., p. 147. 3 Ibid. 4 The Times, “Bulgarian Premier’s Novel Idea. A Peasant International”, 30.12.1920, p. 9. Challenging Modernity 111 cooperative system, which was to provide credit, to store harvested crops and to commercialize agricultural products.5 The cooperative idea was a fundamental aspect of Agrarian ideology and was meant not only to provide material benefit but also to lead to the evolution of civic political morality and international organization.6 The ideal social-economic order from the point of view of agrarian ideology rests upon small-scale private property, called “labor” property, with the idea that it is worked with one’s own (family) labor, without the exploitation of hired labor. The achievement of this ideal requires a thorough reform of capitalism, especially the abolishment of large-scale property and big business, while preserving private property as such (up to a certain size).7 This type of socio-economic and political order is neither capitalist nor socialist (because it preserves private property), but a peculiar “third (or middle) way”.8 The agrarian vision was a society in which all producers would voluntarily join cooperatives and in which the former would become so influential that they would provide the basis for local government and administration.9 Cooperation was not only to provide a new form of local organization but to even lead to the merging of nation-states into a free association of peasant communities, a Peasant or Green International.10 The agrarian movement, in most cases, was directed toward the preservation of what the agrarians termed “the best features of a peasant society” and to a moderate development of industry.11 Generally, the peasant leaders [like Antonín Švehla (Czech 1873-1933), Wincenty Witos (Polish, 1874-1945), Aleksandar Stamboliiski (Bulgarian 1879-1923) and Milan Hodža (Slovak 1878-1940)] advocated reduction of armaments and promotion of policies designed to further international peace and understanding. The Czech agrarian leader Antonin Švehla had put it in this way: R. Crampton, A Short History of Modern Bulgaria, Cambridge, Cambridge University Press, [1987] 1989, p. 87. 5 6 Ibid., pp. 87-88. R. Daskalov, Debating the Past: Modern Bulgarian History: From Stambolov to Zhivkov, Budapest - New York, CEU Press, [2011] 2022, pp. 94-95. 7 8 Ibid., p. 95. 9 R. Crampton, A Short History, op. cit., p. 87. Ibid. Cf. also F. Houillier, L’organisation internationale de l’agriculture. Les institutions agricoles internationales et l’action internationale en agriculture, thèse pour le Doctorat d’état, Université de Paris-Faculté de Droit, Paris, 1935, pp. 261-264 [https://gallica.bnf.fr]. 10 11 G. Jackson, Comintern and Peasant, op. cit., p. 6. 112 Michalis Sarras We are convinced that the victory of agrarianism will be the victory of humanitarianism, of justice, of peace. Humanity, desiring peace, should place its future in the hands of those for whom peace is the first condition of life, that is to say, in the hands of the farmer.12 According to the International Agrarian Bureau, the Εastern European peasant political movement could best be strengthened by the establishment of a real international organization which would advance the “peasant democracy” point of view and would try to create a union of peasant political parties. A united agrarian movement would form the basis for an agrarian federation in Eastern Europe and all the Balkan states. This federation would stand against absolutism, reactionary social policies and blind nationalism.13 The leader of the Polish Peasant Party stated this in 1927: “The peasantry can never be the supporters of a dictator, because they need clear and stable conditions. They must be sure that the state and its administration rest, not on the caprice of one man, but on unshakable institutions”.14 Agrarianism put forward a sort of international rural strategy, based on pacifism, active support of the League of Nations and appeal to arbitration in the case of international controversies.15 At the same time, “it attempted to promote mutual professional interests, but in this it had little success because of a lack of organizational ability and the fierce competition between the national economies”.16 During the 1920’s, the Bureau held annual congresses until engulfed by the Great Depression and the political storms to which it gave rise. A more active international effort was the block of Εastern European states during the thirties. Several conferences were held during the summer of 1930, with peasant delegates from Estonia, Latvia, Poland, Czechoslovakia, Hungary, Yugoslavia, Bulgaria and Rumania. The purpose of these conferences was the coordination of economic policy of their countries so as to obtain better trading conditions from the Western This is an excerpt from a speech made by Svehla at a conference of the Green International at Prague, cited in G. Jackson, Comintern and Peasant, op. cit., p. 43. 12 J. Bell, Peasants in Power: Alexander Stamboliski and the Bulgarian Agrarian National Union, 1899-1923, Princeton, Princeton University Press, 1977 [University Microfilms International], p. 194 and passim. 13 14 G. Jackson, Comintern and Peasant, op. cit., p. 43. St. Bianchini, Eastern Europe and the Challenges of Modernity, 1800-2000, London - New York, Routledge, 2015, p. 86. 15 16 Ibid., pp. 86-87. Challenging Modernity 113 European industrial states. However, as the crisis intensified and spread, the bloc proved too weak to fulfill its aims.17 Generally one could say that the goal of the international peasant movement during the interwar years was to elaborate and institutionalize a more “ethical modernity”, a third road between capitalism and communism, above the level of national politics.18 The agrarians liked to think of their movement as a third force in politics, distinct from and superior to Western Liberalism and Western Marxism, though embodying some of features of both.19 The following words of Stamboliiski sketch the ideal of a modernized agrarian society: In twenty years, Bulgaria will become a model of an agrarian state, whose towns and villages will get rid of the crooked muddy streets and the people’s bloodsuckers. They will be provided with pure, healthy drinking water, with wooded parks, with modern chemical fertilizers, with telegraph and telephone and electric lighting. They will have highly developed cooperatives, and a broad railway network with warehouses for grain and tobacco at every station.20 Many of the leaders at any rate had a vision of a new rural civilization, strengthened by a Green International which was to keep peace among the peasant countries. Their idea was set forth in a leaflet issued in 1922, the idea of Universal Agrarianism; it concluded with this sentence:21 It is up to the agriculturalists of the whole world […] to unite for the sake of the welfare of the people- to defend society, to assist the State on its way to peace and to uphold agriculture. […] to fulfill the principal agrarian idea in giving the people, the States and the nations a firm foundation for a life of material and moral wellbeing. However, it failed to realize the potential that its leaders saw in it. It never worked out a common program; the individual member parties had differing objectives, goals and fears: the Poles were more anti-Russian than the others, whilst the Czechs saw it as a vehicle for pan-Slavism. The Romanians feared D. Mitrany, Marx Against the Peasant. A Study in Social Dogmatism, New York, Collier Books, 1961, pp. 131-156. 17 A. Toshkov, Rescuing Alternative Modernity: The Golden Age of the European Peasantry, New York, Columbia University Press, 2014, pp. 1-6. 18 19 G. Jackson, Comintern and Peasant, op. cit., p. 40. 20 R. Daskalov, Debating the Past, op. cit., pp. 114-115. 21 Issued by the Central Office of the International Agrarian Bureau, Prague 1922, cited in D. Mitrany, Marx Against the Peasant, op. cit., p. 143. 114 Michalis Sarras its predominantly Slav complexion and the Croat Peasant Party, one of the most powerful in the region, did not join at the very beginning because it did not advocate independence for Croatia.22 II. The Obstacles to an International Agrarian Coalition In order to function and act efficiently, an international union of Agrarian parties, (otherwise known also as “Green International” or a Union of Peasant States) had to rely on a series of economic variables. These economic and social preconditions did not exist in interwar Eastern Europe. Thus, a successful union of peasant parties or peasant states was impossible. The objective was to pursue benefits for the East European farmer by protecting him from the peaks and troughs of the international market and the destabilizing pressures, both political and economic, of the interwar period. Agrarian cooperatives had a similar aim during the same period and even previously. These cooperatives attempted to protect, rather unsuccessfully, the small farm holders from the fluctuations of the international markets; they also tried to preserve the social cohesion of the rural areas.23 The main obstacle to a politically and economically advanced agrarian cooperation was the inability of the Eastern European rural countries to accumulate the necessary capital for such an undertaking. Without this accumulation of capital, it was impossible to modernize agriculture and increase agricultural productivity and production. This as a result would mean an increase in income and standard of living for the farmer. In brief, if agricultural production failed to amass capital, any international cooperation of agrarian parties or countries of Eastern Europe would not be feasible. This entailed a halt to the effort of modernizing their societies and improving the standard of living for millions of peasants. The structural and circumstantial factors impeding the modernization of agrarian societies will be analyzed below. 22 R. Crampton, The Peace Conferences of 1919-23 and their Aftermath. Aleksandur Stamboliiski. Bulgaria, London, Haus Publishing Ltd, 2009, pp. 93-94. Between November 1927 and February 1928, the Croatian Peasant Party and the Rumanian National Peasant Party adhered to the newly organized International Agrarian Bureau. For further reading: C. Brégianni, “Agricultural co-operatives: A methodological approach” in Hellen Gardicas-Katsiadakis, Catherine Brégianni (eds.), Agricultural Co-operatives in South and Central Europe. 19th-20th Century. A Comparative Approach, intr. by C. Brégianni, Athens, Academy of Athens, 2013, pp. 13-23 and passim. For a Balkan case study cf. E. R. Weissman, The Cooperative Movement in the Bulgarian Village prior to World War One, Michigan, University Microfilms International, 1982. 23 Challenging Modernity 115 It is well known that the agrarian economy of Eastern Europe suffered a most devastating set back because of WWI (Table. 1). Production plummeted and was slow in recovering.24 For instance in Austria agricultural production was down to approximately 50 per cent of the prewar level; in 1920 it did not exceed 50 per cent of the prewar output.25 Hungary presented a similar image. Shortage of labor, the military requisitioning of horses and the reduction of livestock caused a serious setback in agriculture, the outstanding economic sector. From 71 million quintals in 1913 production of grain fell to 42 million quintals by 1918, while output of maize declined from 48 million quintals to 24 million.26 Generally Hungarian agricultural production was around onethird of the prewar volume in 1919 and 50 to 60 per cent in 1920. Hungarian agrarian exports in 1920 amounted to only 21 per cent of the prewar value (calculated on the basis of the new territory) and to 41 per cent in 1921.27 In Poland the damage to agriculture was such that by the end of the war 4.5 million hectares of arable land lay fallow and about 2.4 million hectares of forests were ravaged; 2 million head of cattle, 1 million of horses and 1.5 million of sheep had been destroyed.28 Similarly, in Yugoslavia, a one-sided agrarian country, war conditions caused the loss of about 500.000 horses, 1.7 million head of cattle, over 2.4 million pigs, 6.3 million sheep and 1.2 million goats. This immense damage represented the loss of close to or more than half of the country’s stock in pigs, sheep and goats, over one-third of its horses and more than one quarter of its cattle.29 In Bulgaria, agricultural production, which suffered the greatest degree of decline, by 1918 was 57 per cent of the level before the Balkan war. In Romania, a grain exporter country, during the prewar years 2.5 to 2.9 million tons of grain were exported; in 1919 only 0.9-1.7 million tons.30 On the whole this situation prevailed in the other agrarian countries of the Danube valley. I. Berend, G. Ranki, Economic Development in East-Central Europe in the 19th & 20th Centuries, New York London, Columbia University Press, 1974, pp. 171-200. 24 25 Ibid., p. 174. 26 Ibid., p. 175. 27 Ibid., p. 178. 28 Ibid., p. 176. 29 Ibid., pp. 176-177. 30 Ibid., p. 177. 116 Michalis Sarras Table 1. Indices of Production, Net Imports or Exports and Supply per Capita. Quinquennial Averages: 1909-13=10031 1919-23 1925-29 1934-38 Production 76 94 96 Net Exports (net imports) 21 67 Eastern Continental Europe Cereals: 81 98 98 Potatoes: Supply Supply 92 109 126 Cereals +Potatoes: Supply 83 100 103 Because of the great catastrophe that shattered Eastern European agriculture during the war, supplying the Western European markets with grain, agricultural raw materials and other agricultural products came to a stop. Therefore, the Western European markets were taken over by the U.S.A. (Table. 2), and other transatlantic countries which stepped in to cover the demand.32 As a result, the import-export balance came to a halt: this used to involve the trade of agricultural products from the East for industrial products from the west. Eastern European countries either lost or curtailed their exports which resulted in the inability to create revenues and accumulate capital from international trades. Hungarian wheat, for instance, could compete with American in Vienna but it was undersold in Munich. It was cheaper to transport grain raised on the highly capitalized farms of America by sea from New York or Buenos Aires to Hamburg and Trieste than to bring the products of the less capitalized estates from Hungary, not to mention the inefficient holdings from the Balkans.33 31 Source of table 1: League of Nations. Economic, Financial and Transit Department, Agricultural Production in Continental Europe during the 1914-18 War and the Reconstruction Period, Geneva, League of Nations, 1943, p. 18. L. G. Michael, Agricultural Survey of Europe. The Danube Βasin. Rumania, Bulgaria and Yugoslavia. Vol. II, Washington, Department of Agriculture, 1929, pp. 1-6. 32 H. S. Watson, Eastern Europe Between the Wars 1918-1941, Connecticut, Archon Books, 1962, pp. 80-84. 33 Challenging Modernity 117 Table 2. Overseas Imports into Continental Europe34 From the united States Total I Values at 1927 prices: $(000,000,000’s) 1913 1919 1920 1927 1937 1.5 2.5 1.7 1.6 1.0 Quantum indices: 1927=100 1913 1919 1920 1927 1937 90 155 108 100 61 [sic] II III .4 1.2 .7 .5 .1 .9 .7 .8 .9 .6 .2 .6 .3 .3 .3 80 255 156 100 24 103 83 86 100 67 69 212 74 100 100 I. Foodstuffs (including live animals), II. Raw materials and semi-manufactured products, III. Finished goods [according to the terminology of the original document] Another factor that impeded the capital accumulation through agricultural production was also the agrarian reforms that happened in many Eastern European countries (Table. 3), after the end of WWI.35 The distribution of land, so urgent from social viewpoint, was accompanied by a decline and stagnation of agricultural production for the time being.36 Nevertheless, as there is no doubt that during the first years, production and productivity were disturbed by the application of the reform, one is first of all faced with the insurmountable difficulty of how to disentangle the effects of the reform from the effects of the war.37 34 Source of table 2: League of Nations. Economic, Financial and Transit Department, Europe’s Overseas Needs 1919-1920 and how they Were Met, Geneva, League of Nations, 1943, p. 14. 35 For the land distribution statistics of the area cf. Η. S. Watson, Eastern Europe, op. cit, p. 121 and Sl. D. Zagoroff, “General Survey of the Agricultural Economy of the Danubian States, 1935-1945” in Food Research Institute, The Agricultural Economy of the Danubian Countries, 1935-45, Stanford, California, Stanford University Press, 1955, pp. 29-63. 36 I. Berend, G. Ranki, Economic Development, op. cit., p. 238. D. Mitrany, “The Land and the Peasant in Rumania. The War and the Agrarian Reform (191721)”, London, Oxford University Press, 1930, pp. 306-307 and passim. 37 118 Michalis Sarras Table 3. Effect of Agricultural Reforms, up to 193038 Country Percentage of the total agricultural land affected Greece 50.0 latvia 42.4 Romania 29.7 Estonia 25.0 lithuania 17.5 Czechoslovakia 14.1 Hungary 10.0 Yugoslavia 10.0 Poland Bulgaria 6.1 Little* Indeed, despite the radical agrarian reform in almost every country of Eastern Europe, reform was implemented only partially in some countries without overturning the model of private holdings. Hungary belongs in this category where until the end of the interwar period a great parcel of farmland, over 30%, was still in the hands of landowners.39 To a lesser extent, large land holdings were still in existence in Poland and still fewer in Czechoslovakia. The presence of powerful landowners in the above-mentioned countries was without a doubt a barrier to the efforts of farmers for international cooperation in Eastern Europe. Moreover, the Great Depression that took place during the 1930s, steadily deteriorated the economic situation in Eastern European countries. The Depression caused a tremendous fall in the price of agricultural products and was particularly disastrous in the Balkan states because of their inability to compete with the great overseas producers.40 As industrial commodities fell neither immediately nor drastically, the resulting “price scissors” hurt the peasant as agricultural producer as well as the Eastern European countries as agricultural exporters. The steep fall in the price of agrarian products According to the source. Source of table 3: League of Nations. Economic, Financial and Transit Department, Agricultural Production in Continental Europe During the 1914-18 War and the Reconstruction Period, Geneva, League of Nations, 1943, p. 49. * 38 39 H. S.-Watson, Eastern Europe, op. cit., p. 171. H. Roberts, Rumania. Political Problems of an Agrarian State, New Haven, Yale University Press, 1951, pp. 176-179. 40 Challenging Modernity 119 became disastrous in a few years. In 1932-33 the prices of most grains were between one-third and one-half of the 1929 prices (Table 4 & 5). As a result of the price collapse, agricultural income decreased in the years of crisis by 57.6 per cent in Romania, 51.8 per cent in Bulgaria, 58.8 per cent in Poland, 35.8 per cent in Hungary.41 The fall of prices and diminished profits plunged agriculture into a serious predicament. Thus, the catastrophic disparity between industrial and agricultural prices was brought about by the “price scissors” (Table 6, 7 & 8). Table 4. Price Index of Grains, East Central Europe, 1930-33 (1929=100)42 Hungary Wheat Rye Romania Corn Wheat Rye Bulgaria Yugoslavia Corn Wheat Corn Wheat Corn 1930 87 63 59 63 50 46 47 51 55 31 1931 72 87 63 39 52 34 45 46 57 29 1932 77 85 59 54 53 30 34 37 67 29 1933 62 50 32 63 33 26 34 25 44 26 Table 5. Agricultural Prices/ Industrial Prices in Rumania43 Wholesale agricultural prices Industrial prices Prices of Industrial products required by agricultural 1929 100 100 100 1939 68.2 92.9 98 1931 50.8 72.0 86.6 1932 47.7 62.2 80.9 1933 44.9 62.2 81.1 1934 44.1 63.4 82.6 1935 48.4 75.2 90.2 41 I. Berend, G. Ranki, Economic Development, op. cit., p. 245. Cf. Information Department of the Royal Institute of International Affairs, The Balkan States. A Review of the Economic Development of Albania, Bulgaria, Greece, Rumania and Yugoslavia since 1919, London, Oxford University Press, 1939, pp. 62-68. 42 Source of table 4: I. Berend, G. Ranki, Economic Development, op. cit., p. 244. Source of table 5: H. Roberts, Rumania. Political Problems of an Agrarian State, New Haven, Yale University Press, 1951, p. 177. 43 120 Michalis Sarras Table 6. “Price Scissors”44 Poland (1928=100) Year Index agricultural prices Index prices industrial goods used by peasants 1930 67.6 98.5 1931 59.5 90.4 1932 48.9 81.0 1933 42.6 72.6 1934 37.0 70.3 1935 35.8 66.3 1936 38.7 64.6 1937 49.2 66.1 1930 68.2 98.0 1931 50.8 86.6 1932 47.7 80.9 1933 44.9 81.1 1934 44.1 82.6 1935 48.4 90.2 1936 54.0 95.4 1937 64.6 101.8 1938 67.1 99.2 1939 72.7 112.5 1940 (Jan) 80.8 159.4 Romania (1929=100) Table 7. Wholesale price indexes in Yugoslavia (1926=100)45 Year 1926 1927 1928 1929 1930 1931 1932 44 Crop products livestock Products 100.0 118.4 141.6 110.2 72.5 71.4 63.5 100.0 105.2 105.9 105.4 91.3 73.6 60.0 Industrial Products 100.0 102.4 102.4 93.2 84.8 87.9 81.4 Source of table 6: H. S. Watson, Eastern Europe, op. cit., p. 122. Source of table 7: J. Tomasevich, Peasants, Politics and Economic Change in Yugoslavia, Stanford, Stanford University Press, 1955, p. 637. 45 Challenging Modernity 1933 1934 1935 1936 1937 1938 1939 121 53.7 51.6 62.9 60.9 65.8 79.0 76.2 57.4 55.8 55.6 60.0 60.6 62.5 68.4 81.3 73.5 75.8 75.5 83.9 83.1 84.2 Articles of export Articles of import 89.43 75.62 72.87 75.98 76.43 73.29 72.58 72.68 Table 8. Wholesale Prices in Bulgaria (1929=100)46 Years and months 1930 1931 1932 October 1932 April 1933 August 1933 September 1933 October 1933 Articles of home consumption 84.01 72.04 65.97 65.76 63.96 63.16 63.48 63.37 72.83 51.77 45.27 42.19 38.21 37.27 37.02 36.59 Another structural reason that obstructed the modernization of agricultural societies was the international economic scene after the end of WWI. A new type of economic policy was implemented in all Eastern European countries. The introduction of new customs tariffs became the most important means of directing postwar economic policy. Between 1919 and 1923/4 and even further along for some countries, prohibitions of imports and exports formed the principal means of control in foreign trade and economic policy. In a few countries such prohibitive measures were maintained or put into force almost directly after the war. Isolation and entrenchment in the countries of East-Central Europe in defense of their own economies naturally meant protection against all foreign trading partners. In reality however, this protection was against the neighboring countries and less so against those more remote. Thus, self-protection pushed the countries of East-Central Europe much further away from one another (Table. 9). It is characteristic that the foreign trade of Yugoslavia with the neighboring Balkan countries remained insignificant throughout the decade following the war.47 Source of table 8: League of Nations, Twenty-ninth Report of the Commissioner of the League of Nations in Bulgaria (Quarter from August 15th to November 15th, 1933), Geneva, December 30th, 1933, p. 14. 46 47 I. Berend, G. Ranki, Economic Development, op. cit., pp. 207-208. 122 Michalis Sarras Table. 9 Foreign Trade in millions of Swiss Francs48 Country Year Imports Exports Foreign trade after deduction of transnational trade Imports Exports Austria 1929 1930 1931 1932 2,379 1,970 1,576 544 1,597 1,348 954 275 1,270 1,021 823 284 950 846 614 175 Bulgaria 1929 1930 1931 1932 308 169 173 77 239 229 220 68 213 121 126 36 152 154 145 33 Czechoslovakia 1929 1930 1931 1932 3,073 2,412 1,804 606 3,151 2,688 2,017 570 2,311 1,737 1,392 455 2,010 1,704 1,435 391 1929 1930 1931 1932 892 710 544 212 464 389 285 80 703 585 495 124 437 354 248 49 Hungary 1929 1930 1931 1932 968 748 500 154 945 828 516 138 431 352 256 78 370 356 274 60 Poland 1929 1930 1931 1932 1,808 1,303 848 251 1,632 1,411 1,090 313 1,523 1,095 724 213 1,203 1,092 857 242 Romania 1929 1930 1931 1932 911 714 492 169 897 884 684 232 656i 516 354i 123i 623i 608 475i 161i Yugoslavia 1929 1930 1931 1932 695 632 435 124 720 617 435 130 367 343 252 78 358 352 238 65 Greece N.B. 1932 data available for January to June. The distribution by country in 1929, 1931 and 1932 not being available, it has been assumed that the distribution, in percentage was the same as in 1930. Source of table 9: League of Nations, Report by the Stresa Conference for the Economic Restoration of Central and Eastern Europe, Geneva, September 1932, p. 6. 48 Challenging Modernity 123 For instance, in Austria numerous articles were put on the valid list of prohibited imports. In Czechoslovakia efforts at agrarian isolation were strengthened, culminating in a considerable increase in the duty on corn, wheat, livestock, and meat in 1930. The tariff on wheat was raised to 75-80 per cent of the value.49 Simultaneously Czechoslovakia imported more than half of its wheat requirements from overseas and not from the neighboring agrarian countries by the late 1920s50 -a revealing fact about the reciprocity of these processes. Similarly, the agrarian countries of the Danubian Valley sought to establish increasingly radical protection against industrial imports from Austria and Czechoslovakia. Thus, self-protection invoked in the name of self-sufficiency inevitably pushed the countries of East-Central Europe much further away from one another.51 The situation was further aggravated by the inauguration of an agrarian protectionist policy by the European industrial states. After 1928 Germany introduced high agricultural tariffs; Italian grain and flour duties reached prohibitive levels between 1929 and 1931 during the Great Depression; France and Greece imposed important tariffs on cereals too.52 Governments around Europe then took various steps toward spending less money on foreign goods such as: imposing tariffs, import quotas, and exchange controls. These restrictions created a lot of tension between trade nations, causing a major trade deduction during the depression. Even though protection resulted in more expensive subsidies and final products, the need for domestic stability suggested the necessity of restricting imports. In these conditions of total collapse of the international and inter-European trade, the agrarian economies of Eastern and Southeastern Europe (Table 10), were unable to generate the capital needed for modernization through their agricultural production and exports. Additionally, export versatility was very limited in most of the countries of the region (Table 11). Therefore, the ability to substitute other products for exportation in case of a price drop or to come up with alternative markets was very limited. This resulted in great 49 I. Berend, G. Ranki, Economic Development, op. cit., p. 207. 50 Ibid., p. 209. 51 Ibid., pp. 201-210. I. Berend, G. Ranki, Economic Development, op. cit. For Greece cf. Μ. Psalidopoulos, Monetary Management and Economic Crisis. The Policy of the Bank of Greece, 1929-1941, Athens, Bank of Greece, 2011, pp. 69-70, in Greek. M. Mazower, Greece and the Inter-War Economic Crisis, Oxford, Clarendon Press, 1991, pp. 203-235. C. Brégianni, “Modernising Models Versus Protectionist Measures? Interwar Organizational Schemes for the Greek Rural Economy”, Neoellinika Istorika 3 (2013), pp. 75-104, in Greek. 52 124 Michalis Sarras dependence on large buyers and international markets. In crises like that of 1929, the consequences of price reductions were very negative. The fall of international trade caused an extraordinary decrease in the investment activity in agriculture; also, the fall of imports of agricultural machinery, tools and implements and the use of artificial fertilizers. Actually, a widespread process of disinvestment took place in agriculture in these years, by failing to provide the necessary capital resources.53 At the same time, the internal markets were too weak to absorb the agricultural products which could not be exported. In addition, most of Eastern and Southeastern European countries had a surplus agricultural population. In Yugoslavia the degree of overpopulation amounted to 61.5 percent of the total agricultural population during ’30s, 53.0 per cent in Bulgaria, 22.4 percent for Hungary, 51.3 percent for Poland and 51.4 percent for Rumania.54 Undoubtedly, this was an impediment in any effort to modernize Eastern European lands. So, could the difficulties stemming from the slow, inadequate domestic capital accumulation be overcome by the importation of foreign capital? In the postwar power system of European and world politics, after a few years of postwar economic chaos, old and new great powers appeared as creditors and factors of European political and economic stabilization in the economic reconstruction of the disordered countries of the Danube Valley. The starting point was to achieve financial stabilization.55 In Eastern and Southeastern Europe the aid of loans from the league of Nations balanced the budgets and stabilized the currencies across the region.56 Of special importance were the credits serving to stabilize the currency in Austria, Hungary, Greece and Estonia.57 Loans from the League of Nations played a role in Bulgaria, Romania and Yugoslavia.58 Stabilization with foreign cooperation became an important 53 J. Tomasevich, Peasants, Politics, op. cit, pp. 643, 441, 447. W. E. Moore, Economic Demography of Eastern and Southern Europe, League of Nations, Geneva, 1945, pp. 61-70. Cf. also Office of Population Research, “Demographic Problems of Southeastern Europe”, Population Index, 7 (Apr. 1941), pp. 84-92. 54 55 I. Berend, G. Ranki, Economic Development, op. cit., pp. 213-241. J-H. Flores, Y. Decorzant, Public Borrowing in Harsh Times: The League of Nations Loans Revisited, Working Paper Series, Genève, Université de Genève, September 2012, pp. 1-37. 56 League of Nations. Economic Intelligence Service, Public Finance 1928-1935. Greece, Geneva, League of Nations, 1936. League of Nations. Economic Intelligence Service, Public Finance 1928-1935. Hungary, Geneva, League of Nations, 1936, League of Nations. Economic Intelligence Service, Public Finance 1928-1935. Austria, Geneva, League of Nations, 1936. 57 For the above-mentioned countries, cf. League of Nations. Economic Intelligence Service, Public Finance 1928-1935. Yugoslavia, Geneva, League of Nations, 1936. League of Nations. Economic Intelligence Service, Public Finance 1928-1935. Bulgaria, Geneva, League of Nations, 1936. League of Nations. Economic Intelligence Service, Public Finance 1928-1935. Roumania, 58 Challenging Modernity 125 link in the chain of events which promoted economic reconstruction in EastCentral Europe. Reorganization of the budget and of financial affairs was intended not only to put an end to postwar chaos and inflation, involving both political and economic dangers, but also to create normal conditions for and acceleration of savings and investment. After the stabilization of currencies, the East-Central European countries could obtain plenty of international credit, albeit at an exorbitantly high interest rate of 7 per cent.59 In addition, in most instances only a small part of these credits was spent on infrastructure, such as electrification, development of transport and agriculture. The greater part of the credit served to convert older debts, or to cover social investments and consumption- this analysis could not even calculate the funds swallowed up by corruption. As a Hungarian economic journal stated: the terms of the loans do not provide for the use of foreign capital in our economic life, as there can be no fundamental rehabilitation of agriculture (…). The loan granted by the League of Nations is only the first step which should be followed by a whole series of further credit transactions.60 The Western financial activities in Eastern European countries during interwar years, revealed no vivid interest in possible investments. The leading creditors and exporters of capital, especially U.S.A. and England, had no strong interest in an economic position in East-Central Europe.61 So the motives of the credit operations were chiefly of a political nature and were intended to serve political objectives. Consequently, the structural problems and difficulties of Eastern European agriculture could not be overcome by the importation of foreign capital during the interwar period. Another important factor which sabotaged the political cooperation of the agricultural countries of Eastern Europe was the increasing clearing trade and economic influence of Germany during the decade of the 1930s (Table 12). The commercial system which was introduced turned the foreign trade of Nazi Germany toward Central and South-Eastern Europe; it seemed feasible to use these countries as main base of foreign raw materials for the development of the German war economy. Most of these countries were agrarian countries in Geneva, League of Nations, 1936. Cf. also J. A. Santaella, “Stabilization Programs and External Enforcement: Experience from the 1920s”, Staff Papers - International Monetary Fund 40/3 (1993), pp. 584-621. 59 I. Berend, G. Ranki, Economic Development, op. cit., p. 223. 60 Cited ibid., pp. 224-225. 61 Ibid., pp. 201-241. 126 Michalis Sarras economic straits, afflicted with the problem of how to market their agrarian products. There could be no doubt that they would welcome any proposal which would promote the sale of their products. The Danubian countries had accepted the principle of bilateral trade proclaimed by the Germans. One ought to consider that these countries even though they were debtors, suffered most from the financial crisis along with Germany. Also, unable to cope with their foreign currency problems, these countries were the first to introduce a controlled foreign exchange policy. It is then understandable that bilateral trade and barter seemed to promise considerable advantages. In conclusion, the objective of making Eastern European countries into a base of food and raw materials for the German war economy had practically been achieved. By 1939 the Danube countries were fettered by economic ties to Germany. The commercial relations had been systematically strengthened during the thirties and were rapidly reinforced at the end of decade, leading to the preponderance of Germany in the foreign trade of the region.62 III. Conclusion: Political Features of Agrarianism Every point mentioned above sketched the inability of the agricultural lands of Eastern Europe to cooperate effectively at an international level, in order to better defend their interests. During the interwar period in Eastern Europe, but also in some Western European countries, agrarian political parties made a dynamic appearance.63 In many countries these parties formed coalitions with other political parties in government or in the case of Bulgaria, they were voted in office on their own. The political ascendance of Agrarianism led to the formation of the International Agrarian Bureau or of the “Green International”, as the international movement of Agrarians is alternatively known. The international union of Eastern European farmers aimed at bringing peace in Europe64 and political/economic cooperation so that farmers would prosper. At a second level, as it was aptly proposed, it targeted “the radical reorganization of social Ibid., pp. 265-284. A. Basch, The Danube Basin and the German Economic Sphere, London, Butler & Tanner Ltd., 1944, pp. 165-200 and passim. Cf. also St. Gross, Export Empire: German Soft Power in Southeastern Europe, 1890-1945, Cambridge, Cambridge University Press, 2015, pp. 68-219. 62 63 G. Jackson, “Peasant Political Movements in Εastern Europe”, in Henry Landsberger (ed.), Rural Protest: Peasant movements and Social Change, Edinburg, Macmillan, 1974, p. 272. L. S. Stavrianos, The Balkans Since 1453, New York, New York University Press, 1958 [2000], p. 610. 64 Challenging Modernity 127 structures and the implementation of a peasant alternative modernity”,65 to be the third alternative way between capitalism and communism. Despite the fact that in bibliography the agrarian parties were labeled traditionally as reactionary and opposing social progress, in fact the opposite appeared to be true as those parties were not impediments in the process of modernization.66 Their dynamic emergence in the political scene of Eastern Europe showcased the aspiration of the agrarian populations to organize their production against the encroaching pressures of the international markets. It also demonstrated how much they resented having to shoulder the costs of modernization. However, the policy of Agrarians was never implemented comprehensively in any Eastern European country. Neither was the creation of a peasant alternative to modern society made possible. Indeed, none of the countries of the region possessed the gravitational force to pull the rest of the countries toward its policies. So, even in Bulgaria where the Agrarians held the power, they failed to bring about international restructuring despite their significant initiatives. In brief, a union of agrarian countries or agrarian political parties seemed to be necessary before an economic reorganization or improvements in the agricultural infrastructure took place. This type of union, a “Green International” was rather a stillborn attempt during the interwar years in Eastern Europe. Summarizing the causes that held back the creation of a radical “Green International”, emphasis must be placed on difficulties to raise sufficient capital through agricultural production. This would have sustained the agrarian economy in the difficult period after World War I. The inability to find resources for restructuring the agricultural economy and to raise funds for such a project at an international level would condemn any international effort of an autonomous political intervention for the Agrarian parties. Parallel to this, the economic protectionism and the rise in tariffs influenced international trade negatively and created significant problems in the export side of agricultural products. The crisis of 1929 aggravated conditions of trade exchange between agricultural and industrial products. It also caused insurmountable problems for agricultural countries. Finally, the German economic inroads and vertical increase of clearing trade system between Germany and Eastern/ Southeastern Europe spelled the demise of any effort toward a viable alternative agrarian policy for that region. 65 A. Toshkov, Rescuing Alternative Modernity, op. cit., p. 58. J. Bell, Peasants in Power, op. cit., pp. 231-236, M. Biondich, S. Radic, The Croat Peasant Party and the Politics of Mass Mobilization, 1904-1928, Toronto, University of Toronto Press, 2000, pp. 74-75, 245-247. 66 128 Michalis Sarras Table 10. Foreign Trade, 1928-30, 1932 and 1934, Exports (in million Swiss francs)67 Albania Foodstuffs 1928-30 (avge) 1932 Bulgaria 1928-30 (avge) 1934 1932 1934 Grain live-stock and poultry Eggs Currants, raisings 0.2 1.5 .. 0.1 0.2 0.5 28.0 8.6 31.4 2.2 9.7 3.6 1.6 .. 0.5 .. 0.5 .. 27.3 .. 23.4 2.0 12.3 5.0 Other fruit Beans Cheese, butter Meat Olives, olive-oil Fish Wine Other agricultural products Tobacco Medicinal plants Hides and skins .. 0.1 2.4 .. 2.3 .. .. .. .. 1.3 .. 0.4 0.5 .. .. 0.2 0.5 .. 0.2 0.4 .. .. 3.8 2.1 .. .. .. .. .. 2.8 1.4 3.0 .. .. .. .. 1.6 1.3 3.1 .. .. .. 0.1 … .. .. 0.1 .. 97.3 .. 40.4 .. 35.3 .. 2.3 0.4 0.5 12.5 3.0 4.9 .. .. .. 8.7 1.4 1.3 1.1 0.3 0.3 .. … .. 1.1 .. .. 0.5 .. 0.8 0.4 .. .. 0.3 .. 0.3 0.1 .. .. 0.4 .. 0.4 .. .. 6.6 .. .. 39.9 0.6 .. 0.4 .. .. 14.7 0.4 .. .. .. .. 13.6 14.0 4.5 4.3 234.8 126.7 92.1 Essence of roses Wool Other exports Timber Chemicals Silk cocoons Ores, metals Petroleum Unspecified exports Total Source of table 10: Information Department of the Royal Institute of International Affairs, The Balkan States. A Review of the Economic Development of Albania, Bulgaria, Greece, Romania and Yugoslavia since 1919, London, Oxford University Press, 1939, p. 135. 67 Challenging Modernity 129 Greece Romania 1928-30 (avge) 1932 1934 192830 (avge) .. .. .. 255.3 .. .. .. .. .. 70.5 1932 Yugoslavia 1934 1928-30 (avge) 1932 1934 163.3 58.7 93.5 26.3 50.3 52.7 17.5 13.9 81.2 39.5 30.9 .. .. .. .. 43.6 15.5 7.1 56.0 39.7 .. .. .. .. .. .. 6.9 .. 4.8 .. 4.2 .. .. 18.1 .. 10.6 5.9 8.8 25.0 8.4 18.6 2.6 11.6 4.0 .. .. .. .. .. .. .. .. .. .. 20.8 .. 29.8 .. 26.1 .. 7.5 .. 13.1 .. 5.5 .. .. .. .. .. .. .. .. .. .. .. .. 22.9 .. .. .. 14.4 .. .. .. 11.1 .. .. .. 236.4 79.0 57.1 .. .. .. .. .. .. .. .. .. .. .. .. 21.92 2.4 8.1 10.6 2.7 3.8 … .. .. 13.3 3.76 6.4 .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 5.8 .. .. 9.4 .. 3.2 .. .. 3.1 .. 5.3 .. .. 5.3 .. 124.1 .. .. .. 288.5 31.0 2.1 .. .. 220.0 45.6 2.1 .. .. 219.0 151.4 28.6 .. 49.3 .. 43.7 15.8 .. 30.4 .. 56.6 8.1 .. 37.7 .. 39.9 14.9 25.0 134.4 71.8 60.0 104.2 27.2 40.4 430.1 197.3 159.0 873.1 516.3 414.0 643.3 259.9 272.3 130 Michalis Sarras Table 11. Exports of Foodstuffs and Raw Tobacco in millions of Swiss francs68 Country Year Exports of foodstuffs and row tobacco as percentage of total exports Exports of cereals as percentage of total exports 1929 1930 1931 Jan-June 1932 % 74.4 81.0 87.7 92.9 % 9.2 15.1 22.3 34.6 Greece 1929 1930 1931 Jan-June 1932 90.9 88.8 89.6 91.8 - Hungary 1929 1930 1931 Jan-June 1932 68.2 67.4 61.9 - 28.2 21.3 14.6 15.1 Poland 1929 1930 1931 Jan-June 1932 33.4 36.2 33.5 32.0 5.7 7.0 4.7 6.7 Romania 1929 1930 1931 Jan-June 1932 38.0 38.3 46.7 41.5 30.9 35.0 39.5 35.7 Yugoslavia 1929 1930 1931 Jan-June 1932 48.9 50.5 53.3 53.4 19.9 15.7 14.6 13.4 Bulgaria Source of table 11: League of Nations, Report by the Stresa Conference for the Economic Restoration of Central and Eastern Europe, Geneva, September 1932, p. 6. 68 Challenging Modernity 131 Table 12. Share of Greater Germany (including Austria and Czecho-Slovakia) in Foreign Trade of South-Eastern European Countries (1938)69 Country Bulgaria Greece Yugoslavia Romania Turkey Hungary Imports from Greater Germany (%) 57.9 31.1 50.0 48.5 51.3 48.1 Exports to Greater Germany (%) 63.6 43.2 49.9 35.9 47.3 50.1 69 Source of table 12: The Royal Institute of International Affairs, South-Eastern Europe. A Political and Economic Survey, Oxford, Oxford University Press, 1939, p. 203. Part of the tables 1-12 are based on the research data base “Southeastern European Statistics during the Interwar Period”, Project Transnational Monetary and Economic Alternatives in the Interwar Politics. 4 ROSER CuSSÓ Professor, University of Paris I Panthéon-Sorbonne INTERNATIONAL QUANTIFICATION AND LIBERALISM THE EARLY STATISTICAL ACTIVITIES OF THE LEAGUE OF NATIONS’ ECONOMIC AND FINANCIAL ORGANIZATION Introduction Analysis of the early statistical activities of the Economic and Financial Organization (EFO) of the League of Nations (LoN) suggests two hypotheses. First, the intention to establish international cooperation on statistics was present at the outset; cooperation was both connected to intergovernmental decision and provided with its own initiative. Second, EFO quantification developed a new relationship between knowledge and power. This relationship differed from that which can be found in the context of the state where governments, and data use, are politically accountable, subject to opposition oversight and criticism. Based on cross-country comparison, EFO statistics reflected international objectives (cross-country interdependence and cooperation) as well as their corresponding ethical basis (multilateralism, peace missions). While these goals and related ethics were to reinforce an emerging “liberal internationalism” as regards economic issues, data helped to consolidate it through convergence towards such paradigm. The LoN’s quantification became a new political instrument in the drive to reshape globalization’s content and method. I. Knowledge and Power within the loN: a New Approach to Global Interdependence? This article analyses the early statistical activities of the Economic and Financial Organization (EFO)1 of the league of Nations (loN). The league The EFO included the Secretariat (the Economic and Financial Section, EFS) and the committees where sat the experts, i.e. the Economic, Financial or Statistical Committees. 1 134 Roser Cussό was created in 1919, in the wake of the First World War. I revisit two hypotheses, which I have discussed elsewhere2 at greater length, in order to further analyze the relationship between international quantification and the development of a new globalization, as regards contents (free trade, cross-country economic interdependence), and methods of implementation, through a common paradigm aimed at internationalizing economic liberalism. The latter was also justified by ethics: it was essentially founded on the idea that free trade brought peaceful international relations and global prosperity. Statistical standardization, as monitored by the EFO, is studied here as a steering mechanism for convergence of countries towards such a paradigm. It was reinforced by international legitimacy (multilateralism) and voluntary and technical cooperation. While national policies could remain varied, international statistics both pointed out common problems and offered shared, quantified knowledge to address them. My first hypothesis is that there was an intention from the start to develop international technical activities in the LoN, based on both the Secretariat’s relative autonomy and the approval of the intergovernmental sphere. This stands in contrast to what the historiography of intergovernmental organizations (IO) has often put forward. V.-Y. Ghébali for instance considers that the development of the loN’s technical activities was essentially a reaction to the “fetters of a political control”.3 According to L. W. Pauly, “[…] the original architects of the League never explicitly intended such [technical] activities to develop […]”.4 More recently, the early EFO technical activities have been acknowledged though they are seen as being rather limited: “[…] a growing sense of frustration in its work prompted EFO to attempt to free itself from inter-governmental oversight and become an independent organization to promote economic and financial co-operation in 1940 […]”.5 R. Cussó, « L’activité statistique de l’Organisation économique et financière de la Société des Nations : Un nouveau lien entre pouvoir et quantification », XXVII/2 (2012), pp. 109-138. 2 V.-Y. Ghébali, La Société des Nations et la Réforme Bruce, 1939-1940, Geneva, Carnegie Endowment for International Peace, 1970, p. 83. 3 L. W. Pauly, The League of Nations and the Foreshadowing of the International Monetary Fund, Princeton, NJ, International Finance Section Department of Economics, Princeton University, 1996, p. 5. 4 P. Clavin, J.-W. Wessels, “Transnationalism and the League of Nations: Understanding the Work of its Economic and Financial Organization”, Contemporary European History, 14/4 (2005), pp. 465-492, p. 465. 5 International Quantification and Liberalism 135 I contend that the loN counted on developing the production of international statistics rapidly, and augmenting considerably their scope (used in the supervision of the mandates, in health programs and trade overviews, among others), without forgoing the intergovernmental nature of the international decision making process. This intergovernmental aspect structured and legitimized international statistics, including their political dimension, i.e. their capability to implicitly define common problems and areas of intervention. My second hypothesis is that the EFO’s statistical program gave rise to a new relationship between power and statistics. International quantification deeply differs from quantification produced by states. While there is a drive at both levels to rationalize public action, their functioning contrasts significantly. Governments, and official data they use, are subordinate to the pluralism of parliamentary systems, where the opposition may express criticism and alternative projects. This is not the case for IOs (and the loN was no exception) seeing that, unlike a party system, there is no majority/ opposition dynamics.6 Consequently, IO missions, and related official data, are directly linked to ethics, independent of political changeovers. It is important, in addition, to note that, in IO assemblies, government representatives can avoid the oversight of their parliaments, at least temporarily. This explains why use of the expression “government representatives” is more accurate than “state representatives”. To sum up, the LoN’s Secretariat, with the follow-up and approval of the intergovernmental sphere, developed new statistical programs founded on common missions and collaboration. Such international quantification accompanied (and channeled) the emergence of a new global order linking free trade (and interdependence) to peace. Internationalizing liberalism came to be thought of as a matter of ethics. Regarding my approach, I endeavor to link a historical analysis of the statistics produced by IOs both to the sociology of quantification and to critical demographics.7 Since the creation of IOs involves political As regards the European Union (EU), the European Parliament (EP) has a limited legislative power: “For most legal acts, the legislative power is shared with the Council, through the ordinary legislative procedure”. The budgetary power is also shared with the Council. The EP does not choose the Commission, http://eur-lex.europa.eu/summary/glossary/european_ parliament.html. The International labor Organization (IlO) does not completely reproduce the diversity of the conflictual character of collective bargaining. Cf. C. Gobin, L’Europe syndicale. Entre désir et réalité. Essai sur le syndicalisme et la construction européenne à l’aube du xxie siècle, Brussels, Labor, 1997. 6 7 A. Desrosières, The Politics of Large Numbers: A History of Statistical Reasoning, Cambridge, Mass., Harvard University Press, 1998. H. Le Bras, Naissance de la mortalité. L’origine politique 136 Roser Cussό innovations, I consider that these organizations have produced specific political instruments beyond those produced by states, as noted above, but also by comparison to those produced by international non-governmental bodies. If the origin of IO statistical programs has begun to be studied in a systematic way,8 researchers have rarely defined the specificities of international quantification.9 Regarding my methodology, I take into account international missions, resolutions, procedures and publications as well as interactions of, and micro-decisions by, different actors. Such multilevel analyses should allow for a better understanding of the evolution of IO programs and policies. Finally, like C. Brégianni,10 I try to interconnect economic and political processes, considering them as inextricable. A macro –as well as a micro– historical research axis focusing on the diachronic formation of both economic globalization (or polarization) and globalizing (or polarizing) methods and instruments, such as international or regional cooperation and local implementation, has thus been launched and may result in new insights.11 de la statistique et de la démographie, Paris, Seuil/Gallimard (collection Hautes études), 2000. R. Cussó, S. D’Amico, “From Development Comparatism to Globalization Comparativism: Towards more Normative International Education Statistics”, Comparative Education, 41/2 (2005), pp. 199-216. R. Cussó, « Aux origines de l’évaluation statistique internationale: la supervision des mandats par la Société des Nations » in Philippe Bourmaud, Norig Neveu, Chantal Verdeil (dir.), Experts et expertises dans les mandats de la SdN: figures, champs et outils, Paris, Presses de l’INALCO, 2020, pp. 161-188. A. Ribi Forclaz, “Agriculture, American Expertise, and the Quest for Global Data: Leon Estabrook and the First World Agricultural Census of 1930”, Journal of Global History, 11 (2016), pp. 44-65. M. Ward, Quantifying the World: UN Ideas and Statistics, Bloomington, Indiana University Press, 2004. H. Westergaard, Contributions to the History of Statistics, The Hague - Paris - London, Mouton Publishers, 1932. As for the literature on statistics produced by the EFO, cf. infra. 8 R. Cussó, Comparer pour mieux régner. Histoire et sociologie de la quantification internationale, HDR dissertation, Paris, IEP, 2012. 9 C. Brégianni, “Monetary Crises in Greece during the 19th Century. Greek Membership in the Latin Monetary Union and Numismatic Issues”, in G. Depeyrot (ed.), Moneys and Economies during 19th Century (from Europe to Asia), Wetteren, Moneta, 2012, pp. 27-38. 10 Cf. C. Brégianni, “Global institutions, refugee crisis and the Great Depression as a turning point: The League of Nations Financial Committee and the creation of the Bank of Greece”, work in progress. Also see the description of the Session “Financial Expertise and Monetary Order as Societal and Individual Experience. Global Actors and Local Players (XIXe c.-XXe c.)”, organized by C. Brégianni, WEHC, Paris 2022. Further R. Cussó, C. Brégianni, “Objectifs du colloque”, Acteurs du développement économique et financier entre global et local, un aperçu par le biais des réseaux personnels, durant l'entre-deux-guerres et au-delà, Colloque coorganisé par Paris I, UMR D&S (IRD/IEDES) & TransMonEA project (HFRI-Academy of Athens), Paris I, 8-9/10/ 2020. Both documents are accessible in https://transmonea.academyofathens.gr/ index.php/en/dissemination/conferences. 11 International Quantification and Liberalism 137 One of the goals of such methodology is to elucidate the mechanisms relating global to local social and economic processes,12 mechanisms which are often overshadowed. In the section which follows, I will briefly discuss a few statistical precedents to the quantification carried out by the LoN, as well as the literature on the EFO’s statistical activities. The third section will present the results of my archival work, especially those focused on the circumstances of the emergence and definition of the EFO’s quantification activities. Lastly, I provide some concluding remarks. The LoN’s archives, located in the Palais des Nations, Geneva, include correspondence, memos, and other documents (drafts and final versions) relating to the activity of the league’s various Secretariat’s sections. In the case of the Economic and Financial Section (EFS), Alexander Loveday’s personal archives are also available – he was a member of the EFS and, from 1931, he was the Director of the Financial Section and Economic Intelligence Service. My professional experience (1993-2001) in the production of statistics (from questionnaires to publication) within the statistical services of the United Nations Educational, Scientific and Cultural Organization (UNESCO) has helped to guide my approach. II. Sparsity of the Literature on early EFO Statistical Activity and Political Innovation A few Predecessors to Quantification by the LoN The quantification activities carried out by the International Congress of Statistics (1853-1876), impelled by Adolphe Quetelet, or by the International Institute of Statistics (IIS) since 1885, have been relatively well studied. They have often been considered as a precedent for those developed by the LoN. They contributed to moving “statistical internationalism” forward, in particular by propagating recommendations for the development of harmonized data.13 Nevertheless, the scope of the activities of the Congress and the IIS was limited, in comparison to the League’s programs and publications. These early non-governmental entities mainly aimed at encouraging the development of statistical systems within states. At the time, these systems 12 Cf. the introduction of the present volume. E. Brian, « Statistique administrative et internationalisme statistique pendant la seconde moitié du XIXe siècle », Histoire & Mesure, IV/3.4 (1989), pp. 201-224, p. 216. 13 138 Roser Cussό were relatively poorly organized and unconcerned with harmonization.14 The LoN was certainly confronted by similar problems, but it managed, as an intergovernmental institution, to develop more comprehensive and comparative statistical series. The particularities of these organizations may explain the differences in their scope and efficacy. The League introduced an international civil service (Secretariat) which was permanent and formally independent from member states.15 What is more, and this was a significant political innovation, the LoN was granted a part of the sovereignty traditionally exercised by states, thus allowing it to have its own missions, as consecrated in the Covenant.16 The Congress and the IIS mainly worked at the transnational level, and unofficially at that: “The 1878 crisis was triggered by the uncertainty regarding the status of the participants to the Statistical Congress”.17 The same applies to the forerunner of the ILO, the International Association for Labor Legislation (IALL) which was “composed of free personalities without mandates […]”18 and which did not manage to gather internationally harmonized data. This is also noted in the case of agriculture,19 and observed in the outputs of the Congress and the IIS.20 These entities did not hold the international power which would have derived both from (a share of) state sovereignty and from the debating, and official approval, of government representatives in international assemblies. International non-governmental organizations’ autonomy allowed neither for an extensive statistical production, nor for a remarkable influence on state statistics. They did not produce a bona fide international quantification. R. Cussó, « La quantification internationale à la lumière de la SSP et des congrès internationaux de statistique : continuités et ruptures », Journ@l Électronique d’Histoire des Probabilités et de la Statistique, 6/2 (2010), http://www.emis.de/journals/JEHPS/Decembre2010/Cusso.pdf 14 LoN, Statut du personnel, Geneva, LoN, 1946. For more details on the international administration, cf. F. P. Walters, A history of the League of the Nations, London, Oxford University Press, 1952. 15 16 http://digital.library.northwestern.edu/league/le000003.pdf A. Desrosières, « Entre l’administration et la science: les transformations de l’internationalisme statistique », Congrès de l’Institut international de statistique, Berlin, 2003, p. 4. 17 18 I. Lespinet-Moret, « Le vivier de la direction et du ministère du Travail à l’œuvre au sein de l’Organisation internationale du travail, 1919-1932 », in A. Chatriot, O. Join-Lambert, V. Viet (eds.), Les politiques du travail (1906-2006): acteurs, institutions, réseaux, Rennes, Presses universitaires de Rennes, 2006, pp. 241-257, p. 243. 19 A. Ribi Forclaz, “Agriculture, American Expertise, and the Quest for Global Data”, op. cit. R. Cussó, « La quantification internationale à la lumière de la SSP et des congrès internationaux de statistique », op. cit. 20 International Quantification and Liberalism 139 Some Studies on EFO’s Statistics Susan Pedersen underlined in late 2007 the relative lack of studies on the LoN’s technical organizations: “The history of this third ‘League of Nations’ is not well known”.21 She also noted that statistics were not dealt with specifically through the LoN’s different areas of competence. In the case of the EFO, while almost all related studies note the importance of its statistical activities,22 they rarely describe them in detail; they do not investigate in depth the mechanisms and effects of international quantification as a policymaking innovation. M. Fior23 and A. M. Endres & G. A. Flemming24 have shown interest in the impact of international technical and discursive activities on national economic and financial practices. Their analysis of this impact is rather classical, based on the effects of loans, reports, or statistical production on policy reform: they do not consider quantification as a policy-grounded process on its own. For Fior, the LoN played a remarkable role in the elaboration, legitimization, and spread of financial orthodoxy in the 1920s, thus contributing to the economic and political crisis that was triggered in the 1930s. The LoN’s intervention in Austria can be seen as an example of this.25 Endres & Flemming focus on the contribution of the loN’s economists to economic and social research. In their opinion, also shared by Fior, the EFO’s statistical activities take on meaning mostly in the context of the studies that were carried out at the time. Focused on the origins of the International Monetary Fund, L. W. Pauly is more interested in the development of EFO’s data collecting, but mostly for its role therein rather than as a political S. Pedersen, “Back to the League of Nations”, American Historical Review, 112/4 (2007), pp. 1091-1117, p. 1108. 21 “At the present time [February 1921] the Economic and Financial Section produce practically the whole of the statistical work done by the League […]” in Compilation of Statistics of the League, by F. Nixon, February 3th, 1921: LoN’s Archives (LoNA), Box R.290 “International Statistics”. 22 M. Fior, Institution globale et marchés financiers : la Société des Nations face à la reconstruction de l’Europe, 1918-1931, Brussels - Bern - Berlin, Peter Lang, 2008. 23 A. Endres, G. Fleming, International Organizations and the Analysis of Economic Policy, 1919-1950, Cambridge, Cambridge University Press, 2002. 24 Among the functions of the Economic and Financial Committee, it is to note the “financial reconstruction of Austria, Hungary, Greece and Bulgaria; [Greek and Bulgarian] refugee settlement schemes; advice and assistance to a number of individual governments on financial problems …”. The Fiscal Committee was concerned “with the removal of tax barriers to international trade and investment”. Cf. E. F. Ranshofen-Wertheimer, The International Secretariat, New York, Carnegie Endowment, 1945, p. 113. 25 140 Roser Cussό instrument. He mentions a “first survey compiled in 1922 at the behest of the Brussels Conference”.26 However, he does not refer to the questionnaires which were sent out regularly as early as 1920 for use in the Monthly Bulletin of Statistics. In fact, Pauly mainly notes the development of the EFO’s statistical program, starting in 1927 with the International Economic Conference in Geneva.27 From a transnational and actor-based approach,28 Y. Decorzant29 has analyzed the expert networks on economic and financial issues and their relationship with the EFO, while Clavin and Wessels have more clearly underlined the linkages between international data and economic policy. Yet they circumscribe this linkage to data’s capacity to inform policy rather than create it: “The initial focus of the section’s work was to collate economic statistics. In this form, the Economic and Financial Section had neither the remit nor the power to formulate policy recommendations (although its data often informed the policy choices of governments)”.30 The characteristics of the committees remain ambiguous. They are deemed to be independent: “[…] the officials of the Economic and Financial secretariat demonstrated ambition and independence of mind by pressing for the creation of an independent expert advisory committee on economic and financial questions […]”, but their members are also described as “So-called ‘independent experts’ ”. They would have been “seconded to the Economic and Financial committees as a result of informal, behind-the-scenes negotiations between governments of the primary League member states”.31 L. W. Pauly, The League of Nations and the Foreshadowing of the International Monetary Fund, op. cit., p. 27. 26 27 Ibid., p. 19. “This approach facilitates an increased sensitivity to how the history of international relations shapes, and is shaped by, all members of society”, P. Clavin, “Introduction: Defining Transnationalism”, Contemporary European History, 14/4 (2005), pp. 421-439 & p. 437. Cf. as well M. D. Dubin on transgovernmentalism: “[...] what actually was occurring in the 1930’s, and what senior international officials were advocating, was the development of sectoral political linkages across state boundaries, a development today described as the processes of ‘transgovernmentalism’ ”. M. D. Dubin, “Toward the Bruce Report: The Economic and Social Programs of the League of Nations in the Avenol era”, The League of Nations in retrospect, Berlin - New York, Walter de Gruyter, 1983, pp. 42-72, p. 64. 28 Y. Decorzant, « La Société des Nations et l’apparition d’un nouveau réseau d’expertise économique et financière (1914-1923) », Critique internationale, 52/3 (2011), pp. 35-50. 29 30 P. Clavin, J.-W. Wessels, “Transnationalism and the League of Nations”, op. cit., pp. 470-471. 31 Ibid., pp. 471, 472. International Quantification and Liberalism 141 M. D’Alessandro further dissociates the governments’ objectives from the Secretariat’s. In his opinion, the EFO’s invitation of representatives of the private sector aimed to circumvent “governments’ interference”.32 Industrialists, bankers, union representatives, economists, and others, supported by international principles, are viewed as agents for “policy change” within the states. Nevertheless, D’Alessandro’s definition of international technical expertise brushes aside the legitimacy gained by the EFO from government participation and approval, as it is explicit in LoN’s organization,33 and more specifically, as it is defined in a 1920 resolution on governments role in committees. Thus, the idea of “behind-the-scenes” goings-on may also be nuanced given the official nature of the relation between governments and technical experts: The Technical Organisations […] are established for the purpose of facilitating the task of the Assembly and the Council by the setting up of technical sections on the one hand, and on the other to assist the Members of the League, by establishing direct contact between their technical representatives in the various spheres, to fulfill their international duties.34 M. D’Alessandro, “Seeking Governance for World Markets. The League of Nations between Corporatism and Public Opinion, 1925-1929”, European Business History Association - XIth Annual Conference, Geneva, September 2007, pp. 13-15, p. 1, http://www.ebha.org/ebha2007/ pdf/Alessandro.pdf 32 As P. Clavin and J.-W. Wessels noted: The … system […] can be reduced to a cyclical procedure of five steps […]. First, […] the Second Committee would begin its discussions based on the previous year’s reports from the Economic Committee, the Financial Committee and their sub-committees. The national delegations would then propose and eventually agree on resolutions recommending a particular subject or set of subjects to be studied by the Economic and Financial committees [EFC]. The Second Committee would ask the Council to authorise the [EFC] to continue an inquiry, to begin a new inquiry and/or to appoint a new special sub-committee. Second, […], the [EFC] decided the method of the inquiry and who would undertake it. […]. The third step was for the designated committee to get to work, […]. The fourth step […] was, of course, to write a memorandum. At this stage, […] the [EFC] reports had to be agreed unanimously, or at least there had to be unanimity among the representatives of the primary League member states. Once this hurdle was overcome, the report was submitted to the Council and, with the latter’s consent, published. The fifth and final stage of the cycle came in two arenas […]: in the public sphere where national governments, the press, interest groups and the public at large received, and […] formulated some kind of response to the report; and in the Second Committee which used these reports as the basis of the next year’s [cycle]. […] The Secretariat was involved in each and every stage of the five-step process. Cited in P. Clavin, J.-W. Wessels, “Transnationalism and the League of Nations”, op. cit., pp. 479-480. 33 34 Annex to the sixteenth meeting, General report by M. Gabriel Hanotaux on the Technical Organizations “Relations between the Technical Organisations, the Council and the Assembly 142 Roser Cussό In line with this, and according to M. Hill, a former member of the LoN, it was established that “[…] the Economic Committee, was composed mainly of high officials from ministries of commerce – persons actively concerned with the framing and execution of national commercial policies; […] the Financial Committee, included several well-known bankers, two or three government officials, and two or three high officials of Central Banks”.35 He adds: Side by side with its conference and committee work, the [EFO] built up a comprehensive Economic Intelligence Service. A group of economists and statisticians formed part of the League Secretariat as early as the summer of 1919; before the end of that year it had taken over and expanded the Statistical Bulletin of the Supreme Economic Council of the Allies and had called an international meeting of experts with a view to organizing its statistical work. This embryo Economic Intelligence Service prepared for the Brussels Conference of 1920 the basic documentation on the currency and financial conditions in European countries, matters.36 Hill, who began working at the EFS in October 1927, emphasizes the 1928 International Convention relating to economic statistics. In his opinion, “The convention contained far-reaching specific obligations”.37 He did not elaborate on the technical details of data production. Nor did C. K. Nichols, another former member of the LoN, who interestingly considered that the comparability of statistics was one of the EFS’s first goals: “[…] it was soon seen that international comparisons could only be made if the national statistics were available in comparable form and represented non dissimilar phenomena by comparable methods”.38 A. A. Menzies39 focuses on the EFO’s statistical activities in the mid-1920s, in particular on the difficulties surrounding the definition of a nomenclature for customs formalities. He examines the origins of these activities less than Nichols or Hill do, but he is of the League of the Nations” in LoN, Records of the First Assembly. Plenary Meetings, Geneva, 1920, pp. 339-340. Cf. also M. D. Dubin, “Transgovernmental Processes in the League of Nations”, International Organization, 37 (1983), pp. 469-493, p. 479. M. Hill, The Economic and Financial Organization of the League of Nations, Washington, Carnegie Endowment for International Peace, 1946, p. 97. 35 36 Ibid., p. 95. 37 LoNA: List of the Secretariat Personnel (1920-1938), ref. C 1185. C. K. Nichols, “The Statistical Work of the League of Nations in Economic, Financial and Related Fields”, Journal of the American Statistical Association, 37/219 (1942), pp. 336-342, p. 338. 38 39 A. A. Menzies, “Technical Assistance and the League of Nations”, The League of Nations in Retrospect, Berlin - New York, Walter de Gruyter, 1983, pp. 295-312. International Quantification and Liberalism 143 the first observer to ponder the close link between international globalizing action and the early need for international data. Finally, research by Martin Bemmann is also to be noted, especially as regards his concept of “World Economic Statistics” in the context of the quantification approach. He analyses, for instance, the actors’ motives as regards the production of such statistics, i.e. “information gathering, securing of political influence and shaping of national identities and prestige”.40 The effect of international cooperation developed by the EFO as regards reform (or adaptation) of national statistical services and, consequently, in the transformation of national economic identities is thus not treated in the available literature.41 The following section investigates the key period of the development of the EFO’s early statistical work, by considering the immediate start of its quantification program as well as the EFO’s early interactions with government representatives. How does international quantification trigger policy change? How does comparison impact on a country’s economic paradigm? III. The Emergence of International Quantification: “Compare and Globalize” Political versus Technical Activities? While President of the USA, Woodrow Wilson, strongly supported the creation of the loN in the follow-up to the First World War (1919). He had already proposed the creation of a “general association of nations” in January 1918, in his well-known “Fourteen Points”. Putting an end to secret diplomacy and fostering cooperation were among the motivations for his proposal. The united Kingdom’s government is also considered to have actively participated in drafting the LoN’s Covenant, and so is J. C. Smuts,42 a South African general, who had worked on a document closely resembling its final version.43 In M. Bemmann, “Comparing Economic Processes on a Global Level in the 1920s and 1930s. Motives and Consequences”, Working Paper, 2017. Cf. as well: https://www.eah.geschichte.unifreiburg.de/staff/dr.-martin-bemmann 40 There is a work in progress on this issue: R. Cussó, “Building a Global Representation of Trade through International Quantification: the League of Nations’ Unification of Methods in Economic Statistics”. 41 J. C. Smuts, The League of Nations: A Practical Suggestion, London, New York, Hodder and Stoughton, 1918. 42 Cf. E. Manela, The Wilsonian Moment. Self-determination and the International Origins of Anticolonial Nationalism, Oxford, Oxford University Press, 2007. G. J. Mangone, A Short History of International Organisation, New York, McGraw-Hill Book Company, 1954. 43 144 Roser Cussό spite of its central involvement in the creation of the LoN, the United States did not join the organization. The American Congress opposed it because such organizations could reduce the united States’ ability to defend its own interests. Yet the US did participate in numerous League technical activities, as did other non-member countries. The Covenant can be divided into four main parts. The first one dealt with questions relative to peace keeping, such as disarmament or treaty negotiation, i.e. the political questions. The second one concerned the compromise regarding the future of the colonies of Germany and the Ottoman Empire. The united States being hostile to the extension of other colonial empires, especially those of the United Kingdom and France, the compromise consisted in attributing only mandates on the territories of the vanquished empires to the concerned powers – France, UK, Japan, Belgium... This arrangement introduced a significant novelty: the LoN supervised the mandatory powers as stated in the Article 22 of the Covenant.44 The compromise introduced the adoption of the open-door policy as well. In his “Fourteen Points”, Wilson’s proposed “the removal, so far as possible, of all economic barriers and the establishment of an equality of trade conditions among all the nations”. The third part of the Covenant pertained to the organization and to the operation of the loN. The relationship between the Assembly, the Council, and the Secretariat (Article 2) was not elaborated, and neither was the Secretariat’s concrete work (Articles 6 and 7). In fact, the Covenant described the conditions for the development of international expertise rather than defining the way this expertise would function. The fourth part of the Covenant referred to technical activities. According to Article 23, these “economic and social” activities were: “[…] commercial, industrial, and agricultural matters, finance and transportation matters, demography and emigration matters, hygiene and public health matters, as well as those of housing and food […]”.45 It is important to bear in mind that the word “technical” was quickly qualified at the time: The term “technical” is obviously inadequate to define all these activities, and it is a truism that most of these questions are to a greater or lesser degree political, especially in their national aspect. But the term was used consistently until the so-called Bruce Report of 1939 attempted to replace it by “economic and social affairs”.46 44 http://digital.library.northwestern.edu/league/le000003.pdf 45 V.-Y. Ghébali, La Société des Nations et la Réforme Bruce, 1939-1940, op. cit., p. 91. 46 E. F. Ranshofen-Wertheimer, The International Secretariat, op. cit., p. xviii. International Quantification and Liberalism 145 IOs have continued using the expression “technical activities” and “technical cooperation”, which are often considered to be their most genuine activities. Regardless, the formal separation between the political and technical activities reconciled two opposing visions, as expressed in 1919: the will to keep decisions solely at the intergovernmental level and the idea of creating a transnational sphere composed of independent experts. The former supported the permanent representation of governments within the LoN, while the latter favored direct links between the Secretariat and the different countries’ technical officials or experts.47 As will become clear in what follows, the development of international quantification resulted from the powerful complementarity between these two options rather than from their opposition. The Rapid Development of Statistics While international data were mentioned only indirectly in the Covenant,48 statistics immediately drew attention. Even before the loN was formally organized, the Conference on International Co-operation in Statistics was held in London on August 14 and 15, 191949 (see Table 1 below for a summary of the EFO’s activities and evolutions). In a letter to the legal service (September 11, 1919), Arthur J. Salter underlined the link between the new international responsibility with regard to free trade and the collection of statistics in this area: The position with regard to commercial statistics has now been altered, not only by the creation of the League of Nations and the International Secretariat, but by the specific duties imposed upon the League under the Covenant, which 47 M. D. Dubin, “Transgovernmental Processes in the League of Nations”, op. cit. “Article 24. […] In all matters of international interest which are regulated by general conventions but which are not placed under the control of international bureaux or commissions, the Secretariat of the League shall, subject to the consent of the Council and if desired by the parties, collect and distribute all relevant information and shall render any other assistance which may be necessary or desirable”. 48 “In summer 1919, these men [Fosdick, Monnet, Anzilotti, Nitobe, Beer, Salter, Attolico, Colban, van Hamel, Comert, Mantoux, Ames et Mme Crowdy] settled down in London to prepare the future organisation”. F. P. Walters, A history of the League of the Nations, op. cit. p. 79. “The Treaty of Versailles came into force on January 1920, bringing the League of Nations into formal existence. The Secretariat, which to this moment had been provisional, now acquired formal status and, on 16 January 1920, the League of Nations Council met for the first time”, M. D. Dubin, “Transgovernmental Processes in the League of Nations”, op. cit., pp. 485-486. 49 146 Roser Cussό include, for example, the securing of the equitable treatment of the commerce of all nations. Co-ordination and improved methods of collecting commercial statistics became, therefore, matters of the first importance to the League.50 Table 1. Main Activities of the LoN’s EFO, 1919-1931 Year EFO’s general activities EFO’s statistical activities 1919 loN’s provisional organization Conference on international co-operation in statistics, London (August 14th-15th) Regular questionnaire aimed at producing the Monthly Statistical Bulletin 1920 Provisional Economic and Financial Committee International Financial Conference Brussels (September 25th - October 8th) 1921 1922 Statistical questionnaires being sent to Member States in order to prepare the Conference (March) International Statistical Committee, Paris (October 11th) Creation of the Statistical Section in london International Economic Conference, Genoa (April 10th -May 19th) “Minutes transmitting report of the International Conference for Commercial Statistics […]. Asking for legal opinion on several points in connection with the Convention signed at that time [1913] by the Great Powers; most of the Minor Powers”. Document signed by Arthur J. Salter, 11 September 1919: LoNA, Box R.289 “International Statistics”. Salter was officially appointed as EFS’s director in 1922. According to L. Pauly “Walter Layton and, then Frank Nixon were the first directors, soon to be followed by Arthur Salter, who served as permanent director from 1922 until 1931”. L. W. Pauly, The League of Nations and the Foreshadowing of the International Monetary Fund, op. cit., p. 6. Nevertheless, Salter was very influent on decisions regarding the EFS from 1919: “I am now installed […] with Salter in the Economic Section of the League of Nations Secretariat”. Letter from W. Lloyd to U. Yule, 30 June 1919, LoNA, Box R.289. 50 International Quantification and Liberalism 1923 Economic and Financial Committee Intern. Conference for the Simplification of Customs formalities, Geneva (October 15th November 3rd) 1924 First issue of Balances of Payments 1927 International Economic Conference, Geneva (Mai 4th 23th) First International Statistical YearBook 1928 Fiscal Committee International Conference on Economic Statistics, Geneva (November 26th December 14th) International Convention relating to economic statistics Committee of Statisticians 1931 147 The EFS splits into the Economic Intelligence Service and the Financial Section, on the one hand, and the Section of Economic Relations, on the other hand* By noting the need to merge power and knowledge, Salter actually described the nascent international quantification. Yet he did not explain how international statistics could help the LoN to “secure” free trade. Adolphe Quetelet, in the context of the International Statistical Congress of 1853, probably made one of the first analyses of how international quantification, unfeasible at the time, could influence and/or help states in their politics: “Statistics, conceived in a spirit of unity and relying on set bases appropriate for all countries, are destined […] to spread its benefits to all lands and shed new light on the real interests of governments”.51 The combination of a positivist perception of data, the harmonization of statistics (allowing cross-country comparison), and the emergence of objectives “above politics”, certainly are among the genuine founding stones of international policy, as further analyzed in the next section. The EFS rapidly took up its statistical activities. Relying on a sizeable and experimented personnel,52 the EFS appealed to experts of different “The Economic Intelligence Service, while attached to the Financial Section, assisted and continues to assist all the activities of the [EFO] as a research body”, E. F. RanshofenWertheimer, The International Secretariat, op. cit., p. 113. 51 Minutes of the international Congress of statistics of 1853, p. 19. * 52 The EFS was the larger LoN’s technical unit. According to the: List of the Secretariat 148 Roser Cussό nationalities, organized conferences, participated in drafting documents… It was within this context of growing initiatives that the interaction between Secretariat, experts, and government delegates was built up. The decision to have statistics produced by the LoN, and not only by preexisting statistical non-governmental entities (IIS, among others), is an example well worth considering. The aforementioned Conference on International Co-operation in Statistics (August 14-15, 1919) proposed nominating a Committee “to consider the definite distribution of statistical work between the various bodies connected with, or proposed to be connected with, the League of Nations […]”. The Imperial Conference on Statistics of the British Empire (January 20-February 26 1920) went further by underlining “the possibility of centralising all classes of international statistics in a single Bureau […]”.53 The proposal to constitute an International Committee of Statisticians was supported and presented by Eric Drummond, the Secretary General. In a letter dated February 14, 1920, A. J. Salter suggested to Drummond “[…] that the appointment of such a committee might perhaps be properly made upon the authority of the Secretary General and without the actual instructions of the Council”.54 The Council was then composed of the United Kingdom, France, Italy, Japan, Belgium, Brazil, Greece, and Spain. In agreement with Salter, the memorandum included the list of statisticians and experts who would sit on the Committee, along with its program, but the Council’s ratification was finally requested. Thus, Drummond acknowledged the crucial dependency between the different levels of decision-making in the league as compared to the IIS: “I do not much like Salter’s plan that I should convoke a Committee without the approval, event in principle, of the Council, since the Governments would, no doubt become aware of what have been done, and might resent it”.55 The International Committee of Statisticians met in Paris, on October 11, 1920, during the second Conference on International Co-operation in Statistics. The debates did not lead to a unanimous decision. The Committee produced a Majority Report in favor of the LoN simply coordinating statistics, and a Minority Report proposing the LoN produce its own data: “… the step now imperatively needed to unify and standardise international statistics Personnel (LoNA, ref. C 1185), in 1921, the EFS (including the London Bureau) summed up 17 members. In 1925, they were 42, in 1927, 45; in 1928, 49; in 1929, 55; in 1930, 56; in 1932, 58; in 1937, 63, and in 1938, 65 members. International Statistics. Memorandum by the Secretary-general, p. 5, April 5th, 1920, LoNA, Box R.289 “International Statistics”. 53 54 LoNA, Box R.289 “International Statistics”. 55 Letter to Jean Monnet, February 16th, 1920; LoNA, Box R.289 “International Statistics”. International Quantification and Liberalism 149 is to establish within the organization of the league a statistical section corresponding to the other technical organisations set up in the League”.56 The Minority Report was signed by Royal Meeker (Chief of the Statistical Division of the International Bureau of Labor), R. H. Coats (Canada’s official statistician), and A. W. Flux (Assistant Secretary to the Statistics Bureau, Board of Trade, London) – Coats and Flux had taken part in the Imperial Conference on Statistics of the British Empire which already supported the idea of separate international statistics.57 Unsurprisingly, those who signed the Majority Report were representatives of preexisting statistical entities whose remits were to be reduced in the other configuration: A. Delatour (VicePresident of the ISI) and P. Delombre (official delegate of the International Institute of Commerce in Brussels). They were supported by L. March (Director of the Central Bureau of Statistics, Paris), as well as by L. Bodio (President of the Supreme Council of Statistics, Rome). Strangely enough, in a letter to Royal Meeker, Camille Jacquart (Managing Director at the Interior Ministry in Brussels and delegate from the International Bureau of trade statistics in Brussels), also a signatory of the Majority Report, considered that the Minority Report was superior, but that “it did not correspond to the terms of the mandate which [they] were given”.58 The lack of unanimity brought about a consultation of the member states, led by the EFS. The coordination policy was chosen by a majority of respondents: Following his communication dated November 5, 1920, the Secretary General has only received the answers of thirteen governments at this time [August 13, 1921]. Eight of them: Belgium, Bulgaria, Denmark, Finland, Italy, the Netherlands, Norway, and Sweden have approved the Majority Report. The other five: South Africa, Australia, Czechoslovakia, Japan, and New Zealand favor the minority’s proposal.59 The decision of the General Assembly (through its Commission International Statistics Organisation), delays the final decision: P. 1 of International Committee of Statisticians. Minority Report; LoNA, Box R.290 “International Statistics”. 56 P. 1 of Minutes of Conference with British Imperial Statisticians; LoNA, Box R.289 “International Statistics”. 57 58 Letter of November 24th, 1920; LoNA, Box R.290 “International Statistics”. P. 3 of Memorandum by the Secretary-general, August 13th, 1921; LoNA, Box R.355 “Organisation of International Statistics”. The response of India is to be noted: “The Government of India […] are not in favour of the recommendations either in the majority or in the minority Report”, August 4th, 1921; LoNA, Box R.355. 59 150 Roser Cussό Assembly decides that statistics […] will not be undertaken by the League as long as the question of the organization of international statistics has not been decided, and this question is entirely deferred until the next session […]. The title of the [Monthly Bulletin of Statistics] published by the League should indicate that it does not contain original statistics, but consists of figures collected from other statistical sources.60 This decision could be interpreted as the result of tensions between the Secretariat and governments, between the autonomy of the first and the political oversight of the latter. Further analysis rather shows that it led to a pragmatic tradeoff between the LoN’s official collaboration with non-governmental entities and their taking, in effect, direct responsibility for statistics production. The production of international data within the LoN had already been launched, following a decision by the Allies. Firstly, the latter approved the creation of the Bulletin in August 1919. A questionnaire was to be sent on behalf of the provisional Economic and Financial Committee, which included experts officially linked to government representatives.61 Secondly, in order to prepare the International Financial Conference in Brussels (September 24-October 8, 1920), the EFS had also sent questionnaires (in March 1920) to participating states, asking them for information on their public finances, national debt or foreign trade.62 This practice allowed the EFS not only to assemble preexisting series but also to classify country statistics in categories established by the Section, and according to conference goals. To sum up, governmental differences did not put into question the necessary interdependence of the secretariat and member states. The EFS did not wish to develop activities which were not under government supervision, rather, it favored international programs unanimously adopted by them. In other words, the EFS made efforts to act through agreements under intergovernmental decision while participating in the definition of such agreements. 60 Report of Committee No. 2 “Organisation of International Statistics”. LoN, Records of the Second Assembly. Plenary Meetings, Geneva, 1921, p. 459. Decision of the Supreme Economic Council of August 1st, 1919, to constitute an International Committee for the purpose of publishing a monthly Bulletin of Economic Statistics, London (LoNA, Box R.289 “International statistics”) and following the “Statistical Bulletin of the Suprem Economic Council of the Allies”. M. Hill, The Economic and Financial Organization of the League of Nations, op. cit., p. 97. See also Box R.349 “Monthly Bulletin of Statistics”. 61 Draft of the circular letter asking for information on “Budget”, “Total Domestic Debt”, “Foreign Trade”, etc. March 3rd, 1920; LoNA, Box R.303 “Economic Questionnaire to Various Governments”. 62 International Quantification and Liberalism 151 Another example of the interaction sought between the EFS and the member states is that of transnational activity. The work carried out by the United Kingdom with the Commonwealth, as seen in the activity of the EFS’s London bureau, was a primary reference for international statistics, reinforced by the fact that the Section’s top officials were British.63 The EFS was also inspired by work developed in the United States, which was a collaborating state. For instance, during the second Conference on International Co-operation in Statistics (October 11, 1920), the Section presented a memorandum on the American classification of commodities, originally meant for the American Chamber of Commerce.64 The activities carried out by some countries may thus have been at the root of EFS choices and developments, and may then have served in an international agreement on statistical definitions and methods. In this context, exchanges with experts made it easier for “epistemic communities”65 to develop in the field of data production. Some practices could indeed be adopted (or at least known) long before conventions had been signed, through ministerial exchanges for instance. That may explain why formal intergovernmental agreements would become increasingly consensual, as observed in the UN Assembly’s meetings, for instance. The IO fundamentals remain: an international accord can only be effective in the long run if those who hold political legitimacy ultimately adopt it. Comparing as the Foundation of Quantification As already analyzed through Quetelet’s citation, two of the foundations of international quantification are data harmonization and cross-country comparison. The former was relatively laborious for the EFS. The standardized presentation of the population by age group, for instance, was still problematic in 1929: “For the Irish Free State, the large [age] groups which they show do Cf. for instance, the letter of March 3rd, 1922, between A. Loveday (EFS in Geneva) and D. Etlinger (London Office); LoNA, Box P.133 “Archives of Mr. Loveday” or exchanges between D. Etlinger and G. Frumkin (Geneva), 1929-1932; LoNA, Box R. 2683-7 “Statistical Year-Book”. In a letter of May 24th, 1932, it can be read that the Imperial Institute had estimated, for instance, the figures of production of nitrate in Norway for 1929 and 1930. 63 Memorandum attached to the letter of September 3rd, 1920, of G. B. Boorbach, Professor of Foreign Trade (Harvard University); LoNA, Box R.348 “The statistical activities of the League of Nations”. 64 65 S. Kott, « Une ‘communauté épistémique’ du social? Experts de l’OIT et internationalisation des politiques sociales dans l’entre-guerres », Genèses, 71 (2008), pp. 26-46. 152 Roser Cussό not correspond satisfactorily with those which we show in the Yearbook”.66 Indeed, the data standardization process depended mostly on a fundamental factor: the definition of a consistent and uniform framework for collecting and treating statistics on a regular basis, i.e. the use of common questionnaires and categories. The EFS laid down these foundations from the start and managed to prepare rather rigorous statistical series as shown in the LoN early publications on economic and financial data (Monthly Bulletin, Statistical Yearbook, etc.). As for international comparison, it implicitly followed by virtue of having data issued by country or territory under the same categories, in a single document. Carried out by the LoN, these comparisons were official and were thus leading into something new. First, statistical publications concretized the possibility for the LoN to look at all states from “above”; they could be perceived as being on the same level. Second, those publications also allowed for the existence of an “international community”67 with their agricultural and mining productions, trade, industry, labor force, public finances, etc.68 One of the most important exercises of political power is precisely to count the population and to draw up an inventory of wealth. Finally, whenever common objectives can be found (equitable treatment of the commerce of all nations), harmonized data open up to the possibility of imagining common policies, a common approach to economic and social issues, traditional domains of the state. It was through the (official) comparison of countries that international quantification bound together international knowledge and power. While data harmonization allows simplification of the complex social and economic structures of states, comparison defines the scope of intervention. Without yet having produced rankings and benchmarks, EFO’s data offered an indirect “neutral” measurement of the progress made by states towards their agreed goals, thus becoming an instrument of evaluation, and, somehow, of implicit emulation. 66 Letter of D. Etlinger to G. Frumkin, March 27th, 1929, LoNA, Box R. 2683 “Statistical YearBook”. 67 As expressed, for instance in the context of the description of the Mandatory system, see LoN, The Mandates System. Origin, Principles, Application, Geneva, LoN, 1945. As regards the diversity of the studied topics, often by means of statistics: LoN, Catalogue des publications éditées de 1920-1934, Geneva, LoN, 1935. 68 International Quantification and Liberalism 153 Figure 1. A fragment of Table 74 from the 1926 International Statistical Yearbook At first glance, Table 74 in the LoN’s first Yearbook provides a “mere” snapshot of goods; imports and exports by country (see Figure 1.) In fact, it is the result of a long technical process and was an intermediate step in the promotion of free trade. For tariff barriers to decrease or even disappear, statistics both had to implicitly reflect this goal and to encourage it. In this context, the standardization of the nomenclature of import/export goods (coal, wheat, cotton, etc.) and of their weight, quantity and value were prerequisite to the long run effort to compare the tariffs associated with them. Referring to the International Conference for the Simplification of Customs formalities of 1923, Menzies notes that it “was unable to agree on [...] how ad valorem duties should be calculated. [...] Many of the calculations problems were the result of statistical disagreements about such matters as gross and net weights and measures, and the exact definition of commodities which determined the applicable tariff”.69 Five years later, in 1928, the International Conference on Economic Statistics adopted a nomenclature 69 A. A. Menzies, “Technical Assistance and the League of Nations”, op. cit., p. 308. 154 Roser Cussό on customs formalities. In the meantime the league had started a program aiming at the unification of methods in economic statistics, including a nomenclature on goods and recommendations as regards measurement of a good’s value, weight and quantity, as well as the use of common categories on general and special trade.70 As early as 1920, the EFO wanted to propose the above-mentioned American classification to the Statistical Conference: “There is a growing feeling that steps should be taken to remove the inconvenience and confusion caused by the extreme diversity of commodity classifications used by the different nations in collecting and publishing their trade statistics”. A decimal system was retained: for instance, two would be assigned to the “textiles” category, while 20 would be assigned to cotton, and 200 to raw cotton. It was “necessary and desirable that tariff purposes be met by a classification”.71 In other words, the measurement instrument, while still deemed to serve country’s needs for information, essentially allowed (the idea of) common tariff policies. The importance of statistical comparison between states was omitted from the innocuous preface to the first issue of the International Statistical Yearbook, signed by A. Loveday: “This [Yearbook] is published in accordance with a recommendation made by the Economic Committee of the [LoN] to the Council in its report of December 1925”. It was also noted that … the Committee had been struck by the fact that, in the course of the League’s business, a very considerable volume of statistics of great interest to Governments and business-men has been published, that these statistics are scattered through a number of different publications ... and that it would be of great advantage to publish a summary of them in a single volume.72 In 1928, the need to carry out scientific studies was also mentioned by the Statistical Conference as justification for statistical comparability, while clearly noting the need for harmonization.73 The influence of comparison on the perception of the phenomena being compared was noted much later: 70 LoNA, Boxes R414-415 ‘Unification of Methods in Economic Statistics’. Memorandum attached to the letter of September 3rd, 1920 of G. B. Boorbach, Professor of Foreign Trade (Harvard University): LoNA, Box R.348 “The Statistical Activities of the League of Nations”. 71 72 LoN, International Statistical Year-Book 1926, Geneva, LoN, 1927, p. 7. “In elaborating these statistics, the Governments should try to use uniform methods with a view of obtaining international, comparable figures”. “Committee for the agenda of the proposed Statistical Conference”, p. 1-2; LoNA, Box R.2683 “International Statistical Conference, Geneva, 1928, Preparatory Committee”. 73 International Quantification and Liberalism 155 “[…] national tariffs were generally held to be a matter of purely domestic concern in 1920; the international consideration of tariff questions is now just as generally considered to be normal and desirable”.74 In brief, a mutually consented and implemented international comparison, of customarily domestic questions, resulted from a huge effort comprising several steps: preparing and discussing harmonization methods and categories; ensuring participation and approval by governments; collecting, treating and issuing the data. In this process, countries not only classify their data according to the new methods, but also explain, even justify, their decisions as regards the underlying policies which governed their data production.75 Governments accepted having their standardized data published by an international body able to produce studies, recommendations, and, in some cases, austerity programs. They participated in a new globalizing activity where free trade and liberalism were assimilated to peace and improved international relations. International quantification thereby comes to be considered, in fine, as an expression of shared ethical objectives. IV. Conclusions: IOs and Technical Activity Considering that technical activities were at the root of the creation of the LoN, my analysis moves away from the position according to which those activities became autonomous slowly and out of necessity. They are often portrayed as having evolved as a way to bypass the limits imposed on the Secretariat by government delegates. This interpretation fails to take three aspects of the story into account. The first is the priority which was immediately given to technical activities by the LoN, a priority illustrated by the importance and scope of the EFO’s work in the field of statistics. The second is the official participation of government delegates in technical issues, as seen in the joint construction of statistical expertise and its approval. The third aspect is that technical activity is a specificity of the LoN for geopolitical reasons. The United States, which instigated the League, was also a pioneer of technical cooperation. At the end of the 19th century, it implemented a new “cooperation and aid” policy aimed in particular at Latin American countries.76 The colonial model could not compete with 74 M. Hill, The Economic and Financial Organization of the League of Nations, op. cit., p. 6. R. Cussó, “Building a Global Representation of Trade through International Quantification: the League of Nations’ Unification of Methods in Economic Statistics”, International History Review, 42/4 (2020), pp. 714-736. 75 76 P. W. Drake, “From Good men to Good Neighbors: 1912-1932”, in A. F. Lowenthal (ed), Exporting Democracy: The United States and Latin America, Baltimore, Johns Hopkins University Press, 156 Roser Cussό emerging modern international relations based, in principle, on pacific and technical cooperation between governments. Humanitarian work was also a fundamental pillar of these new relations;77 this would eventually lead to “development programs” from the 1940s onwards. The LoN was to contribute to the transition from the old to the new world order. Emerging International Quantification: the loN’s relation to its statistics was different from that of states to their data. The former was free from debates between opposing political projects; it relied on the hybrid decisionmaking that resulted from interactions between the Secretariat, experts, and governments. In brief, international quantification directly linked ethical objectives and the production of knowledge. The power of comparing: An international entity was given the official mission of comparing and examining countries from an external viewpoint, resulting in implicit evaluation and emulation. International comparison did underlie international power. Indeed, governments could and did “use” international statistics to their own ends. For instance, in the comparison between national budget deficits of the 1926 Statistical Yearbook, (Table 83) it could be noted that, in 1924-1925, Norway had a negative balance in its public finances, which was much higher than most other European countries (133.3 million krone with a revenue of 317 million). The country’s “overspending” policies could thus be both perceived and problematized in this context. While, in general, it is just the use of such data by IOs which is underlined, such statistics could also help governments justify austerity measures, for instance, by presenting them as coming from an impartial IO. In this implementation of international quantification, governments may nonetheless be weakened: international quantification survives changes in the make-up of parliaments, while the comparison between states remains an implicit judgment on government actions. Quantification and policy convergence: Common data methodologies, classifications and calculations opened up the possibility of triggering policy convergence without expressing explicit policy recommendations. Early statistical programs certainly facilitated the development of shared knowledge on economic issues and, thus, a shared view of economic problems and solutions. The shared knowledge supported a new paradigm based on economic freedom with an ever increasing cross-country interdependence. International quantification triggered both new forms in international 1991, pp. 3-40. E. S. Rosenberg, Financial Missionaries to the World: The Politics and Culture of Dollar Diplomacy, 1900-1930, Durham, NC, London, Duke University Press, 2003. 77 V.-Y. Ghébali, La Société des Nations et la Réforme Bruce, 1939-1940, op. cit., p. 17. International Quantification and Liberalism 157 relations and new economic policies aiming at liberal globalization. The latter was thus backed by international technical cooperation but also by universalism. Ethical considerations came to have an important role in this context. liberalism and capitalism-based free trade were seen as a guarantee of peace and fairness. Protection, equilibrium in trade balances and regional solidarity (or bilateralism) were implicitly deemed to be negative policies and, more recently, “discriminatory”, as often evoked by the International Monetary Fund (IMF), for instance. International instruments have thus contributed crucially to politically dominant narratives regarding justice, discrimination and peace. Their capacity for impact on local policies still calls for further clarification and new insights. These issues are of increasing importance as directions for developing research. Part II The Pivotal Role of the Great Depression 5 JÜRGEN NAUTZ Associate University Professor THE GREAT DEPRESSION IN THE WEIMAR REPUBLIC AND ITS PRECONDITIONS A VIEW ON THE NATIONAL, STATE, AND LOCAL LEVEL Introduction Germany's economic, political, and social condition was already precarious when the country was hit by the Great Depression; the glamor of the Golden Twenties may occasionally obscure this fact.1 After overcoming inflation, only a relative economic stabilization was achieved. The weakness of the Weimar Republic can be attributed to many significant factors, namely reparation obligations, higher labor costs, increased social benefits and an unstable social system. Moreover, the Republic was embroiled in troublesome foreign policy and an adverse global economic climate. This has been covered extensively in research, and the analyses have led to sometimes heated academic debates. In the following, the most important developments will be presented. The consideration of national developments will be supplemented by the situation in Hesse and in the city of Kassel in rural North Hesse (in the current boundaries).2 Heike Knortz discusses the German “Golden Twenties” and their role in the reception of Weimar development in the book Wirtschaftsgeschichte der Weimarer Republik. Eine Einführung in Ökonomie und Gesellschaft der ersten Deutschen Republik, Göttingen, Vandenhoek & Ruprecht, 2010, pp. 115-125. 1 Hesse was formed in 1945 from the territory of the Volksstaat Hessen (People's State of Hesse) of the east side of the Rhine river Oberhessen (upper Hesse) and Starkenburg, the Prussian provinces of Hessen (Hesse) and parts of Nassau. These two provinces were the result of the division of the former province of Hessen-Nassau (Hesse-Nassau) in 1944. A map can be found at the link https://www.lagis-hessen.de/img/ga/s2/117.jpg. I thank Walter Mühlhausen for his useful comments on the sections on Hessian history in this article. A draft version of this paper was presented in the TransMonEA Seminar Currency, Crises, Representations of Money and of Economy. First Thematic Cycle 2020/2021. Interwar Crisis. Transnational Approaches and National Case Studies: Quantification and Conceptualisation, from the Local to the Global (J. Nautz, “Germany's Economy and Society in the 1930s: Great 2 162 Jürgen Nautz I. Between Devaluation and Great Slump At the beginning of the 1920s, the Weimar Republic suffered from an extreme devaluation of money, primarily as a result of war funding. In 1923, demonetization was additionally fueled by the financing of the Ruhr War and the compensation of the resulting production losses as well as the decline in tax revenues by expanding the money supply.3 In July 1922, the value of 1 Goldmark (gold mark) was around 120 Papiermark (paper mark), a month later around 270 Papiermark. In November 1923 one U.S. dollar was equivalent to around 4.2 trillion paper marks. By December 1923, the value of 1 gold mark had risen to around 1 trillion paper marks (see table 1). From November 15, 1923, the Papiermark was replaced by the Rentenmark (exchange rate: 1 trillion Papiermark = 1 Rentenmark). The Rentenmark was finally converted into the Reichsmark (RM) in August 1924 at par. Table 1. Hyperinflation in the Weimar Republic, July 1922-December 1923. Value of 1 gold mark from July 1922 to December 1923 in 1,000 paper marks4 July '22 August '22 September '22 October '22 November '22 December '22 January '23 February '23 March '23 0.12 0.27 0.35 0.76 1.71 1.81 4.28 6.65 5.05 April '23 May '23 June '23 July '23 August '23 September '23 October '23 November '23 December '23 5.83 11.36 26.20 84.19 1,100.63 23,500 6,100,000 522,300,000 1,000,000,000 Depression and the Weimar Republic”, 25.1.2.021, https://transmonea.academyofathens.gr/ index.php/en/dissemination/seminars/first-thematic-circle) Main titles on the inflation period: Carl-Ludwig Holtfrerich, The German Inflation 1914-1923. Causes and Effects in International Perspective, Berlin, De Gruyter, 1986. Gerald D. Feldman, The Great Disorder. Politics, Economics and Society in the German Inflation 1914-1924, New York - Oxford, Oxford University Press, 1997. Costantino Bresciani-Turroni, The Economics of Inflation. A Study of Currency Depreciation in Post-War Germany 1914-1923, London, 1937, reprint: The Economics of Inflation, Auburn Alb., Ludwig von Mises Institute, 2007. H. Knortz, Wirtschaftsgeschichte, op. cit. with further readings. 3 Source of table 1: Statista Research Department, Hyperinflation in der Weimarer Republik 1922-1923, based on: C. Bresciani-Turroni, The Economics of Inflation, op. cit., Tab. IV, p. 441, https://de.statista.com/statistik/daten/studie/281794/umfrage/hyperinflation-in-derweimarer-republik/. 4 The Great Depression in the Weimar Republic and its Preconditions 163 In the second half of the 1920s some important developments contributed positively to the improvement of the economic climate, especially the currency reform, the provisional settlement of the reparations issue under the Dawes Plan, and the supply of foreign capital.5 On the other hand the economic constitution of the republic was burdened by structural deficits. The industry had to contend with a lack of capital, overcapacities, and overall weak growth. The protectionism, characteristic of the world economy in the interwar period, also hindered a more positive development. Structural problems also affected the agricultural sector, which was in a chronic crisis. It suffered from outdated practices, global competition and falling prices for its products. State subsidies in particular could hardly be granted in view of the difficult financial situation faced by the state. Agriculture still represented an important economic sector, although industry had even before 1914 overtaken its share in overall economic importance.6 Moreover, agriculture was very well connected with the political class, which was also evident in the shaping of the deflationary policy: Brüning’s deflationary strategy spared agriculture.7 Cf. H. Knortz, Wirtschaftsgeschichte, op. cit., p. 115 et seqq. Heinrich August Winkler, Weimar 1918-1933. Die Geschichte der ersten deutschen Demokratie, revized edition, München, C. H. Beck, 1998. Hans Mommsen, Aufstieg und Untergang der Republik von Weimar. 1918-1933, revized and actualized edition, Berlin, Ullstein, 1998. 5 Cf. H. Knortz, Wirtschaftsgeschichte, op. cit., pp. 17-18, 122-125, 236, 241. Heinrich Becker, Handlungsspielräume der Agrarpolitik in der Weimarer Republik zwischen 1923 und 1929, Stuttgart, Steiner, 1990. 6 Cf. Hartmut Berghoff, Ingo Köhler, Harald Wixforth, “Navigation im Meer der Interessen”, in C.-L. Holtfrerich (ed.), Das Reichswirtschaftsministerium der Weimarer Republik und seine Vorläufer. Strukturen, Akteure, Handlungsfelder (Wirtschaftspolitik in Deutschland 1917-1990), Berlin - Boston, Walter de Gruyter, 2016, vol. 1, pp. 421-516. Dirk Stegmann, “Deutsche Zoll-und Handelspolitik 1924/25-1929 unter besonderer Berücksichtigung agrarischer und industrieller Interessen”, in Hans Mommsen, Dietmar Petzina, Bernd Weisbrod (eds.), Industrielles System und politische Entwicklung in der Weimarer Republik, Düsseldorf, Droste, 1977, pp. 499-513. Dietrich Hertz-Eichenrode, Politik und Landwirtschaft in Ostpreußen 19191930. Untersuchung eines Strukturproblems in der Weimarer Republik, Köln, Westdeutscher Verlag, 1969. Dieter Gessner, Agrarverbände in der Weimarer Republik. Wirtschaftliche und soziale Voraussetzungen agrarkonservativer Politik vor 1933, Düsseldorf, Droste, 1976. 7 164 Jürgen Nautz Table 2a. German Reich: Economic Sectors Value added in billion euros8 Gross value added in billion euros Total Agriculture Manufacturing Trade, Transport and Hospitality 1913 24.8 5.8 11.2 3.9 3.5 1925 23.3 3.7 11.3 4.0 3.9 1929 27.4 4.3 13.3 4.7 4.6 1933 23.0 5.3 9.1 3.6 4.7 1937 32.3 4.9 16.6 5.0 5.4 Service Table 2b. German Reich: Economic Sectors Value added in percent Agriculture Value-added share % ManuTrade, facturing Transport and Hospitality Service 1913 23.3 45.0 15.6 14.0 1925 15.7 48.5 17.0 16.7 1929 15.8 48.5 17.2 16.7 1933 22.8 39.5 15.5 20.6 1937 15.1 51.5 15.4 16.6 The currency reform of 1924 created the basis for a stable currency, but the real economy could not be set to a sustainable and sufficient growth course. Moreover, public finances could not be made resilient. The development of the banking sector is the subject of differential research conclusions. While Harold James and others attest to structural deficits in the German banking sector, this is disputed by other researchers.9 Despite stabilization trends, weaknesses in the German economy can be identified.10 Therefore, the period Source of tables 2a and 2b: Thomas Rahlf (ed.), Deutschland in Daten. Zeitreihen zur Historischen Statistik, Bonn, Bundeszentrale für politische Bildung, 2015: Chapter 13, Tab. 2 Bruttowertschöpfung und Wertschöpfungsanteile, p. 193, http://www.bpb.de/shop/buecher/ zeitbilder/211002/deutschland-in-daten. 8 Cf. Harold James, The German Slump: Politics and Economics 1924-1936, Oxford, Clarendon Press, 1986; H. Knortz, Wirtschaftsgeschichte, op. cit., passim. For the controversial sight cf. pp. 185-187. 9 10 Cf. H. Knortz, Wirtschaftsgeschichte, op. cit., pp. 115 et seqq. The Great Depression in the Weimar Republic and its Preconditions 165 from currency stabilization and return to gold standard until the onset of the German slump, 1924 to 1929, can only be seen as a period of relative prosperity. The German economy was not in good shape when it was hit by the Great Depression. This has led Knut Borchardt to speak of the “crisis before the crisis”.11 This ambivalent assessment is also found among contemporary actors, such as the Hessian chambers of industry and commerce: The currency reform and the Dawes Plan were unanimously welcomed as a promising beginning of a new era. On the other hand, the Reichsbank’s deflationary policy had negative effects: the economy sustained a shortage of money and credit, as well as excessively high taxes and transportation costs.12 The economic data reflect the unstable situation of the German economy: Following the data delivered by Albert Ritschl and Mark Spoerer in 1997,13 German economy reached pre-war level in the late 1920s: In 1927 the index of the GNP (1913 = 100) was at 99.3 points and in 1928 at 102.3. In 1929 there was a decline to 100.4 index points (see table 3). Together with stagnating Great Britain, Germany fell behind the growth rates of other industrialized countries:14 Global data show that the German economy grew between 1924 and 1929, but at a slower pace than before the world war. It was not until 1927 that Germany's industrial production, at 103 index points, was again just above the 1913 level and remained at this level until 1929. By 1930, industrial production had already fallen back to 91 index points. Economic growth only took place in the years 1924 to 1927(see figure 1). The peak of the economy was already over by the end of 1929 at the latest.15 The deteriorating figures for the domestic market indicate that the Knut Borchardt, “Wirtschaftliche Ursachen des Scheiterns der Weimarer Republik”, in KarlDietrich Erdmann, Hagen Schulze (eds.), Weimar. Selbstpreisgabe einer Demokratie: Eine Bilanz heute, Düsseldorf, Droste 1980, pp. 211-249. Borchardt’s theses were the starting point of a controversy about room for maneuver in the Weimar Republic. The Borchardt controversy was linked to a debate on room for maneuver with regard to a change of course in economic policy in the early 1980s in the Federal Republic and raised awareness of the lack of room for maneuver. Cf. Albrecht Ritschl, Knut Borchardts Interpretation der Weimarer Wirtschaft. Zur Geschichte und Wirkung einer wirtschaftsgeschichtlichen Kontroverse. Vortrag, gehalten auf der Jahrestagung 2001 der Ranke-Gesellschaft Essen, 17.11.2001, https://personal.lse.ac.uk/ ritschl/pdf_files/BorchardtsInterpretation.pdf. 11 Cf. Gerd Hardach, “Wirtschaftspolitik und wirtschaftliche Entwicklung in Hessen”, Jahrbuch für hesssische Landesgeschichte, 43 (1993), pp. 205-235, here: p. 229. 12 Albrecht Ritschl, Mark Spoerer, “Das Bruttosozialprodukt in Deutschland nach den amtlichen Volkseinkommens- und Sozialproduktstatistiken 1901-1995”, Jahrbuch für Wirtschaftsgeschichte, 2 (1997), pp. 27-54. 13 14 Cf. H. Knortz, Wirtschaftsgeschichte, op. cit., p. 119. 15 Ibid., pp. 204-205. 166 Jürgen Nautz Weimar economy was already on its way into recession when it was hit by the collapse of the world economy in 1929/30.16 Table 3. Gross National Product and Gross Domestic Product at 1913 Market Prices (RM)17 Year GNPMP real GDPMP real GNP Index real GNP/BSP per capita real * 1913 66,978 56,618 n.a. 100.0 845.3 1914 67,790 52,275 n.a. 92.3 771.1 1918 66,811 43,502 n.a. 76.8 651.1 1919 62,897 38,688 n.a. 68.3 615.1 1920 61,090 43,290 n.a. 76.5 708.6 1921 61,757 45,891 n.a. 81.1 743.1 1922 61,313 48,632 n.a. 85.9 793.2 1923 61,718 42,294 n.a. 74.7 685.3 1924 62,107 47,123 n.a. 83.2 758.7 1925 62,410 50,546 50,550 89.3 810.0 1926 62,867 51,089 51,209 90.2 814.6 1927 Year 16 Population in 1.000 63,253 Population in 1.000 56,201 GNPMP real 56,435 GDPMP real 99.3 GNP Index real 892.2 GNP/GDP per capita real 1928 63,618 57,896 58,264 102.3 915.8 1929 63,958 56,859 57,373 100.4 897.0 1930 64,295 52,899 53,545 93.4 832.8 1931 64,631 45,895 46,716 81.1 722.8 1932 64,912 42,207 42,891 74.5 660.8 1933 65,225 45,527 46,203 80.4 708.4 1934 65,243 50,424 50,918 89.1 780.4 1935 66,871 56,704 57,142 100.2 854.5 1936 67,349 63,297 63,677 111.8 945.5 1937 67,831 70,361 70,751 124.3 1,043.0 1938 75,396 77,076 77,443 136.1 1,027.1 1939 86,910 91,635 91,978 161.8 1,058.3 Ibid., chapter “Die Zeit der relativen Stabilität”, pp. 115-157, pp. 259-60. Source of table 3: A. Ritschl, M. Spoerer, Bruttosozialprodukt in Deutschland, op. cit., Table A.l, p. 53. Bolds = estimates. * Untill 1924 GNP, 1925-1939 GDP. 17 The Great Depression in the Weimar Republic and its Preconditions 167 Figure 1. GNP Index (1913 Market Prices) and Industrial Production Index (borders of 1928, after 1934 incl. Saarland; 1913=100)18 There were already indications of an earlier critical development. For instance, as early as 1928, the Kassel Chamber of Industry and Commerce indicated a slow but steady cooling of the economic climate, which had become clearly visible by the end of the year.19 The strongly export oriented economy of Hesse suffered particularly from difficult foreign trade conditions, which added to the problems at home and hampered growth. The French occupation of the Rhineland, which also affected large parts of Southern Hesse, was also a particular hindrance to the Hessian economy.20 The Hessische Statistische Landesamt (Hessian State Statistical Office) has determined a GDP index of 91.1 compared with 1913 for the year 1926, 108.6 for 1928 and 72.9 for 1932 (table 4).21 The net domestic product of Hesse in 1913 prices did not exceed Sources of figure 1: A. Ritschl, M. Spoerer, Bruttosozialprodukt, op. cit., Table A.l, p. 53. Statistisches Bundesamt, Bevölkerung und Wirtschaft, 1872-1972. Herausgegeben anläßlich des 100jährigen Bestehens der zentralen amtlichen Statistik, Stuttgart - Mainz, Kohlhammer, 1972, p. 179. 18 19 Cf. G. Hardach, Wirtschaftspolitik, op. cit., p. 229. Thomas Klein, “Einleitung”, in Th. Klein (ed.), Der Regierungsbezirk Kassel 1933-1936: Die Berichte des Regierungspräsidenten und der Landräte, Erster Teil, Darmstadt-Wiesbaden, Selbstverlag Historische Kommission für Hessen, 1985, pp. XVII-CXXIX, here p. XCV. Cf. Ralf Banken, “Hessen vorn? Die Entwicklung der hessischen Wirtschaft im 20. Jahrhundert”, in Bernd Heidenreich, Angelika Röming (eds.), Das Land Hessen. GeschichteGesellschaft-Politik, Stuttgart, Kohlhammer, 2014, pp. 199-247, here: pp. 212-213. 20 Cf. Hessisches Statistisches Landesamt (ed.), Hessen im Wandel der letzten hundert Jahre 1860-1960. Sonderdruck Hessische Landeszentrale für Heimatdienst. O.O., o.J. (1960), pp. 275276. 21 168 Jürgen Nautz its prewar level until 1928. By 1932, the index had fallen to 73 points. In 1936, it reached 145.5 points. The per capita NDP-index (at 1913 prices) was 100 points in 1928, then collapsed to 40.8 points in 1932. By 1936, the index had climbed significantly to 93.4 points (see table 5). Table 4. Gross Domestic Product in Hesse 1913-193622 1913 1926 1928 1932 1936 at market prices (million M/RM) 3,030 3,910 4,870 2,680 3,950 GDP at 1913 prices (M) 3,030 2,760 3,200 2,210 3,160 Index 1913 = 100 100.0 91.1 108.6 72.9 104.3 at market prices (million M/RM) 990 1,210 1,500 810 1,160 GDP per capita at 1913 prices (million M) 990 960 990 660 920 Index 1913 = 100 100.0 97.0 100.0 66.7 92.9 Table 5. Net Domestic Product in Hesse 1913-193623 NDP at 1913 prices (M) 1913 1926 3,010 2,120 91.0 930 660 86.8 1928 3,750 2,460 105.6 1,150 760 100.0 1932 2,060 1,700 73.0 620 310 40.8 1936 3,040 3,390 145.5 890 710 93.4 2,330 Index 1913 = 100 NDP per capita at market at 1913 prices prices (million M/ (million M) RM) 760 760 at market prices (million M/RM) 2,330 100.0 Index 1913 = 100 100.0 The labor market was a serious problem for the republic. After the end of the war, it stabilized only briefly. Demobilization initially caused the number of unemployed to rise sharply, but it then fell again very quickly. During the 1920s the rationalization boom which represented a necessary global economic adjustment, put a strain on the labor market, where, as a result of the general economic weakness, there was already a considerable base unemployment Source of table 4: Hessisches Statistisches Landesamt (ed.), Hessen im Wandel. Eine Bevölkerungs-und Wirtschaftskunde, Wiesbaden, in-house publishing, 1986, p. 172. 22 23 Source of table 5: Hessisches Statistisches Landesamt (ed.), Hessen im Wandel der letzten hundert Jahre 1860-1960, op. cit., p. 295. The Great Depression in the Weimar Republic and its Preconditions 169 before 1929: As early as 1923, the unemployment rate rose from 1.5 in 1922 to 10.2 percent. In the next year it was between 11 and 13 percent. Only 1927/28 the unemployment rate was under 10 percent. But by 1929 it again had climbed to about 14 percent, and in 1930 to more than 14 percent.24 After that, the world economic crisis hit the labor market with full force (see figure 2).25 Figure 2. Number of Unemployed, Germany, 1926-193526 The development was quite similar in the area presently known as the state of Hesse: If the labor market had calmed down temporarily in the early 1920s, the number of people without jobs swelled again, mainly as a result of rationalization in industry and the exit from the market of companies founded during the inflationary period. In 1926, Hesse had more than 100,000 unemployed. In addition to cyclical unemployment, there was also structural unemployment. The situation was particularly problematic for older employees. Not all persons however willing to work are recorded in the official statistics. The Hessische Statistische Landesamt estimates that the Cf. Manfred Lohr, “Langfristige Entwicklungstendenzen der Arbeitslosigkeit in Deutschland”, in Erich Wiegand, Wolfgang Zapf (eds.), Wandel der Lebensbedingungen in Deutschland, Frankfurt am Main - New York, Campus, 1982, pp. 237-333, table 15, pp. 281-282. The data on unemployment are approximate or interpolations. Data were collected by different organizations and government agencies according to non-uniform criteria. lohr provides a source-critical analysis. 24 25 Cf. H. Knortz, Wirtschaftsgeschichte, op. cit., pp. 245-247. Naoki Fukuzawa, Staatliche Arbeitslosenunterstützung in der Weimarer Republik und die Entstehung der Arbeitslosenversicherung, Frankfurt am Main - Berlin - Bern - New York Paris - Wien, Peter Lang, 1995. C.-L. Holtfrerich, “Vom sozialpolitischen Aufbruch zur sozialen Demontage. Die Weimarer Republik und die Weltwirtschaftskrise”, in Hansjoachim Henning, Dieter Lindenlaub, Eckhard Wandel (eds.), Wirtschafts-und sozialgeschichtliche Forschungen und Probleme. Karl Erich Born zur Vollendung des 65. Lebensjahres zugeeignet von Kollegen, Freunden und Schülern, St. Katharinen, Scripta-Mercaturae-Verlag, 1987, pp. 335-346. Source of figure 2: https://de.statista.com/statistik/daten/studie/277373/umfrage/historischearbeitslosenzahl-in-der-weimarer-republik/ 26 170 Jürgen Nautz number of unemployed persons and their dependents accounted for about a quarter of the total population in Hesse. Since 1932/33, the labor market in Hesse recovered in the course of the global economic recovery, additionally supported by job creation measures of the National Socialist government.27 Table 6. Number of Unemployed, Hesse 1921-1938 (annual averages)28 Year 1921* 1922* 1923* 1924* 1925* 1926* 1927 1928 1929 1930 unemployed Total Per 1,000 of population 14,200 4.6 8,300 2.7 36,000 11.4 55,500 17.5 39,000 12.2 132,800 41.1 88,700 27.3 84,000 25.7 118,900 36.2 186,000 56.4 Year 1931 1932 1933 1934 1935 1936 1937 1938 unemployed Total Per 1,000 of population 249,400 75.2 286,800 86.0 253,100 75.4 170,300 50.5 145,000 42.7 104,800 30.7 61,600 17.9 36,700 10.6 Researchers differ as to the causes of financial difficulties: Some espouse the contemporary assumption that excessive sociopolitical intervention by the state exacerbated the economic straits. Such measures affected the tax burden and the credit system. Exceedingly high wage levels were also held partly responsible by some. In the Weimar Republic, these issues created conflict which led to increasing confrontation between business associations and trade unions, soon after some initial efforts at cooperation failed. As a result of the system of compulsory state arbitration of collective bargaining disputes, criticism of the Weimar state grew on the business side at the same time.29 As early as Cf. Hessen im Wandel, 1960, op. cit., pp. 94-96; Hessen im Wandel, 1986, op. cit., pp. 275-276. Cf. also table 6. 27 28 Source of table 6: Hessen im Wandel, 1986, op. cit., p. 279. Hessen im Wandel, 1960, op. cit., pp. 95-96. * = available jobseekers. 29 Cf. A. Ritschl, Knut Borchardts Interpretation der Weimarer Wirtschaft. Zur Geschichte und Wirkung einer wirtschaftsgeschichtlichen Kontroverse. Vortrag, gehalten auf der Jahrestagung 2001 der Ranke-Gesellschaft Essen, 17.11.2001. Cf. for the scholarly debate: Tim B. Müller, “Demokratie und Wirtschaftspolitik in der Weimarer Republik”, Vierteljahrshefte für Zeitgeschichte [henchforth VfZ], 62 (2014), pp. 569-601. Steffen Kailitz, “Demokratie und Wirtschaftspolitik in der Weimarer Republik in international vergleichender Perspektive. Eine Replik auf den Beitrag von Tim B. Müller”, VfZ, 63 (2015), pp. 437-451 (DOI 10.1515/vfzg-2015-0025), with further references. For collective bargaining and industrial relations, cf. Michael Kittner, Arbeitskampf-Geschichte, Recht, The Great Depression in the Weimar Republic and its Preconditions 171 1929, Schumpeter had pointed out that Germany was already in the midst of a depression because of its high wage costs and expensive social policies.30 Albrecht Ritschl notes that Schumpeter’s recipe of a mixture of wage, price and budget cuts against the crisis had contained exactly what later became known as Brüning’s deflation policy.31 Public finances were another problem area of the Weimar Republic. Government tasks and public spending grew after 1918 and increased by about 50 % between 1925 and 1930. However, tax revenues grew by only 38% during this period. This discrepancy between government expenditures and revenues induced the state to borrow on a substantial scale. The budget gaps were repeatedly financed with short-term (foreign) loans. As a result, the state budget was increasingly burdened with loan servicing and interest charges from 1926/27 onward. Until the end of 1929, Berlin was in a permanent payment crisis.32 The reparation obligations of the German Reich arising from the Treaty of Versailles were of a special character. Or as Albrecht Ritschl describes it: Between the return to the gold standard in 1924 and the beginning of World War Two, the German economy went through a succession of reparation arrangements, which coincided with balance-of-payment regimes. These were characterized by increasingly tight foreign borrowing constraints and growing levels of debt default.33 Gegenwart, München, Beck, 2005, pp. 395-504. Bernd Weisbrod, Schwerindustrie in der Weimarer Republik: Interessenpolitik zwischen Stabilisierung und Krise, Wuppertal, Hammer Verlag, 1978. B. Weisbrod, “Schwerindustrie und Politik”, in Ulrich Borsdorf, Heinrich Theodor Grüttner, Dieter Nellen (eds.), Zukunft war immer. Zur Geschichte der Metropole Ruhr, Essen, Klartext, 2007, pp. 92-101. B. Weisbrod, “Die Befreiung von den ‘Tariffesseln’. Deflationspolitik als Krisenstrategie der Unternehmer in der Ära Brüning”, Geschichte und Gesellschaft, 11 (1985), pp. 295-325. J. Nautz, “Die Tarifautonomie im System der sozialen Sicherung der Weimarer Republik”, in J. Nautz, Joachim F. E. Bläsing (eds.), Staatliche Intervention und gesellschaftliche Freiheit. Staat und Gesellschaft in den Niederlanden und Deutschland im 20. Jahrhundert, Melsungen, Verlag Kasseler Forschungen zur Zeitgeschichte, 1988, pp. 59-72. Idem, “Tarifvertragsrecht und Anschluß. Das Projekt einer gemeinsamen Tarifrechtsreform in Deutschland und Österreich 1919-1931”, Archiv für Sozialgeschichte, XXXI (1991), pp. 52-62. Idem, “Reallohnentwicklung, Arbeitskampfverhalten und Tarifrechtspolitik der Gewerkschaften während der Inflationsphase der Weimarer Republik”, in Eckart Schremmer (ed.), Geld und Währung in der Neuzeit vom 16. Jahrhundert bis zur Gegenwart, Stuttgart, Steiner, 1993, pp. 245-273. Cf. Josef A. Schumpeter, “Grenzen der Lohnpolitik” (1928-1929), in W. F. Stolper, Chr. Seidl (eds.), J. A. Schumpeter: Aufsätze zur Wirtschaftspolitik, Tübingen, introduced by W. F. Stolper, Chr. Seidl, Mohr, 1985, pp. 192-201. 30 31 Cf. A. Ritschl, Knut Borchardts Interpretation, op. cit., p. 1. 32 Cf. H. Knortz, Wirtschaftsgeschichte, op. cit., pp. 205-208. A. Ritschl, “Reparations, Deficits, and Debt Default: The Great Depression in Germany”, in Nicholas Crafts, Peter Fearon (eds.), Depression of the 1930s. Lessons for Today, New York, 33 172 Jürgen Nautz Under the auspices of the Dawes Plan between 1924 and 1929 Germany was a massive importer of capital. This changed abruptly with the Young Plan in 1929/30.34 With the end of the Young Plan, a regime of exchange controls was introduced in Germany. These regime changes coincided with the turning points of the business cycle and determined the scope of German macroeconomic policy.35 Figure 3. Revenues, Expenditures and Debt of the German Reich in the Fiscal Years 1926/27-1932/33 (Millions Reichsmarks)36 When it comes to naming problem areas of the German economy in the interwar period, reference was repeatedly made to the banking sector, which had been burdened not least by structural problems. This finding has been disputed in the more recent literature. According to the counter-position, the condition of the banking sector was not (solely) the cause of the severe economic crisis. However, many banks folded after the currency reform between 1924 Oxford University Press, 2013, pp. 110-139, here p. 110. 34 Cf. Wolfgang J. Helbich, Die Reparationen in der Ära Brüning. Zur Bedeutung des YoungPlans für die deutsche Politik 1930 bis 1932, Berlin, Colloquium Verlag, 1962. Hermann Graml, Zwischen Stresemann und Hitler. Die Außenpolitik der Präsidialkabinette Brüning, Papen und Schleicher, München, Oldenbourg, 2001. 35 Cf. A. Ritschl, Reparations, op. cit., p. 110. Source of figure 3: Statista: Dossier Weimarer Republik, p. 31, https://de.statista.com/ statistik/studie/id/69376/dokument/weimarer-republik/. 36 The Great Depression in the Weimar Republic and its Preconditions 173 and 1929, which points to an unstable structure of the banking system in Germany. From the beginning, the banking sector of the Weimar Republic had to contend with the profound economic and monetary distress and suffered from a low equity ratio since the inflation period. In the Goldmark opening balance sheet, the share capital of all German joint-stock banks was 30 percent of its prewar value, and total assets were 21 percent of their prewar level.37 “It seems that the banking market was characterized by fiercer competition, smaller profit margins, and by banks having a thinner capital basis”.38 In addition, large German companies increasingly made use of foreign capital markets and banks. Carsten Burhop assumes that the equilibrium interest rate was higher after 1924 than before the war. Banks tried to serve the German market by accepting deposits from investors abroad which made banks more vulnerable to a currency crisis. Following Karl-Erich Born’s argumentation, the Reichsbank had no means of preventing commercial borrowing from abroad. And thus, the central bank lacked the means to protect the stability of the banking system, which triggered minor currency crises as early as 1929 and 1930.39 However, as mentioned above, the role of the banking sector in triggering the economic slump has recently been called into question.40 The growing indebtedness of the credit institutions made them more vulnerable to the effects of crisis-ridden economic developments.41 However they were still able to cover initial losses incurred during the economic crisis Cf. Gerd Hardach, “Banking in Germany, 1918-1939”, in Charles H. Feinstein (ed.), Banking, Currency and Finance in Europe between the Wars, Oxford, 1995, pp. 269-295. C.-L. Holtfrerich, “Auswirkungen der Inflation auf die Struktur des deutschen Kreditgewerbes”, in G. D. Feldman (ed.), Die Nachwirkungen der Inflation auf die deutsche Geschichte, München, 1985, pp. 187209. 37 Carsten Burhop, “The Historiography of the 1931 Crisis in Germany”, Jahrbuch für Wirtschaftsgeschichte, 52/2 (2011), pp. 9-27, here p. 10. 38 Cf. Karl Erich Born, Die deutsche Bankenkrise 1931, München, Piper, 1967, pp. 28-29. C. Burhop, “Das Wechselkreditgeschäft der Reichsbank vor der Bankenkrise von 1931. The Discount Business of the Reichsbank before the Banking Crisis of 1931”, Jahrbuch für Wirtschaftsgeschichte, 61/2 (2020), pp. 403-428, here p. 404, https://doi.org/10.1515/jbwg2020-0017. 39 A good overview of the debate provides: Christopher Kopper, “New Perspectives on the 1931 Banking Crisis in Germany and Central Europe”, Business History 53/2 (2011), pp. 216229. Johannes Bähr, “Die deutsche Bankenkrise von 1931”, in J. Bähr, Bernd Rudolph, 1931 Finanzkrisen 2008, München, Piper, 2011, pp. 15-141. C. Burhop, “The Historiography”, op. cit. Tobias Straumann, 1931: Debt, Crises, and the Rise of Hitler, Oxford, Oxford University Press, 2019. C.-L. Holtfrerich, “Einleitung”, in C.-L. Holtfrerich (ed.), Das Reichswirtschaftsministerium der Weimarer Republik und seine Vorläufer Strukturen, Akteure, Handlungsfelder, Berlin Boston, Walter de Gruyter, 2016, pp. 1-26. Cf. also pp. 185-187. 40 41 Cf. C. Burhop, “The Historiography”, op. cit., p. 26. 174 Jürgen Nautz that began in 1928 from hidden reserves built up between 1924 and 1927. As of 1930 at the latest, additional losses began to drain the banks’ equity capital.42 Carsten Burhop has criticized the fact that individual credit risks and the lending business of commercial banks have been considered only as marginal explanatory factors regarding the banking crisis in Germany. Moreover, the Reichsbank has been discussed in the research literature almost exclusively in its capacity as a central bank. Its role as a direct lender to trade and commerce had been neglected. C. Burhop studied the role of lending as the cause of the banking crisis in 1931. To this end, he examined the granting of bill discount loans by the Reichsbankhauptstelle Leipzig (central bank’s Leipzig office) in the period from 1924 to 1932. He concludes that there is only evidence of risks in the lending business at the leipzig banking center. Over-indebtedness abroad does not seem to have been of major relevance. In particular, the credit risks had become apparent in the repayment of credit lines by Reichsbankhauptstelle Leipzig, which began in 1928. Furthermore, the data on the Reichsbank’s acceptance of credit business showed that it had suffered relatively high loan defaults.43 Figure 4. Reichsbank: Gold and Foreign Exchange Holdings, incl. Foreign Deposits, 1913-194544 The banking sector was also assisted by the public sector in alleviating the debt burden. A paper published by the Economics and Statistics Department Cf. Gerd Hardach, “Banking and Industry in Germany in the Interwar Period 1919-1939”, Journal of European Economic History, 13/2 (1984), pp. 203-234, here p. 220. 42 43 Cf. C. Burhop, “The Historiography”, op. cit. 44 Source of figure 4: H. Knortz, Wirtschaftsgeschichte, op. cit., p. 223. The Great Depression in the Weimar Republic and its Preconditions 175 of the Reichsbank in January 1934 shows that the public sector supported the credit banks to the tune of about 670 million Reichsmarks. The total volume of losses incurred by the credit banks amounted to RM 1.6 billion. Including other financial commitments by the German Reich and the states in the form of guarantees, liquidity loans, support loans, and the like, the total involvement of the public sector amounts to more than 2 billion RM. The loss suffered by the state as a result of the commitment was around 1 billion RM. Overall, the total share of support measures by the Reich and the Länder, including loans to the savings banks, was around 3% of the 1931 gross national product.45 II. The Great Slump There is every indication that the German economy was already weakening before the great slump. First signs of a crisis in 1928 were initially mitigated by an international economic boom. In the following year, production capacity was still being utilized at over 70%, but by 1932 capacity utilization had fallen to approximately 45%. As this development caused a decline of investments, incomes subsequently fell and demand for commercial products continued to fall. Due to the global crisis, the German economy was no longer able to compensate for the drop in domestic demand by increasing exports.46 The downward trend in the German economy continued until 1932 (table 3). The economic problems were compounded by instability in politics and society. The political situation in the interwar period was permanently more or less precarious.47 Nevertheless, the public sector, the financial sector and business still had access to foreign capital markets, especially the American. This changed after the Nationalsozialistische Deutsche Arbeiterpartei (NSDAP), which had distinguished itself as a fierce opponent of the Young Plan, made Cf. J. Bär, “Die deutsche Bankenkrise 1931”, in J. Bähr, Bernd Rudolph (eds.), 1931 Finanzkrisen 2008, op. cit., pp. 15-142, here pp. 108-110. 45 46 Cf. H. Knortz, Wirtschaftsgeschichte, op. cit., p. 218-219. For an overview on the political and societal developments in the Weimar period, cf. Walter Mühlhausen, Das Weimarer Experiment. Die erste deutsche Demokratie 1918-1933, Bonn, Dietz, 2019. Eberhard Kolb, Deutschland 1918-1933. Eine Geschichte der Weimarer Republik, München, Oldenbourg, 2010. Nadine Rossol, Benjamin Ziemann (eds.), Aufbruch und Abgründe. Das Handbuch der Weimarer Republik, Darmstadt, Wissenschaftliche Buchgesellschaft, 2021. Cf. on the social and political history of the Hessian state territory in the period of the Weimar Republic, W. Mühlhausen, Hessen in der Weimarer Republik: Politische Geschichte 1918-1933, Frankfurt am Main, Waldemar Kramer - Verlagshaus Römerweg, 2021. 47 176 Jürgen Nautz significant gains in the Reichstag elections in 1930.48 As a reaction, within a short time foreign deposits and loans with the major German banks were cancelled. In addition, German capital fled abroad due to the high tax burden in Germany.49 The German banking crisis expanded into an international financial crisis and initiated the disintegration of the international monetary system. The financial crisis then had negative effects on the real economy and exacerbated the economic problems.50 In her economic history of the Weimar Republic, Heike Knortz follows the view, first advanced by Karl-Erich Born,51 that the banking crisis in Germany was triggered by the near collapse of the Austrian major bank Credit-Anstalt für Handel und Gewerbe (CA) in May 1931.52 However, Thomas Ferguson and Peter Temin disagree whether the difficulties of the Austrian banking sector had an impact on German banks: There had been no change on either the liability or the asset side of bank balance sheets in May.53 48 Cf. Deutscher Bundestag, Reichstagswahlergebnisse und Mandate in der Weimarer Republik. Reichstagswahlen 1919-1933, https://www.bundestag.de/resource/blob/190456/f8d637d1039a06a614cff0264f8b5d10/ reichstagswahlergebnisse-data.pdf. In 1930, the NSDAP was still behind the SPD; in 1932 and 1933, the NSDAP emerged from the Reichstag elections as the strongest party. For Hesse cf. Mühlhausen, Hessen in der Weimarer Republik, op. cit., chapters 10-12. H. Knortz, Wirtschaftsgeschichte, op. cit., p. 220. H. James, Deutschland in der Weltwirtschaftskrise 1924-1936, Stuttgart, Deutsche Verlags-Anstalt, 1988, pp. 137-138, 290-294. William C. McNeil, American Money and the Weimar Republic. Economics and Politics on the Eve of the Great Depression, New York, Columbia University Press, 1986, pp. 215-219. 49 50 H. Knortz, Wirtschaftsgeschichte, op. cit., p. 219. Karl-Erich Born, Die deutsche Bankenkrise 1931. Finanzen und Politik, München, Piper, 1967, pp. 28-30. 51 Cf. H. Knortz, Wirtschaftsgeschichte, op. cit., p. 220. For the Credit-Anstalt Crisis cf. Aurel Schubert, The Credit-Anstalt Crisis of 1931, Cambridge University Press, 1991. Nathan Marcus, Austrian Reconstruction and the Collapse of Global Finance, 1921-1931, Cambridge, Massachusetts, Harvard University Press, 2018, chapter 8. Fritz Weber, Vor dem großen Krach: Österreichs Bankwesen der Zwischenkriegszeit am Beispiel der Credit-Anstalt für Handel und Gewerbe, Vienna, Böhlau, 2016. J. Nautz, “Die CA-Krise 1931. Ein politischer Skandal?”, in Michael Gehler, Hubert Sickinger (eds.), Politische Skandale und Affären in Österreich. Von Mayerling bis Waldheim, Vienna, Böhlau, 21995, p. 222-252. 52 53 Cf. Thomas Ferguson, Peter Temin, “Made in Germany. The German Currency Crisis of 1931”, Research in Economic History, 21 (2003), pp. 1-53, here p. 19. The Great Depression in the Weimar Republic and its Preconditions 177 Table 7. German Commercial Banks: Relation Capital and Reserves to Balance Sheet Totals54 Year % of total assets 1913 23.2 1924 17.7 1925 13.8 1926 12.3 1927 11.1 1928 8.1 1929 7.0 1930 7.6 German banks now got into serious trouble not only because of their refinancing strategy (the high level of foreign debt). A second problem of the leading German banking houses had an impact: Some of these banking houses had invested huge parts of their assets in loans to a few large companies. Thus, in July 1931 Germany saw the spectacular collapse of the Darmstädter und Nationalbank (Danat Bank), which was together with the Dresdner Bank the main creditor of the bankrupt Norddeutsche Wollkämmerei & Kammgarnspinnerei (Nordwolle). The suspension of cash payments by the Danat-Bank on 13 July 1931 triggered a run on all German banks and savings banks. Another risk item for German commercial banks was their interconnectedness with local authorities, which were dependent on bank loans.55 An additional loss of confidence among foreign investors and lenders was generated by the disclosure of dubious business practices in course of the Nordwolle bankruptcy and caused terminations of foreign credits. The Reichsbank had to use considerable amounts of foreign currency to service the canceled foreign loans (see figure 4). German statements on servicing reparation obligations56 increased the outflow of foreign capital. In addition, there were outflows of German money. However, the reduction or complete suspension of reparation payments was effected in the course of the Hoover moratorium in 1931.57 At the same time the Hoover Moratorium fueled distrust among German savers, who in turn began to cancel their deposits Source of table 7: Ilse Haebler, Die Krise im deutschen Kreditbankwesen und die Mittel zu ihrer Überwindung, Hamburg, 1934, p. 34, cited in H. Knortz, Wirtschaftsgeschichte, op. cit., p. 209. 54 55 Cf. C. Burhop, Wechselkreditgeschäft, op. cit., p. 405. Cf. “Aufruf der Reichsregierung, Berlin, den 5. Juni 1931”, Verhandlungen des Reichstages, Bd. 451.1930, Berlin, 1932, pp. 1-2. 56 Cf. Public Papers of the Presidents of the United States: Herbert Hoover, Containing the Public Messages, Speeches, and Statements of the President, January 1 to December 31, 1931, Washington D.C., G.P.O., 1976, pp. 321-323. 57 178 Jürgen Nautz on current and savings bank accounts.58 At the Lausanne Conference on July 9, 1932, it was decided to stop reparations payments in exchange for a onetime settlement of 3 billion Reichsmarks, not payable before 1935.59 The banking crisis worsened by a politically induced currency crisis in the summer of 1931. The highest priority of the central bank was the stability of the Reichsmark. In addition to the expenses associated with stabilizing the currency, the Reichsbank lacked the necessary resources to act as lender of last resort, so that the banks collapsed.60 “At this point, the Reichsbank could not expand its money supply, since its gold reserves were low […] and the gold standard constrained the banknote circulation”.61 During the Great Depression, German economic policy is characterized primarily by the deflationary policy, which is linked in particular to Brüning. However, the deflationary policy began under the social-democratic Reich Chancellor Hermann Müller, whose cabinet was the last government with a parliamentary majority. After the coalition government broke up over budget cuts and differences over unemployment insurance (27 March 1930), Chancellor Brüning, with the support of President von Hindenburg, largely bypassed the Reichstag via emergency decrees (see figure 5).62 Brüning’s goal was to strengthen the competitiveness of the German economy through internal devaluation. By means of emergency decrees, direct and indirect taxes were increased. This was paired with reductions in social spending, public investment, and the salaries of public employees. 58 Cf. H. Knortz, Wirtschaftsgeschichte, op. cit., p. 247. 59 Ibid., p. 280. 60 Cf. C. Burhop, Wechselkreditgeschäft, op. cit., p. 405-406. 61 Cf. C. Burhop, Historiography, op. cit., pp. 25-26. Eberhard Kolb, Die Weimarer Republik, 2., durchges. u. erg. Aufl., München, Oldenbourg, 1988. Hans Mommsen, Die verspielte Freiheit. Der Weg der Republik von Weimar in den Untergang. 1918 bis 1933, Berlin, Propyläen, 1989. Th. Ferguson, P. Temin, Made in Germany, op. cit., pp. 5-8. 62 The Great Depression in the Weimar Republic and its Preconditions 179 Figure 5. Number of Laws and Emergency Decrees Issued in 1930, 1931, and 193263 In 1931 the shortfall in the national budget caused by the recession prompted the Reich Chancellor to cut spending. An emergency decree presented by Heinrich Brüning on June 5, 1931, provided for severe cuts in social services.64 The chancellor accompanied the decree with a public declaration that in view of the crisis, Germany could not pay any further reparations (Tributaufruf).65 Other foreign policy burdens resulted from the project of a German-Austrian customs union and the announcement of the construction of an armored cruiser (Panzerkreuzer B). “To pursue foreign and military policy plans in these critical weeks before the German banking crisis of July 1931, which were known to alarm and provoke the foreign creditors of German reparations and private debts, amounted to a deliberate aggravation of the impending banking and currency crisis”.66 The uncertainty was heightened by the announcement of the Hoover moratorium on June 20, 1931. The new Reich Chancellor von Papen initially continued Brüning’s deflationary policy after his resignation at the end of May 1932. This policy did not help mitigate the crisis. Rather, the deflationary strategy further reduced the already low purchasing power of the German population, which contributed not least to the impoverishment of broad sections of the population.67 The goal of using the deflationary policy to Source of figure 5: Statistisches Bundesamt, Statistiken zur Weimarer Republik, p. 11, https://de.statista.com/statistik/studie/id/69376/dokument/weimarer-republik/ 63 “Zweite Verordnung des Reichspräsidenten zur Sicherung von Wirtschaft und Finanzen. Vom 5. Juni 1931”, Finanz-Archiv / Public Finance Analysis, 48/2 (1931), pp. 211-228. 64 “Aufruf der Reichsregierung, Berlin, den 5. Juni 1931”, Verhandlungen des Reichstages, Bd. 451. 1930, Berlin, 1932, pp. 1-2. 65 66 C. L. Holtfrerich, “Einleitung”, op. cit., p. 10. Cf. Hans Frambach, “How to Fight Unemployment? A Review of the Strategy Discussion in ‘Der Deutsche Volkswirt’, 1930-1932”, in Jürgen Georg Backhaus (ed.), The Beginnings of 67 180 Jürgen Nautz stimulate exports could not be achieved, as the global crisis on international markets caused prices for products from other countries to fall rapidly and sharply (cf. figure 6). The index of the real GNP at market prices felt from 102.3 points in 1928 to 74.5 points in 1932. Signs of a slight recovery in the economy were not seen until 1932.68 The upswing started in 1933 at 80.4 points. This development is also reflected in the industrial production figures. The per capita GDP in 1913 market prices declined from 915.5 RM in 1928 to 660.8 RM in 1932. From 1933 on, it rose again (cf. table 2 and figure 1). This development is also reflected in the industrial production figures.69 Figure 6. Decline of Prices and Production in Selected European Countries, 1929193470 Despite his deflationary policies, Brüning did not lose sight of the developments in the labor market. Thus, a commission was set up to identify ways out of mass unemployment. Brüning’s successor as Reich Chancellor, the Zentrum-politician Franz von Papen (1. 6. – 17. 11. 1932), initiated job creation measures that were financed from without the regular state budget. Under the next Chancellor, the independent Kurt von Schleicher (3. 12. 1932 – 28. 1. 1933), employment promotion was continued and supplemented by Scholarly Economic Journalism. The Austrian Economist and The German Economist, New York, Springer, 2011, pp. 109-124. 68 Cf. H. Knortz, Wirtschaftsgeschichte, op. cit., pp. 217-219. Cf. Statistisches Bundesamt, Bevölkerung und Wirtschaft 1872-1972, Herausgegeben anläßlich des 100jährigen Bestehens der zentralen amtlichen Statistik, Stuttgart - Mainz, Kohlhammer, 1972, p. 179. 69 Source of figure 6: Statistisches Bundesamt, Statistiken zur Weimarer Republik, p. 34, https://de.statista.com/themen/5726/weimarer-republik/. 70 The Great Depression in the Weimar Republic and its Preconditions 181 an emergency program for job creation measures. However, the labor policy measures did not bring about any decisive improvement in the situation on the labor market. The average number of unemployed climbed from 1.5 million to 5.6 million between 1928 and 1932. Short after the Schleicher cabinet’s measures took effect, Adolf Hitler was appointed Reich Chancellor (30.1.1933).71 Since 1933 Germany saw a significant decline in the number of unemployed: In 1933 the number of unemployed dropped to 4.8 million, in 1934 to 2.7 and 1935 to 2.15 million (see figure 7). Figure 7. Number of Unemployed, Germany, 1926-193572 Not surprisingly, the national economic data generally is confirmed through the data of the state, local and corporate levels. The regional data broadly confirm national developments. This does not conflict with the fact that there are sometimes different developments in the federal states, for example the areas of the later federal state of Hesse,73 which were affected by blockades by the French occupation. While the internationally interlinked Rhine-Main region suffered more than average from frictions in international economic relations, structural deficits had a negative impact on performance in the other regions.74 The Hessian statistics shows a 33 percent drop in Cf. H. Knortz, Wirtschaftsgeschichte, op. cit., pp. 237 et seqq. Karl Hardach, Wirtschaftsgeschichte Deutschlands im 20. Jahrhundert, Göttingen, Vandenhoek & Ruprecht, 1979, pp. 58-62. Fritz Blaich, Der schwarze Freitag - Inflation und Wirtschaftskrise, München, dtv, 1985, p. 108. 71 72 Source of figure 7: https://de.statista.com/statistik/daten/studie/277373/umfrage/historischearbeitslosenzahl-in-der-weimarer-republik/ After World War II, the American military government formed the state Gross-Hessen from the Prussian provinces of Kurhessen and Nassau and the Volksstaat Hessen, excluding the areas in the west that had become part of the French occupation zone. The figures presented here apply to the area the Hessian state territory in the borders of 1945. 73 74 Cf. Hans-Werner Hahn, “Wirtschaft und Verkehr”, in Winfried Speitkamp (ed.), Handbuch 182 Jürgen Nautz real per capita income in Hesse between 1928 and 1932, compared with 24 percent in the German Reich.75 Table 8. Development of Consumer Prices, Raw Material Prices, Agricultural and Industrial Commodity Prices in Hesse76 Index 19001913/14 1913/141924 19241928 19281933 19331939 19391948 Consumer Prices 22 31 23 -36 8 85 Raw Material Prices 10 36 18 -54 14 71 Agricultural + Industrial Basic Material Prices 30 12 18 -39 34 39 % 19001913/14 1913/141924 Consumer Prices 28 31 Raw Material Prices 11 36 Agricultural + Industrial Basic Material Prices 30 12 19241928 18 18 19281933 19331939 19391948 -23 7 67 -40 17 74 -39 34 39 Unemployment figures already rose significantly in the winter of 1929/30, starting from a relatively high level. In the area that is now the state of Hesse, there were around 300,000 unemployed at the height of the Great Depression. At the same time, the Hessian share of the rank of unemployed roughly corresponded to the Hessian share of the total population.77 der hessischen Geschichte. Band 1: Bevölkerung, Wirtschaft und Staat in Hessen 1806-1945, Marburg, Historische Kommission für Hessen, 2010, p. 206. 75 Ibid. Also, Hessen im Wandel, 1986, op. cit., p. 86. 76 Source of table 8: Hessen im Wandel, 1960, op. cit., pp. 325-334. 77 H.-W. Hahn, Wirtschaft und Verkehr, op. cit., pp. 206-207. The Great Depression in the Weimar Republic and its Preconditions 183 Table 9. Number of Unemployed, Hesse 1921-1938 (annual averages)78 Year unemployed Per 1,000 of population 14,200 5 55,500 18 132,800 41 84,000 26 186,00 56 Year Total 1921* 1924* 1926* 1928 1930 1932 1934 1936 1938 unemployed Total Per 1,000 of population 286,800 86 170,300 51 104,800 31 36,700 11 For the city of Kassel, statistics show a decline of industrial employment between 1925 and 1932 of about 3,000 and a growth from 1932 to 1936 of about 6,500 (see table 10). A draft of a memorandum by the Frankfurt/M. and Hanau Chamber of Industry and Commerce provides more detailed data for the years 1929 to 1932, also for Kassel. These show that the labor market rebounded at a significant rate in spring 1929, while in the following years up to 1932 the unemployment figures rose, and the recovery was much weaker (cf. table 11).79 The large Kassel-based company Henschel will serve as an example for the company level: In 1928, 5,532 people were employed here. Four years later only 1,400 people were still employed at Henschel enterprise (see table 12). From 1933 to 1938 the number of employed at the Henschel plants grew from 2,204 to 11,960. For another large Kassel based company, the Wintershall AG, are data about the workforce for the years 1930 to 1938 available: Also Wintershall saw between 1930 and 1938 a dynamic growth in its workforce (see table 12). 78 Source of table 9: Hessen im Wandel der letzten hundert Jahre, p. 95, * = available jobseekers. Cf. Klaus Schönekäs, “Hinweise auf die soziopolitische Verfassung Hessens in der Weimarer Republik”, in Eike Hennig, with the collaboration of Herbert Bauch, Martin Loiperdinger, and Kl. Schönekäs (eds.), Hessen unterm Hakenkreuz. Studien zur Durchsetzung der NSDAP in Hessen, Frankfurt, Insel Verlag, 1983, pp. 45-60, here p. 52. Th. Klein, “Einleitung”, op. cit., pp. CXV-CVIII. 79 184 Jürgen Nautz Table 10. City of Kassel: Basic data80 Population Industrial enterprises Industrial employment Share of total employment Service employment Total employment unemployed 1907 1922 1924 1925 1932 1933 1936 1939 152,200 167,147 166,800 171,234 175,200 175,179 178,919 213,467 3,326 n.a. n.a. 3,694 n.a. 4,242 1,124 1,565 28,707 n.a. n.a. 23,235 n.a. 20,333 46,978 60,963 48.9 n.a. n.a. 32.4 n.a. 51.8 n.a. 56.4 12,426 n.a. n.a. 27,608 n.a. 24,534 n.a. 46,950 58,673 n.a. n.a. 71,702 n.a. 51,021 n.a. 108,058 10,248 n.a. n.a. n.a. n.a. 14,046 n.a. n.a. Table 11. Number of unemployed in Kassel, 1929-1932 in absolute numbers81 1929 1930 1932 1931 Peak 28. 2 low 31. 8 Peak 28.2 low 31.8 Peak 28.2 low 30.6 Peak 28.2 low 31.8 29,135 11,406 22,560 19,140 33,563 28,893 42,625 37,654 Source of table 10: Michael Lacher, Arbeit und Industrie in Kassel. Zur Industrie-und Sozialgeschichte von 1914 bis heute, Marburg, Schüren, 2018, pp. 437-443. 80 81 Source of table 11: K. Schönekäs, “Hinweise”, op. cit., p. 52. The Great Depression in the Weimar Republic and its Preconditions 185 Table 12. Size of the Workforce, Henschel and Wintershall AG, 1928-193882 Year 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 Henschel 5,548 4,430 2,750 — 1,440 2,044 3,864 6,067 — — — 11,960 Wintershall AG — — 4,301 — 4,743 — 6,657 — 8,696 — 13,340 — III. Triggers of the Crisis: Viewpoints There has been a sustained debate among economic historians since 2004 about the cause-and-effect relationship of the currency and banking crises at the end of the Weimar Republic, with implications for the assessment of economic policy at the time.83 In their article “Made in Germany. The German Currency Crisis of July 1931”, Thomas Ferguson and Peter Temin attributed the banking and currency crisis that fully erupted in Germany in July 1931 primarily to domestic developments. They argued that this was a currency crisis rather than a banking crisis, the triggers of which can be found primarily in the political sphere. The main cause was the lack of political will to consistently counter the negative economic development.84 The weakness of the German banking sector is not seen as decisive.85 An 82 Sources of table 12: M. Lacher, Arbeit und Industrie, op. cit., pp. 444-447. Rainer Karlsch, “Krisengewinner? Der Einstieg des Kalikonzerns in die Erdölwirtschaft 1929-1945”, in Manfred Grieger, Rainer Karlsch, Ingo Köhler, Expansion um jeden Preis. Studien zur Wintershall AG zwischen Krise und Krieg 1929-1945, Frankfurt, Societäts-Verlag, 2020, pp. 18-88, here: p. 62. Henschel Company, Kassel: Nazi period figures excluding forced laborers. For a detailed summary and discussion of the arguments, cf. C.-L. Holtfrerich, “Einleitung”, op. cit. 83 Which has also been criticized by contemporaries: cf. H. Frambach, How to Fight Unemployment?, op. cit. Hansjörg Klausinger, “Die Alternativen zur Deflationspolitik Brünings im Lichte zeitgenössischer Kritik. Zugleich ein neuer Blick auf die Borchardt-These”, Department of Economics Working Paper Series 49, WU Vienna University of Economics and Business 1997, https://econpapers.repec.org/RAS/pkl7.htm. 84 85 Cf. Th. Ferguson, P. Temin, “Made in Germany”, op. cit. 186 Jürgen Nautz initial reaction came from Isabel Schnabel. She also blames political shocks for capital withdrawals from Germany. However, unlike Ferguson and Temin, Schnabel concludes with reference to bank balance sheets that a second cause can very well be found in undesirable developments at the German banking sector. Both would have led to the crisis independently of each other.86 Schnabel’s analysis was supported by Carsten Burhop and Christopher Kopper, who highlighted the role of high write-downs which caused distress to the banks.87 In contrast, Holtfrerich favors the position of Ferguson and Temin: Since the onset of the economic downturn in the last quarter of 1928, he argues, German banks have overcome several challenges: - the bankruptcy of the major insurance company Frankfurter Allgemeine Versicherungs-AG in August 1929, which had led to losses for German banks and foreign lenders, - the withdrawal of French capital in April 1929 in response to the Young Plan negotiations, - the sharp decline in the inflow of U.S. capital since the second half of 1928 compared with capital imports in previous years, - the large withdrawals of foreign capital and the flight of German capital following the high increase in votes for the National Socialist German Workers' Party (NSDAP)88 in the Reichstag elections of September 14, 1930. (Holtfrerich also includes the “considerable increase in votes of the KPD” in his argumentation.89 However, the KPD's increase in votes compared to the Reichstag elections of 1928 was only 2.5%, while the NSDAP's increase was 15.5 %.)90 Cf. Isabel Schnabel, “The German Twin Crisis of 1931”, Journal of Economic History, 64 (2004), pp. 822-871. In replications, Th. Ferguson, P. Temin and I. Schnabel tried to support their theses. Cf. C.-L. Holtfrerich, “Einleitung”, op. cit., pp. 7-8. Th. Ferguson, P. Temin, ‘‘Comment on “The German Twin Crisis of 1931”, Journal of Economic History, 64 (2004), pp. 872-876. I. Schnabel, “Reply to Thomas Ferguson and Peter Temin’s ‘Comment on The German Twin Crisis of 1931’ ”, Journal of Economic History, 64 (2004), 877-878. P. Temin, “The German Crisis of 1931. Evidence and Tradition”, Cliometrica, 2 (2008), pp. 5-17. I. Schnabel, “The Role of Liquidity and Implicit Guarantees in the German Twin Crisis of 1931”, Journal of International Money and Finance, 28 (2009), pp. 1-25. 86 87 Cf. Ch. Kopper, “New Perspectives on the 1931 Banking Crisis in Germany and Central Europe”, Business History, 53 (2011), pp. 216-229. C. Burhop, “The Historiography of the 1931 Crisis in Germany”, Jahrbuch für Wirtschaftsgeschichte, 52/2 (2011), pp. 9-27. 88 Cf. C.-L. Holtfrerich, “Einleitung”, op. cit., pp. 9-10. 89 Ibid., p. 10. Cf. https://de.statista.com/statistik/daten/studie/275954/umfrage/ergebnisse-derreichstagswahlen-in-der-weimarer-republik-1919-1933/ ; http://www.gonschior.de/weimar/ Deutschland/RT4.html. 90 The Great Depression in the Weimar Republic and its Preconditions 187 “It was not until the third wave, from late May to mid-July 1931, that the banking crisis in Germany was triggered”.91 The severe banking crisis in July 1931 was not mainly due to the losses of DANAT and other banks. Rather, it was caused by the much larger losses of deposits due to withdrawals from abroad and German capital flight. Isabel Schnabel also blames political shocks for capital withdrawals from Germany.92 However, Holtfrerich argues, foreign capital withdrawals and capital flight are characteristics of a currency crisis. The outflows had been caused by “cardinal economic policy errors” committed by Reich Chancellor Brüning. After the near collapse of the Austrian Credit-Anstalt in mid-May 1931 and the risk of contagion for the German universal banks became known, German policymakers should have given the highest priority to preserving the confidence of foreign investors in the security of their investments. The foreign and military policy plans pursued by the Reich government in the critical weeks leading up to the German banking crisis of July 1931 were bound to worsen the situation. This policy, in Holtfrerich’s judgment, “amounted to a deliberate aggravation of the impending banking and currency crisis … The German banking system was not weak in the years before the Great Crisis and even after it until the first half of 1931; on the contrary, it proved remarkably resilient to shocks”.93 From 1933 to 1935, fiscal policy was based on a consensus between the NSDAP party leadership and the national conservative elites. They agreed that only an active economic policy could ensure the survival of the regime. The economy had to pick up again and unemployment had to fall significantly. Tax increases were abandoned. Job creation programs and rearmament projects were financed mainly by loans. Since armaments expenditures did not appear in the Reich budget, the billions in expenditure spent did not burden the budget. Only a small portion of the budget had to be reallocated to job creation measures. This prevented distribution struggles. limits on government spending demanded by the Reichsbank since 1935 failed to gain acceptance. Starting in 1935, however, medium- and long-term fixed-interest Reich bonds were again issued.94 91 C. L. Holtfrerich, “Einleitung”, op. cit., p. 10. 92 Cf. I. Schnabel, “The German Twin Crisis of 1931”, op. cit., pp. 822-871. 93 C.-L. Holtfrerich, “Einleitung”, op. cit., pp. 9-11. Cf. Ralf Banken, “Der Ursprung der geräuschlosen Kriegsfinanzierung im 'Dritten Reich' 19351939”, Jahrbuch für Wirtschaftsgeschichte, 61/2 (2020), pp. 459-485, https://doi.org/10.1515/ jbwg-2020-0019, here: 461-466. 94 6 lEFTERIS TSOulFIDIS Professor, Department of Economics University of Macedonia THE INTERWAR DEPRESSION AND THE GREEK ECONOMY LESSONS LEARNED AND NOT LEARNED* Introduction The article uses the term “Interwar Depression” because is covering a period spanning at least two decades. The usual narratives of the Great Depression concentrate on the year 1929, marking the onset of a depressionary period from 1929 to 1932. The year 1932 is the worst in terms of the growth rate of the real GDP and unemployment not only for the USA but also for most European countries. The downturn of economic activity though had already started by the end of WWI. It is identified as the depressionary phase of a long cycle, the third Kondratiev cycle, the beginnings of which can be traced around in the mid-1890s.1 Typically, the upward phase of the third long cycle spans the 1896-1920 period while the downward phase shadows the period 1920-1939. It begins with the USA because changes there affect the rest of the world. This is the reason why upheavals affecting the economy of any single country and therefore Greece, must be studied by considering the global economic conditions. A version of this article was presented at the Conference: “Monetary Integration and Disintegration in the Interwar Europe: The Impact of the Great Depression, from Institutional Agency to Local Conditions”, organized by the Research Project Transnational Monetary and Economic Alternatives in the Interwar Politics. The 1930s Greek Crisis in the European Context, Academy of Athens - HFRI, head of Research Catherine Brégianni, Academy of Athens 1 & 2 November 2021. Many thanks to Catherine Brégianni and Antonis Antoniou for their apposite comments. The usual caveats apply. 1 Nikolai Kondratiev, “Long Cycles of Economic Conjuncture”, in N. Makasheva, W. J. Samuels (eds.), The Works of Nikolai D. Kondratiev, London, Pickering & Chatto, 1998, vol. I, pp. 25-63. * 190 Lefteris Tsoulfidis In view of this, research need not focus on Greek economy alone. The country was struggling during the 1920s, not only because of the burden of accommodating one and a half million refugees, but also because of the global economic crisis. Even economically sound countries least expected to fail, such as the UK and France were severely affected by the global economic crisis. During WWI the USA in the effort to support the allies (the UK and France, in particular), lent them significant amounts of money, known as the “interwar debt”. However, the UK and France could only redeem their debt to the USA, provided that Germany would faithfully serve the burdensome terms of the Treaty of Versailles (1919). On the other hand, the US economy was not nearly as thriving as the usual accounts describe it. In the so-called “roaring twenties", the fundamentals of the uS economy were anything but solid. The relatively high growth rates were not as healthy as usually thought of because they were not based on investment proper (i.e., spending on plant and equipment) but on consumption and the expansion of financial activities. The rising consumption expenditures also which depended on financialization were in a sense the leading indicators of the downturn phase of the third long cycle. The latter had already been anticipated by Kondratiev, in the early 1920s.2 The rest of the article is structured as follows. Section I discusses the situation in the USA, the UK, France, and Germany, four highly interconnected economies whose GDP was nearly eighty percent of the world capitalist economy. Section II deals with the fundamentals of the US economy. The movement of the rate of profit in the US occupied center stage in the determination of the long cycle phase; by extension, that of the world economy. Section III grapples with the Greek economy, how she was affected by the crisis, and by the application of economic policies. Section 5 examines the long-term movement of the key economic variables that have determined the extent to which the depression affected the Greek. On The first long cycle begins with the industrial revolution and ends in the 1840s (typically 18901848; the second 1848-1896; the third 1896-1940, the fourth 1940-1982 and the fifth 1982202?. The question mark stands for the exact year which one cannot determine with precision but certainly is toward the end of the decade of 2020s). Cf. L. Tsoulfidis, “Rethinking long cycles: Are the 1990s the onset of a new golden age of accumulation?”, in T. Georgakopoulos, C. Paraskevopoulos, J. Smithin (eds.), Globalization and Growth. A Critical Evaluation, Toronto, Athenean Policy Forum Press, 2002, available at https://mpra.ub.uni-muenchen.de/39739/1/ MPRA_paper_39739.pdf. L. Tsoulfidis, A. Papageorgiou, “The recurrence of long cycles: Theories, stylized facts and figures”, World Review of Political Economy, 10/4 (2019), pp. 1-36. L. Tsoulfidis, Persefoni Tsaliki, Classical Political Economics. Theories of Value, Competition, Trade and Long Cycles, Cham, Springer, 2019. 2 The Interwar Depression and the Greek Economy 191 this point, some alternative or contrasting views are presented. Section 6 summarizes and makes some concluding remarks about the lessons learned or ignored from both the causes of the long cycles and the effectiveness of various economic policies. I. Interconnected Economies and the Transmission of Crisis The analysis of the downward phase of the long cycle starts with some background. In the author’s view, developments in different countries during the 1920s directly relate to the 1929-1932 period of deepening depression. There is no doubt that European countries in the post-WWI period were in a lasting recession; by contrast, descriptions of the USA give a diametrically opposite picture. In the famous “roaring twenties” the US was regarded as a prosperous society; the population could afford what at the time were perceived as luxury items, namely household appliances, cars and the like. The purchase of those durable goods was not based on available funds but on the easy access of cheap credit. At the same time, a speculative culture was gaining momentum with the involvement of large segments of the US population in the real estate market. An often cited example is the purchasing of summer houses in Florida. The buyers neither intended to live nor spend vacation time there; the aim was rather to resell at profit. One important parameter pertaining to the above purchases was that they were not made counting on available savings. They were financed through loans that would be repaid from anticipated sizable profit margins, resulting from the expected rise in housing prices. The speculative fever spread rapidly, increasing the stock market index, an indication that the fundamentals of the economy were not healthy at all. The public turns to speculation when profits that businesses can make through their investment proper (i.e., in plant and equipment, mainly) are not promising enough and may take a long time to bear fruits. By contrast, “investment” in financial instruments, when the market is on the rise and credit is relatively cheap, gives much higher returns realized in a much shorter time. Keynes’ writing about and during the great depression was informed as to the effects of differences in returns. This is the reason he coined the terms ‘speculative’ investment and ‘enterprise’ investment.3 The speculative investment, he argued, is about predicting future market psychology, and making gains out of it. By contrast, ‘enterprise investment’ is the activity J. Μ. Keynes, The General Theory of Employment, Interest and Money, London, Macmillan, 1936, ch. 12. 3 192 Lefteris Tsoulfidis in which businesses buy capital goods and estimates their expected return for their entire life cycle. Furthermore, Keynes pointed out that speculative investors have a short-term horizon and expect profits from rising prices. This form of entrepreneurial activities, Keynes argued, is in the wrong direction and prevails in the uS. He predicted that the higher the speculative activity, the more it will undermine the fundamentals of the economy. Then the economy will slide further down into deep crisis. In the 1920s, most European countries were experiencing severe unemployment of labor. More specifically, the Weimar government was in high debt, hyperinflation, and rising social dissatisfaction. The USA had surpluses in its trade balance and sought to expand its exports to European countries. The Dawes plan (1924) encouraged the US banks to lend to German ones, and in so doing, they served several purposes.4 In particular, Germany could: - increase its imports from the USA, - maintain social order through various welfare programs, - pay its war reparations (mainly to France, the UK, Greece was also expecting), - facilitate the uK and France to pay their own inter-alliance loans to the USA. The policy of easily obtaining credit in the uS and the relatively higher German interest rates seemed to present an opportunity for profit. The Dawes plan further encouraged American financial institutions such as J.P. Morgan to seize the advantage by issuing bonds. These bonds would satisfy the public demand for higher earnings with minimal risks. The Dawes plan enhanced speculative behavior in the USA and enabled Germany to reach for every one of the above goals which also benefitted the other involved countries. It is interesting to note at this juncture that that uK’s policy was to restore the gold standard and the pound was pegged to its prewar exchange rate with the dollar of 1£=4.86$ instead of what was the market determined ratio of 1£=4.4$.5 This made the uK exports more expensive and precipitated William Quinn, John D. Turner, Boom and Bust: A Global History of Financial Bubbles, Cambridge, Cambridge University Press, 2020, pp. 127-128. 4 J. Μ. Keynes, “The Economic Consequences of Mr. Churchill”, 1925, available at the link https://www.economicsnetwork.ac.uk/archive/keynes_persuasion/. In his article, Keynes explained that the appreciated pound was to the detriment of the industrial sector of the northern UK and stood in favor of the financial capital of the southern UK. One is wondering how possibly an approximately 10% appreciation of the pound may have such destructive effects on the economy. England had lost her competitive advantage in international markets, 5 The Interwar Depression and the Greek Economy 193 the downward trend of economic activity in the UK; at the same time, it promoted the US exports. The overvalued pound, if nothing else, would force UK exporters to cut costs to regain at least part of their competitiveness, which would mean wage cuts and rising unemployment. The Dawes plan was effective, so long as interest rates in Germany were higher than those of the USA. However, by 1928 the US banks had already lent a lot to German banks, and they were no longer willing to carry on with this policy. At the same time, the gains in the real estate and stock markets in the USA were lucrative enough and contributed to curtailing money outflows, thereby worsening Germany’s position.6 It is interesting to note that the combination of falling profit-cum-interest rates in the US became the fuel for the development of real estate and the stock market bubbles. Sooner than later those bubbles were destined to burst. The real estate and stock market boom in the US along with the lending out of the German banks to the point of saturation, brought Germany to the untenable position of not being able to pay for war reparations to England and France, the two major recipients. The German government, having experienced the hyperinflation of 1922-1923, applied austerity policies worsening even more the situation. In 1931, the rising unemployment reached record levels, and in July 1931, the collapse of the German banks followed. These developments led the German government to exchange rate restrictions (freezing large sums of pounds) and to the closing of stock exchanges. The chain reactions were as follows: - On 9/21/31, the UK abandoned the gold base, and the pound depreciated by 30% while 25 countries followed suit. - In 1932, Germany defaulted on its war reparations on which the UK and France, along with other countries, were counting. - The uK and France defaulted on their repayment of loans to the uS. The term “excusable default” has been coined to characterize the failure of the UK to meet her obligations as a result of Germany defaulting. Greece was counting on War Reparations and new loans to finance her ambitious investment in infrastructures and found that new loans were no longer available. and even a depreciated pound, let alone an equilibrium, would not be of much help. In 1928 the flow of “other long-term” capital out of the United States was 752 million dollars, but in 1929 it was only 34 million dollars. Cf. Gene Smiley, The U.S. Economy in the 1920s, 2021, https://eh.net/encyclopedia/the-u-s-economy-in-the-1920s/ 6 194 Lefteris Tsoulfidis II. The Fundamentals of the Economy were not as Sound as Thought These recessionary developments did not occur only in Europe; similar conditions existed in the uS where the fundamentals of the economy were not sound. On the contrary, the key economic variables of the USA were also in recessionary mode, as can be seen from the movement in profitability and interest rate. The estimations of the USA profits are derived by subtracting from the net national product (NNP) the total wages, in which the wage equivalent of the self-employed population is also included.7 The rate of profit is derived by dividing the so-estimated total profits by the net capital stock, both expressed in current prices. Subsequently, the profit rate is divided by the degree of capacity utilization (Cu) of the economy estimated by the ratio of NNP (at constant prices in 2009) to its linear trend.8 The interest rate is also displayed in Figure 1. Figure 1. The Rate of Profit and Interest Rate, USA 1896-19399 7 Source of the data for the estimations of the rate of profit and the mass of real net profits of the US economy: Gerald Duménil, Dominique Lévy, The Historical Trends of Technology and Distribution in the U.S. Economy. Data and Figures (since 1869), 2016, http://www.cepremap. fr/membres/dlevy/dle2016e.pdf. 8 The estimations are based on the database provided by G. Duménil, D. Lévy, ibid. Source of the figure 1 (data on the long run interest rate): Lawrence Officer “What Was the Interest Rate Then?”, 2021, in http://www.measuringworth.com/interestrates/ 9 The Interwar Depression and the Greek Economy 195 The monetary variables represent the epiphenomena and underneath them, one finds the US economy in crisis since the 1920s. This view is based on the evolution of the rate of profit and the total of real net profits. The investment decisions depended primarily on profitability, and the rate of profit since 1918 was in its long declining trend. The net rate of profit, that is, the difference between the rate of profit and the interest rate, the “rate of profit of enterprise” in Marx (or the difference between the marginal efficiency of capital and the interest rate in Keynes), is the decisive variable for the investment decisions. More specifically, as the net (of interest) profit rate remains in its long-lasting declining trend, a point is reached where the real net profits stagnate. This is the tipping point of “absolute overaccumulation” where more investment spending brings approximately the equivalent amount of real profit. In other words, the increased investment (marginal investment) does not change the overall profit picture. The real profits persistently dwell at a maximized plateau, and therefore the imperative of businesses to further accumulate is spirited away.10 This is Marx’s and Keynes’s point of absolute overaccumulation,11 meaning that there is an abundance of savings that find no profitable investment opportunities. Under these conditions, the available savings may obtain more profits by being invested in speculative activities, real estate, or even hoarding rather than investment in plant and equipment. The falling interest rate is supportive of this channeling of savings. Figure 2 below paints the picture of the stagnating mass of real net profits along with its logistic trend for the full period of this study. 10 L. Tsoulfidis, P. Tsaliki, Classical Political Economics, op. cit., ch. 8. L. Tsoulfidis, “Falling Rate of Profit and Overaccumulation in Marx and Keynes”, Political Economy Quarterly, 43/3 (2006), pp. 65-75. 11 196 Lefteris Tsoulfidis Figure 2 Fundamentals Matter: Net Profits (Billions $ 1929), 1896-193912 The logistic curve that was employed is of the form π=L+(U-L)/(1+exp((α·t+b), where π=real net profits adjusted by CU, L=lower asymptote, U=upper asymptote, t=years, α, and b are parameters to be estimated. The ratios -b/α, or (L+U)/2 give the inflection point. The logistic equation which was applied for the full period 1896-1939 gave an R-square=53% while the estimated coefficients were: L=63.78, U=161.17, α=2.298, b=-0.198 and -(-α/b)=11.62 years. This added to the year 1896 points approximately to the year 1908, the year that the inflection point occurs, which is also approximately found as the midpoint between the upper and lower boundaries, that is 112.5 billion USD corresponding to about the same year. It is important to note that the fit of the curve looks quite good given the magnitude of the Great Depression and the unprecedented government intervention after 1932. In a similar exercise with a different source of data, a very similar picture emerges, with the inflection point occurring in the year 1914.13 In Figure 2 above, the annual growth rate in real profits between 1908 and 1914 along the logistic curve was at 3.34% while The real profits are derived by dividing the nominal profits by the price index with the base year 2009. The latter is estimated by the ratio of current prices NNP by the NNP in constant 2009 prices. All the data series are available in the database by Duménil, Lévy, The Historical Trends, op. cit. 12 13 Cf. l. Tsoulfidis, A. Papageorgiou, “The Recurrence of Long Cycles: Theories, Stylized Facts and Figures”, op. cit. The investigated period is up to 1934. The Interwar Depression and the Greek Economy 197 the actual real profits were falling during the same period as can be seen from the Figure 2, above. These results suggest that the two data sets do not generate significant differences.14 From Figures 1 and 2, one can observe the rate of profit; its declining path had started even before the 1920s and thus dragged down the mass of real profits ushering the economy into its depressionary stage. A falling rate of profit is succeeded by stagnating real profits, which means that the incentive to invest has weakened. This leads to rising unemployment and underutilization of capacity to produce. Real profits remained stagnant all the while the profit rate of the economy continued to drop until 1932; the gains in the following years did not even approach pre-1920 levels. The stagnation of the uS agricultural sector necessitated the imposition of tariffs in the 1930s (the famous Smoot Hawley Act) aiming to support mainly the ailing agricultural sector. This does not mean that the rest of the economy was in good shape. On the contrary, things were not as prosperous as they were usually described by historians, who were carried away by the deceptive climate of euphoria, created by the rising real estate and especially the stock markets. In those years two leading US industries, construction and automotive experienced a lot of turmoil and resorted to mass layoffs without even the consideration of any compensation. Especially the automobile industry, which was the leading industry in the rising phase of the third long cycle of 1896-1920, experienced underutilized capacity and became more and more vulnerable in the recessions of 1918, 1921, and 1924.15 In effect, the recession of 1927 forced Ford to discontinue the production of his famous Model-T. Mass layoffs followed, and a significant market share of Ford was lost to the newly emerging rivals of General Motors and Chrysler. Some other traditional industries, such as transportation were also in dire financial straits, and there was a consensus that the uS infrastructure was reduced to obsolescence and urgently needed renewal. In Europe, the Great Depression had already brought about consequences on Germany, where the unemployment rate had reached, if not surpassed, 44 percent, while extreme unemployment rates were observed in other countries.16 Therefore, declining profitability and stagnation in profits had reduced An effort was made to fit a logistic curve in the unadjusted for CU real profits for the period 1896-1939 generating a logit kind (step) curve with the inflection point in the year 1917, which could extend up until the year 1939. A decision was made to limit the scope to the corrected for Cu period and the data for the period of the long cycle. 14 15 John K. Galbraith, The Great Crash, 1929, Νew York, Houghton Mifflin Company, 1980, p. 205. Eric Hobsbawm, The Age of Extremes: A History of the World, 1914-1991, New York, Vintage Books, 1996, p. 93. 16 198 Lefteris Tsoulfidis investment spending and had raised unemployment to unprecedented levels. The decline in the rate of profit and the consequent stagnation of profits turned the business world into “investments” in securities (stocks), paving the way for the stock market bubble. The subsequent burst of the bubble merely revealed that the problem started from the real passing onto the financial economy and not vice versa. No one wants to undermine the importance of the feedback effects of the stock market and the financial developments in general on the real economy but at the same time the causes of the depression ought not to be confused with the factors that triggered it. III. The Interwar Depression and Greece Greece in the 1920s was not suffering so much from the global economic crisis as from the 1922 Asia Minor defeat. The Greek government in cooperation with the Refugees Settlements Commission (instituted by the league of Nations) was mobilized, in the effort to accommodate the urgent needs of more than one and a half million Greek refugees, that is, nearly one-fourth of the total population. In the 1920s, there were already many pro-capital institutional changes restricting strikes and repealing taxation on the profits of large corporations. Moreover, public land was made available to newly established manufacturing industries, and also tariffs were imposed to encourage domestic production. However, the contemplation of a comprehensive and, at the same time, effective industrial policy was extremely difficult to apply due to the lack of sufficient demand or domestic funding. Neither were international loans available. These constraints were somewhat eased after rectly affected industrialization by means of the measures below: i. Reduction in wages as a result of rising surplus labor ii. The utilization of the entrepreneurial abilities of refugees iii. Increase in production through the growth in demand It is known that in the pre-WWII years the evolution of the general price index reflected the phase of an economy. Periods of inflation and anti-inflation have indicared economic prosperity and recession, respectively. Inflation as a lasting feature of capitalism appears only after WWII. However, the golden price, the ratio of the price index to the price index of gold, continues to give us the ups and downs of economic activity. In Greece, the wholesale price index of 1933 was 10.3% higher than that of 1929.17 However, by taking the wholesale price over the price of gold, the so-called golden price index, one can obtain The price indexes of the USA, UK, France and Germany, among other major economies, were significantly lower than those of 1929. 17 The Interwar Depression and the Greek Economy 199 a view of the depressionary phase of the Greek economy. As can be observed in figure 3 below, when the US economy was in deflation while Greece was in inflation, the respective golden price indexes have nonetheless traced quite similar long cycles. In both countries, the downward stage of the long cycle started in the 1920s, if not by the end of WWI (the dashed lines refer to their respective trends derived with the Hodrick-Prescott filter). Most if not all major economies share similar depressionary traits; nevertheless, each of them has presented distinct and idiosyncratic features. Figure 3. Normalized Price Indices of the US and Greek Economies 1896-193918 In 1929 widespread was the belief that Greece managed to find solutions to her monetary stability problems. More specifically, the central Bank of Greece (BoG) was instituted, and the Greek drachma (GDR) was tied to the British pound, which, in turn, was pegged to gold. The establishment of a central bank and the stability of domestic currency were two non- negotiable prerequisites if Greece were to receive new loans via the League of Nations. The government The estimate of the normalized price index is made by expressing the price of gold given in dollars per ounce of gold in drachmas through the exchange rate of drachma to dollar. l. Tsoulfidis, Economic History of Greece, Thessaloniki, University of Macedonia Press, 2022, in Greek. 18 200 Lefteris Tsoulfidis had already designed an ambitious program of public works to absorb and effectively utilize these loans. The investment projects included: the building of new schools, the expansion of the road and railway networks, the installation of a telephone network, the design of new cities to accommodate refugees and the draining of lakes. Finally, the project for the man-made lake of Marathon was to provide Athens with a water supply system. Everything was giving the impression that all major problems had been overcome, and a period of growth, if not relative prosperity was underway. In the years that followed, a sequence of events brought Greece into financial straits. In October 1929, the stock market in New York collapsed, and other major stock markets in Europe followed suit but not the Athens Stock Exchange, which continued its activities. The Greek government (with the help of the banking sector) kept the stock market in operation, albeit in reduced activity. The price index of stocks kept sliding down, and the cumulative losses in the next two years amounted to 45.6 percent. From October 1929 onwards, the phase-change of the world economy became apparent, and the Greek economy was not to be the exception. Meanwhile, the situation in Europe was further deteriorating. The Western economies were already quite interconnected. The exchange rate restrictions in Germany and the suspension of war reparations impacted the uK economy. The ecumenical government formed in England decided on 9/21/31 to abandon the golden base and at the same time the pound depreciated by 30%. Prime Minister Venizelos, however, remained loyal to his monetary policy in the expectation that England would soon after return to the gold standard. He argued that if Greece abandoned the gold exchange standard, to return to it after a while, would prove, if nothing else that she did not pursue a policy of monetary stability. Consequently, the country's creditworthiness would be at stake. Meanwhile, many countries abandoned the gold standard in 1932 and 1933 followed during 1935-1936 by the so-called “gold bloc” countries, i.e., France, Poland, Belgium, and Switzerland. Thus, the monetary instability of this period was not an exclusively Greek phenomenon but rather an international one.19 The Greek government, faithful as it was to the policy of the hard drachma decided to follow the US dollar (USD) exchange standard at the rate of 70.05 GDR = 1 USD (9/28/1931).20 The crisis initially appeared as foreign exchange The problems of hyperinflation in the early 1920s in the Weimar Republic, Austria, and Hungary are well-known. The onerous war reparations to France severely damaged the German economy; the running of large deficits increased the public debt, the servicing of which led to the rapid devaluation of the mark by way of hyperinflation (cf. Tsoulfidis, Economic History of Greece, op. cit., ch. 10 and 12 for the Greek hyperinflation of the 1940s). 19 20 Catherine Brégianni, “The Interwar Economic Crisis and Greece, 1929-1935”, Neoellinika The Interwar Depression and the Greek Economy 201 problem, since Greek exports (tobacco, raisins, olives, oil, in the main, all luxury goods in those years) decreased because the trading partners of Greece cut their imports due to depression. In addition, remittances from Greeks in the USA (a significant component of Greek foreign exchanges) dropped because of the Great Depression, and funding from abroad –so necessary for the ambitious public investment projects– had been cut off. Venizelos did not seem to have realized the “signs of the times”, and acted as if the international community were a family that helps its vulnerable members provided they follow the expected policy. The adoption of the gold standard was the equivalent of a strict monetary policy if a country were to be assessed as a reliable borrower. The Greek government announced a light austerity program aiming at showing the international community that an effort was being made to balance the budget. Venizelos believed that this was the way to increase his bargaining power in his talks with the Heads of State on successive visits to Rome, Paris, and London (January 1932). Unfortunately, though, while he was received with a lot of sympathy, he failed to secure any new loans. The economic situation deteriorated as the BoG's coverage of the GDR by gold and reserves was reduced to 27% instead of the 44%, the institutionally set threshold by the Finance Committee of the league of Nations. This meant that there was no possibility of new borrowing. On March 25, 1932, the policy measures that were taken were as follows: - Suspension of the convertibility of the GDR to USD. - Devaluation of the GDR by 60% - The foreign exchange market became the exclusive responsibility of the BoG. - Suspension of payment of arrears and interest for all loans of the State. Only the interest on loans of the domestic lenders (banks) was paid at one-fourth. - Debts in foreign currency of Greeks and foreigners residing in Greece are converted into drachmas on the exchange rate of 100GDR= 1USD. - Increase in tariffs (excluding necessities) sometimes up to tenfold. - Imposition of quotas on most imported items (1/3 or 2/3 of their 1931 level). - The clearing trade of the country with others was adopted.21 Istorika, 5 (2018), pp. 11-41, in Greek. C. Brégianni, “The Gold-Exchange Standard, the Great Depression and Greece; Lessons (?) from the Interwar Greek Default”, paper presented in the Symposium The Euro: (Greek) Tragedy or Europe's Destiny? Economic, Historical and Legal Perspectives on the Common Currency, University of Bayreuth, Germany, 11 & 12 January 2012. The default officially was announced on May 5, 1932, and the various policy measures were taken not all at once but rather over a period of a few months. Cf. C. Brégianni, “The Interwar 21 202 Lefteris Tsoulfidis With the above policy measures, Greece essentially reduced her international payments down to the absolutely necessary and followed the policy of economic self-sufficiency. One side effect of the latter was the increase in domestic production, especially agricultural production, the result of the mobilization of the existing productive potential. The above policy measures contributed to the development of closer interconnections between the industries and sectors of the domestic economy. The monetary and fiscal crisis that plagued the country from 1932 onwards had as its indirect and unplanned consequence the strengthening of the role of the BoG. The latter assumed exclusive control of the foreign exchange market. The circulation of the GDR without backing in gold or foreign exchange convertible to gold reinforced the role of the BoG and its influence on commercial banks. Another consequence of the default was that the BoG assuming control of the money supply. This control in combination with the exchange rate restrictions discouraged imports and promoted the development of domestic production. The results were not long in coming, as interest rates rose by 2-4 percentage points above European levels and so Greek banks began to attract international capital. The BoG gold reserves increased from $7.6 million left in 1932 to $44.7 million in 1934, which meant that the money supply could also increase. At the same time, the financial crisis has led to the bankruptcy of some commercial banks strengthened even more the BoG position among the remaining commercial banks.22 In addition, the surplus of funds through the suspension of expenses on public debt enabled the continuation financing of public works. During the 1934-1935 period, the government increased wages and instituted various other social policy measures, such as the introduction of the eight-hour work, collective bargaining agreements, and the minimum wage. Lastly, social security was instituted in 1935 and activated in 1937.23 IV. The Movement of Key Variables In Figure 4 below, one observes that the real GDP measured on the left-hand side (LHS) axis expressed in USD in 2011 displays an increasing tendency; however, this might be due to the increase in population after 1922. The GDP of Greece peaked in 1929 and the year 1932, the one usually considered trough year of the depression, was only slightly lower than that of 1929. A more realistic picture Economic Crisis and Greece, 1929-1935”, op. cit., p. 30. L. Tsoulfidis, Μichalis Zouboulakis, “Greek Sovereign Defaults in Retrospect and Prospect”, South-Eastern Europe Journal of Economics, 27/2 (2016), pp. 141-57. 22 23 Cf. L. Tsoulfidis, Economic History of Greece, op. cit., ch. 10. The Interwar Depression and the Greek Economy 203 of the situation of the Greek economy emerges with the per capita real GDP in constant 2011 USD measured on the right-hand side (RHS) axis in Figure 4. It is worth noticing that the per capita real GDP estimates are more representative of the actual state of the economy than the real GDP. The latter, as it hinges on the territorial and population expansion of the country, it may give a distorted picture of reality. Thus, only after 1922 did both the geographical borders and population in Greece consolidate. The two time-series data after 1923 follow a similar course due to the stabilization of the population. One can observe that the per capita real GDP (measured on the RHS axis) shows that the Greek economy essentially returns to the level of 1911 in the distant 1937 year. The data on per capita real GDP show that the performance of the Greek economy in the 1920s and 1930s was recessionary. Figure 4. GDP ($2011) and Per Capita GDP ($2011), Greece 1896-193924 Table 1 below lists estimates of the employed and unemployed population in the 1928-1935 period. The estimated unemployment rates are only indicative of a rising trend and not the exact measurement of the unemployment rates. Source of the figure 4: Maddison Project (www.rug.nl/ggdc/historicaldevelopment) based on George Kostelenos, Sokratis Petmezas, Dimitris Vasiliou, Emmanuel Kounaris and Michail Sfakianakis, Gross Domestic Product 1830-1939, Centre of Planning and Economic Research - Historical Archives of the National Bank of Greece (coll. Sources of Economic History of Modern Greece: Quantitative Data and Statistical Series 1830-1939), Athens, 2007, in Greek. 24 204 Lefteris Tsoulfidis This is on the assumption that there are no data on the labor force but only on the total active population (people over ten years old). The actual working population (employed plus unemployed) is considerably lower, and therefore, the “unemployment” rate is underestimated, even though it gives an idea of the dismal situation of the economy. One can observe that the official number of unemployed during the trough year 1932 more than tripled compared to 1928, while in 1935 it was only double to 1928. At the same time, the employment rate was falling resulting in the employment level of 1935 being lower than that of 1929. The unemployment statistics displayed in Table 1 indicate the deterioration of living conditions, especially between 1931 and 1932. The “unemployment” rate quoted here reflects, to a certain extent, the trend of actual unemployment. If, for example, one hypothesizes that the participation rate of the active population in the labor force was about 50 percent, then the “unemployment” rate of Table 1 increases by much. Also, if from these estimates the rural population is excluded, where the concept of unemployment is not exactly applicable, then the unemployment rate increases and becomes comparable to those in Germany, the UK, and the USA of the same period. Table 1. Rate of Unemployment, Greece 1928-1935 Years 1928 1929 1930 1931 1932 1933 1934 1935 Active Population* 2,603,553 2,636,175 2,668,797 2,701,418 2,734,040 2,766,662 2,799,284 2,831,905 Number of unemployed** 75,000 127,000 165,000 218,000 237,000 156,000 162,000 150,000 Index of Employment*** 100 107.1 104.6 101.9 86.7 94.3 94.9 99.9 Rate of unemployment 2.8% 4.8% 6.1% 8.0% 8.6% 5.6% 5.7% 5.2% Only for the years 1928 and 1940 the research has census data, for the calculation of the active population in the intermediate years it is applied a linear interpolation. ** Source of the data is the Greek Confederation of Workers. *** Andrew Freris, The Greek Economy in the Twentieth Century, London, Croom Helm, 1986, p. 90. * The Interwar Depression and the Greek Economy 205 In Figure 5 below, the ratio of government revenues to expenditures is displayed for the 1918-1937 period. The public revenues include the loans of the Greek government. In the post-1932 years a budget surplus was observed; those were the years that the government pretty much suspended servicing all its debt. Figure 5. Ratio of Government Revenues to Government Expenditures25 The accumulation of deficits and the policy of balancing the budget with loans over the years led to a mounting public debt relative to GDP as shown in Figure 10 below. The drop in the Debt to GDP ratio, especially in the post1932 years, is explained by the rise of the GDP rather than the reduction of public debt. Meanwhile, the government expenditures that remained high, approximately 25% of the GDP (among the top percentages worldwide during the 1920s and early 1930s) were financed more than fully by the revenues since there were no payments to foreign lenders. 25 Source of the figure 5: Michalis Psalidopoulos, The 1929 Crisis and the Greek Economists, Athens, PIETVA, 1989, p. 499, in Greek. 206 Lefteris Tsoulfidis Figure 6. Public Debt to GDP ratio26 The debt-to-GDP ratio peaked in 1921, to fall by 40 points in a single year. The phenomenon of spectacular rise and fall was also observed in the years that followed, which indicated the great monetary upheavals of the interwar period. Public debt was so high that the government could sustain it for as long as the international environment allowed it. However, as the crisis deepened, international competition intensified, uncertainty increased, financial institutions became frugal in lending, and whenever they lent they did so under conditions unbearable for the borrowers. This seems to have been the case in Greece in the 1930s.27 A bold but quite interesting view argues that Greece was positively affected by the international crisis of 1930, as this can be judged by the high growth rate of industrial production.28 This view is based mainly on the data of the Greek manufacturing industries of the post-1929 years. In table 2 below, if one considers 1929 as the base year of crisis, it is obvious that only 26 Source of figure 6: L. Tsoulfidis, Economic History of Greece, op. cit. The high public debt to GDP ratio was a common phenomenon right after WWI. Therefore, countries such as Germany but also England, whose debt to GDP ratio was around 180%, are not included in this part of the research. Cf. Carmen Reinhart, Kenneth Rogoff, “From Financial Crash to Debt Crisis”, The American Economic Review, 101/5 (2011), pp. 1676-706, https://doi. org/10.1257/aer. 101.5.1676. Cf. also for the German case study the contribution of J. Nautz in this volume. 27 Kostas Vergopoulos, Nationalism and Economic Development, Athens, Exantas, 1979, in Greek. 28 The Interwar Depression and the Greek Economy 207 Greece unlike many countries has presented a higher production index in 1932 than that of 1929. The year 1932 marks the trough of the international crisis. If one considers the entire period 1929-1937 (see the third column of Table 2), then the increase in industrial production of Greece lags only behind that of Japan. On the basis of the above rate of performance, it is very difficult to claim that at least the industrial sector of the Greek economy was in a depressionary state. There is no doubt that in the post-1929 years the industrial production was growing at a vigorous rate. However, the same does not apply to the entire spectrum of the economy because the relative weight of manufacturing to total production during that period was about 10%. More specifically, it is estimated 7.72% over the period 19291933 and 8.39% over 1933-1939.29 Furthermore, even though industry was growing vigorously, no claim can be made that the people employed in the industrial sector were improving their situation and enjoying high standards of living; on the contrary, widespread poverty was what characterized the vast majority of people during this time period. Hence, the aphorism that the “numbers prosper but not people” holds true here. Table 2. Index of Industrial Production (%)30 Years Countries Japan Greece Finland Sweden Hungary uK Germany Austria Italy Belgium USA Holland France 29 1929-1932 -2.0 1.0 -17 -11 -23 -17 -42 -39 -33 -31 -46 -38 -31 1932-37 74.4 49.5 79.5 67.4 77.9 49.3 100.0 73.7 49.2 36.2 70.3 46.7 43.0 1929-37 71 51 49 49 37 24 16 6 -6 -8 -9 -28 G. Kostelenos et al., Gross Domestic Product 1830-1939, op. cit., p. 147. Source of the table 2: Chris Freeman, Francisco Louçã, As Time Goes By. From the Industrial Revolution to the Information Revolution, Oxford, Oxford University Press, 2001, p. 268. 30 208 Lefteris Tsoulfidis Greek industrial production in the interwar period experienced high growth rates. The causes should be sought in the cheap labor costs, which were the result of the settlement of the refugees after 1922 and the relatively weak labor movement. Furthermore, many other factors contributed to the growth of the industrial production one way or another. Those included the devaluation of the drachma in 1932, the further restrictions imposed on imports and the increase in population which in turn brought about higher domestic demand for consumer goods. The expansion of the internal market and the substitution of imports in general due to the protectionist tariffs are in line with the available data showing that the share of domestic industries in private consumption increased from 58.6% in 1928 to 72.8% in 1936 and 81.6% in 1939.31 V. Summary and Conclusions Economic crises or depressions are regularly recurring phases of long cycles. In retrospect, the world economy has experienced five such long depressionary phases, which when rounded in decades are the 1820s-1830s; 1870s-1880s; 1920s-1930s; 1970s-1980s, 2010s-2020s. During these phases, major innovations and institutional changes restored the falling profitability and set the stage for a period of economic growth. As soon as the long cycle enters into its upward phase, the usual mantra of economists and policymakers falseley reassures that depressions belong to the past and that the economy will keep growing at a healthy rate. For example, in the 1920s, the leading economists argued that economic crises occurred only in the past. Irving Fisher’s often-cited statement (nine days before the 1929 crash) asserted that the stock prices “reached what looks like a permanently high plateau”. However, less well-known is Keynes’s appraisal of the economic situation just after the US stock market crash. He opined that “after the drastic and even terrible events of the last few weeks, we see daylight ahead [...]. I may be a bad prophet in speaking this way, but there will be no serious direct consequences in London resulting from the Wall Street slump. [...] We find the longer look ahead decidedly encouraging”.32 The climate of euforia appears again in the next two rising phases of the fourth and fifth long cycles. One may recall the “mixed economy” of the 1960s and a similar repeat with 31 A. Freris, The Greek Economy in the Twentieth Century, op. cit., 1986, p. 48. John Maynard Keynes, Collected Works of John Maynard Keynes, Vol. 20: Activities, 1929-31. Rethinking Employment and Unemployment Policies, Cambridge, Cambridge University Press, 1981, p. 2. 32 The Interwar Depression and the Greek Economy 209 the “new economy” of 1990s.33 Writing about the events of the interwar depression in the USA, Heilbroner noted and at the same time predicted that “At first it seemed unconnected with anything bigger. The early weeks after the crash were regularly marked with expressions of confidence: The general cliché of the day was that things were ‘fundamentally sound’. Yet things were not fundamentally sound. The terrifying crash ushered in the much more terrifying depression”.34 The character of these phases, be it prosperity or depression, is set by the leading economic powers and the rest of the world follows. Greece as part of the international economy experienced all these long cycles.35 However, the country had been in a depressionary situation since the 1920s, if not earlier. In 1928, by adopting a monetary stability program according to recommendations of the Financial Commission of the League of Nations, everything appeared as if the worst was over. The intensification of the international crisis, 1929-1932 did not manifest on the wholesale price index as for example was the case for most economies, nor on the industrial production. Greece was the only country the price index of which and industrial production in 1932 were higher than those of 1929. The depression worsened in the case of Greece due to the mistaken monetary policy of the hard drachma based primarily (regrettably) on the unfounded expectations of foreign aid, in a period during which the ideas of isolationism and selfsufficiency were prevailing internationally. The rising public debt and the inability to service it led to the 1932 default followed by the devaluation of the Greek drachma. However, several policy measures enhanced the role of the BoG which abolished the foreign exchange market while the State imposed restrictions on imports. These measures encouraged domestic production and strengthened inter-sectoral connections within the Greek economy. In addition, resources intended for amortization and interest were used to finance public investment in infrastructures. The economy up until WWII was gradually recovering though far from thriving. There are many lessons to be learned from the interwar depressionary period and the way Greece experienced it. Among the lessons learned is that depressions lead to isolationism or similar tendencies such as deglobalization, nationalism, and autocratic governments. Greece experienced a dictatorship in 1936, but throughout the previous years she also suffered from restrictions on freedoms and more than one coup d'état. Similar was 33 L. Tsoulfidis, Economic History of Greece, op. cit. 34 Robert Heilbroner, The Making of Economic Society, New Jersey, Prentice Hall, 1993, p. 137. 35 L. Tsoulfidis, Economic History of Greece, op. cit. 210 Lefteris Tsoulfidis the situation in countries in the South of Europe (Italy, Spain, and Portugal) and worst of all was the rise of Nazism in Germany. Another lesson is that the tight monetary policy under depressionary circumstances aggravates an already bad situation. The policy of hard drachma in Greece was disastrous, and so were the policies of those countries that stayed longer on the gold standard and were forced to abandon it during the mid-1930s. Government expenditures and welfare programs are particularly helpful to alleviate the rising unemployment and its consequences. Institutional changes and their direction (sign positive or negative for the people) are advisable. Regrettably, this is a lesson not fully understood. Central banks implement quantitative easing to keep interest rates as low as possible (even zero or negative) with the expectation of stimulating private investment. However, it is well known that the low-interest rates in the face of a falling rate of profit create the ideal environment which fosters the creation of various bubbles, with the likelihood of bursting higher as time goes by. The implementation of a policy of quantitative easing must be in line with a well-designed program of public expenditures. Such a program generates employment positions and gives rise to profit expectations, which in turn encourage businesses to invest. Currently, the trouble is that in most cases even quantitative easing is considered only temporary. There are already loud voices raised against such government intervention blaming it for contaminating markets. However, it is known that in 1937 the uS government assumed that the depression was over and the return to normality was imminent. As a consequence, the government curtailed expenditures and limited social welfare programs to a minimum. It did not take long for the depressionary phenomena to make their reappearance requiring government intervention and a return to expansionary policies in the effort to avoid the worse. In conclusion, it is certain that “long cycles” cannot be managed away; however, the understanding of their internal dynamics is of great economic and political significance. The interwar downturn of the long cycle left its indelible mark on the political developments in Germany and by extension the whole World in the 1930s. If economists and policymakers are trained to understand that in market economies long periods of upturn give way to periods of crises, the economic and political consequences of of these crises will be less severe for the vast majority of the population. Part III Capital Flaws in the Long Run 7 ANTONIS A. ANTONIOU Postdoctoral Researcher, TransMonEA Project Academy of Athens - HFRI FROM THE STATE DEFAULT TO WAR CONFLICT (1897-1912) TRENDS IN THE GREEK FINANCIAL SECTOR Introduction State bankruptcies all around the globe have been frequently observed during the last quarter of the 19th century. The international capital market expansion during the second phase of the industrial revolution is linked to a variety of such incidents, with the Greek State default in 1893 included in the cases of state bankruptcies during the last decades of the 19th century.1 Economic development in Greece at the end of the 19th century must be seen through a perspective that will highlight the international network of relations and dependencies in which the country was integrated. During the classical gold standard era (1880-1914) capital flows were proffered from developed countries to the peripheries as a sovereign debt. By the last quarter of the nineteenth century due to excessive borrowing, countries like the Ottoman Empire, Russia, Egypt, Portugal, Argentine and Greece could not pay their debt. One measure adopted was the establishment of International Financial Control (IFC) organizations. In Greece the period of heavy borrowing commenced with the period of annexation of Thessaly (1881). The borrowing terms were unfavorable, and the loans were used in an inefficient way, while the governmental attempts to compromise with the lending parties failed. This led the country to bankruptcy in 1893, the war of 1897 and the International Economic Control of 1898. The area of Thessaly remained under Ottoman occupation until Greece had complied with the mandates of mediator states. In the case of Greece, six countries (AustriaC. Brégianni, Modern Greek Currency. State and Ideology in Greece, Athens, Academy of Athens, 2011, p. 218, in Greek. 1 216 Antonis A. Antoniou Hungary, France, Germany, Great Britain, Italy, and Russia) were appointed representatives to the Commission. I. National Accounts and Public Expenditure The national accounts of the Greek State have often been the subject of political debates and historical research. Their extent and direction were widely negotiated, while there has often been criticism regarding mishandling and lack of transparency. The relative analysis has rarely been based on full and reliable evidence.2 Historical research has mostly dealt with the budgetary sums, which fell quite short of the actual payments. The modern Greek political scene was dominated by laying blame and by efforts to impugn reputations and policies. The arguments were intense and widespread.3 The numerous analyses did not only focus on the borrowing terms but also on the counterproductive orientation of investments realized through credit. The political confrontation however was reduced to the level of petty squabbles. The military expenses were carried out through foreign loans, internal credits and voluntary subscriptions. Through the study of national accounts, it seems that the defensive expenses of the Greek State during the 1887-1896 decade were on average 20% of the total state spending. The largest part of them (13%) was absorbed by the infantry, while the navy absorbed a less sizable but not negligible 7%. At the same period, education absorbed only 4% of total expenditure. Public debt payments of the period (which precedes the 1897 war) were quite inflated, reaching 33% of total spending. Public debt payments and military expenses together covered about 53% of total payments. One could view this as a disastrous, self-perpetuating financial policy. The root causes of it can be traced back to the years when the modern Greek State first emerged by rebelling against the disintegrating Ottoman Empire. Apart from the infantry expenses, only 7% was spent for equipment, while a serious purchase of equipment was carried out only in 1897. The war navy instead used 52% of its resources to buy military ships and equipment.4 It should be noted that military equipment had to be purchased from abroad and there had not even been a plan of organizing a national production of light weapons. 2 For exemple, cf. S. Deimezis, The International Control on the Greek Finances, Athens, Konstadinidis, 1898, in Greek. T. Nasiaras, “The Greek Nation in Crisis. Politics and Citizens in Periods of Crisis (1843, 1893, 1932)”, Ph.D. diss., Aristotle University of Thessaloniki History Department, Thessaloniki, 2014, pp. 64-87, in Greek. 3 4 A. Antoniou, Les dépenses publiques en Grèce 1833-1939, Ph.D diss., Université Paris I Panthéon-Sorbonne, Paris, 2004, pp. 131-140. From the State Default to War Conflict 217 The war further deteriorated the financial problem, given the costs and especially the war reparation obligations. The yearly budgets clearly demonstrate that the Greek State was burdened with payments of 140 million drachmas, a sum that was equal to the expenses of a year and a half. This estimate is based on the increase of government expenditures observed in 1897 and 1898 in comparison to the period of the previous three years and the one subsequent to 1898.5 If these sums are added to the burden of the escalating public debt payments in 1898, then the sum of 210 million drachmas (value of 1897) is reached. The above debt was imposed on the Greek State through the punitive terms of the treaty after the defeat of 1897. It was twice the size of the total sum of state payments for two years and understandably caused cash distress. This huge burden of public fund was not as manifest as one would expect because it happened during a period of indebtedness. Some claims have been made that the Greek-Turkish war was provoked by the Great Powers. Supposedly by appealing to the patriotism of easily incited Greeks, they succeeded in imposing on Greece the International Financial Committee and in securing the bondholders thereby. After the 1897 war, various Modern Greek State weaknesses and shortcomings occupied the center of political discussion on a much more pragmatic basis. A result of the war was the imposition of international financial control. The law on international financial control granted the lenders all revenue of monopoly products, such as salt, matches, oil etc. Apart from that, they were also granted the revenue of tobacco taxes, stamp duty and the revenue of Piraeus Customs duties.6 The above terms related to the application of a strict handling pattern for the public spending by the IFC. The appropriation for salaries of the committee members was sizable. It was comparatively quite higher than the allocation of funds toward the payroll of central public services employees.7 GDP per capita at constant prices was decreased during the period of 18931900, especially due to the fiscal crises and the Greek-Turkish war. The GDP increase during 1901-1910 was an important one, since it reached about +8% in relation to the average of 1881-1892 and about +14% in relation to the 1893-1900 average. The flourishing of global economy of the time appeared to have carried along the Greek economy as well. 5 Ministry of Finance, Accounts for the Years 1897-1904, Athens, 1900-1918, in Greek. K. Loulos, German Politics in Greece 1896-1914, Athens, Papazisi, 1991, in Greek. L. Tsoulfidis, Greek Sovereign Defaults in Retrospect, https://mpra.ub.uni-muenchen.de/42843/. Cf. also Official Journal of the Kingdom of Greece, issue Α΄/ 28/26 February 1898. 6 7 Proceedings of the Greek Parliament 1897-1898, Athens, 1898, pp. 15-76, in Greek. 218 Antonis A. Antoniou During the examined period, the primary production sector has been sovereign. At the period of 1881-1893 the primary sector has produced an average of 69% of the GDP, the secondary one around 7% and the tertiary one around 24% of the GDP. The first increase in secondary sector participation in the GDP can be observed in 1899, when for the first time it has contributed to the GDP with a two-digit percentage. In 1904-1910 the primary sector seems to have had a decreased average participation of 59% in the GDP, while the secondary sector has appeared higher and has doubled its participation to reach 14% of the GDP. The tertiary sector has also appeared higher, making gains with a 28% average of the GDP in 1904-10. The important upward trend of the secondary sector during the examined period has not challenged the sovereignty of the primary sector, which used to produce a ten times larger part of the GDP than the secondary one during 1881-1903 and a more than seven times larger part in 1904-10. In spite of the increase in industrial production, the character of modern Greed economy was undoubtedly agricultural (Table 1). Table 1. Allocation of GDP by Sector of Production8 Year Primary Sector Secondary Sector Tertiary Sector 1881 67% 6% 27% 1882 73% 6% 20% 1883 73% 6% 21% 1884 73% 6% 21% 1885 67% 6% 27% 1886 64% 6% 30% 1887 71% 6% 23% 1888 71% 6% 23% 1889 69% 6% 25% 1890 69% 6% 25% 1891 71% 6% 23% 1892 71% 6% 23% Source of table 1: Data processing from George Kostelenos, Sokratis Petmezas, Dimitris Vasiliou, Emmanuel Kounaris and Michail Sfakianakis, Gross Domestic Product 1830-1939, Centre of Planning and Economic Research - Historical Archives of the National Bank of Greece (coll: Sources of Economic History of Modern Greece: Quantitative data and statistical series 1830-1939), Athens, 2007, pp. 137-147, in Greek. 8 From the State Default to War Conflict 219 1893 72% 6% 22% 1894 70% 7% 23% 1895 69% 7% 24% 1896 72% 7% 21% 1897 63% 8% 29% 1898 70% 8% 22% 1899 65% 10% 25% 1900 67% 9% 25% 1901 68% 9% 23% 1902 65% 10% 25% 1903 63% 12% 26% 1904 57% 14% 29% 1905 59% 13% 28% 1906 58% 14% 29% 1907 58% 14% 28% 1908 57% 15% 28% 1909 59% 15% 26% 1910 54% 16% 29% Public spending, as a percentage of the GDP, has shown an important upward trend starting from 1887, when the country demonstrated the initial signs of indebtedness. It is the period of 1887-1910, during which the increased percentage of the GDP ranged from 17 to 21% (Table 2). Table 2. Evolution of Revenue and GDP9 Year GDP Annual Revenue Revenue/GDP 1881 340,537,237 46,803,302 14% 1881 378,493,245 57,100,595 15% 1882 402,037,420 58,537,556 15% Revenue does not include revenue from loans. Current prices in drahmas. Sources of the table 2: Data processing from the annual accounts of the period 1881-1910: List of published accounting data, cf. infra, annex & G. Kostelenos, S. Petmezas et. al., GDP 18301939, op. cit., pp. 137-147. 9 220 Antonis A. Antoniou 1883 409,597,771 60,744,637 15% 1884 404,370,356 59,374,676 15% 1885 427,884,977 63,103,541 15% 1886 445,552,567 82,849,805 19% 1887 457,843,916 89,551,395 20% 1888 441,011,848 83,269,914 19% 1889 463,711,498 79,554,075 17% 1890 506,074,775 85,584,470 17% 1891 530,183,043 94,669,895 18% 1892 550,345,214 92,954,145 17% 1893 497,796,032 99,717,622 20% 1894 519,172,168 94,657,066 18% 1895 551,490,094 95,282,033 17% 1896 512,247,564 86,358,589 17% 1897 568,609,039 102,685,061 18% 1899 542,817,095 109,777,622 20% 1899 585,318,900 108,637,650 19% 1900 663,880,009 114,746,300 17% 1901 638,047,417 114,409,904 18% 1902 623,984,536 114,837,885 18% 1903 572,452,526 115,883,095 20% 1904 579,591,946 122,436,117 21% 1905 604,516,897 125,909,923 21% 1906 646,723,396 128,423,160 20% 1907 638,396,799 122,989,119 19% 1908 689,464,639 121,632,214 18% 1909 660,869,107 133,813,277 20% This increase has obviously been accompanied by a corresponding rise in tax revenue. In the distribution of public tax revenue one can observe a prevalence of indirect taxation. Between 1889 and 1910 the indirect taxes ranged between 16 and 21% of tax revenue. After 1897 there has been a strong upward trend of indirect taxes, especially consumption taxes, which were the easiest to collect but also the greatest tax burden for the financially From the State Default to War Conflict 221 disadvantaged classes. The actual consumption taxes from 1898 to 1910 amounted to 37-43% of tax revenue (Table 3).10 Table 3. Tax Revenue Allocation11 Consumption Taxes Fees Monopolies Year Direct Taxes Other Revenue 1889 21% 32% 18% 12% 17% 1890 19% 34% 18% 12% 17% 1891 21% 33% 17% 11% 17% 1892 20% 32% 19% 11% 18% 1893 22% 31% 21% 12% 14% 1894 19% 34% 19% 11% 16% 1895 20% 35% 19% 13% 13% 1896 19% 36% 20% 12% 12% 1897 16% 39% 17% 13% 15% 1898 17% 41% 19% 12% 12% 1899 18% 38% 19% 12% 15% 1900 18% 37% 20% 12% 13% 1901 19% 38% 13% 12% 19% 1902 18% 39% 12% 12% 19% 1903 17% 39% 12% 13% 19% 1904 16% 40% 12% 13% 19% 1905 16% 39% 11% 12% 21% 1906 17% 43% 12% 11% 18% 1907 17% 43% 11% 10% 18% 1908 17% 43% 12% 11% 18% 1909 18% 41% 12% 11% 18% 1910 17% 43% 12% 10% 18% 10 A. Antoniou, “Trends in Financial Aggregates from the Imposition of International Financial Control to the Goudi Movement”, in The First Decade of the Twentieth Century. Changes and Reversals, Proceedings of the Scientific Symposium, 11-12 December 2009, ed. O. Kaiafa, Athens, Eteria Spoudon Neoellinikou Politismou ke Genikis Pedias Scholis Moraiti, 2012, pp. 25-61, in Greek. 11 Source of the table 3: Data processing from the annual accounts of the period 1881-1910. Cf. Annex. 222 Antonis A. Antoniou Observing the evolution of expenses during this period, not only as an independent financial variable but also in its relation to the GDP of the time, one may conclude that the rearrangements caused by the Eastern issue and the threatened or on-going warfare have strongly affected the boost of public expenses. This is the reason of public expenses increases in 1881, 1885, 1886 and 1897-98. After 1898 and until 1910 the public expenses range between 13-16% of the GDP. This percentage is not much lower than the expenses of the previous period (1881-1898), except for the years of war. One could reasonably assume that the often-planned curtailing of government spending programs did not deliver the expected results. The orientation of public expenditure of this period all has been for the most constant. The two grater expense categories, military and public debt expenses, continued to dominate the budgets. The public debt payments usually exceeded 25% of the total expenses and may have reached up to 58% of total expenses. Military expenditures also tended to reach extremely high levels. Together with debt service costs in 1899-1910 the military expenses have absorbed more than 60% of public expenses, leading to a policy of developmental stagnation (Table 4).12 The signs of financial recovery, which were more obvious after the middle of the first decade of the 20th century, secured a margin of funds allocated to the strengthening of the Greek armed forces. There have been efforts to reduce the number of military personnel, as well as a systematic effort to purchase equipment for the army and the navy and to improve armed forces training. Especially after 1900, special funds were set aside in order to aid the effort of equipment upgrade. These funds were an extra burden for the budget but also brought in revenue on their own.13 An orientation towards public works expenses, one that was obvious in past decades, has been abandoned. Educational expenses have remained consistent with the low priority usually assigned by the Greek State. They have always been represented in single-digit percentages, most often below 5%. Source of the table 4: A. Antoniou, Les dépenses publiques en Grèce 1833-1939, op. cit., pp. 242-251. 12 13 Official Journal of the Kingdom of Greece, issue A΄122, 11.2.1904, in Greek. From the State Default to War Conflict 223 Table 4. Allocation of Public Expenditure14 Year Military Education Debt Others 1881 62% 2% 16% 21% 1882 31% 3% 31% 34% 1883 30% 4% 30% 36% 1884 35% 3% 27% 34% 1885 46% 2% 25% 27% 1886 46% 2% 27% 25% 1887 25% 2% 43% 29% 1888 29% 3% 33% 34% 1889 16% 2% 58% 24% 1890 23% 2% 38% 37% 1891 25% 2% 34% 39% 1892 21% 4% 36% 39% 1893 25% 7% 27% 41% 1894 30% 8% 26% 36% 1895 30% 9% 25% 36% 1896 33% 5% 26% 36% 1897 58% 3% 15% 24% 1898 45% 1% 43% 10% 1899 35% 5% 28% 32% 1900 30% 4% 31% 35% 1901 29% 5% 32% 34% 1902 28% 5% 28% 39% 1903 30% 5% 31% 34% 1904 31% 5% 32% 32% 1905 32% 5% 30% 33% 1906 33% 6% 28% 33% 1907 34% 4% 28% 34% 1908 37% 4% 27% 31% 1909 41% 5% 24% 31% 1910 42% 5% 25% 28% 14 Data processing from A. Antoniou, Les dépenses publiques en Grèce 1833-1939, op. cit., pp. 131-140. 224 Antonis A. Antoniou II. The Public Debt Service The public debt service payments have never ceased, despite the bankruptcy and the 1897 war. In 1891 and 1892 the loans service seemed to decline, leading to the exacerbation of the fiscal and economic crisis which led to the 1893 bankruptcy. The State default was accompanied by a reduction in debt revenue, which was decreased from 4% of total revenue in 1893 to 3% in 1894 and 0% in 1895, to rise only to 2% in 1896. In 1897 loan proceeds consisted of a 12% of total revenue, while in 1898 the war reparation to the Ottoman Empire and the IFC contributed to an increase of a total 69% of public revenue. (Table 5) Table 5. Public Revenues from Loan issue and other non-related to Loans Public Revenues15 15 Υear Other Public Revenues 1889 1890 1891 1892 1893 1894 1895 1896 1897 1898 1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 45% 65% 80% 89% 96% 97% 100% 98% 88% 31% 95% 91% 68% 83% 99% 87% 94% 95% 94% 97% 97% 76% Public Revenues from loan Issue 54% 35% 19% 11% 4% 3% 0% 2% 12% 69% 5% 8% 32% 17% 1% 13% 6% 5% 6% 3% 3% 24% Source of the table 5: Data processing from the annual accounts of the period 1881-1910. From the State Default to War Conflict 225 until 1909 the revenues from loan issues as a percentage of total revenue have been kept in relatively low levels (below 8%), but not without exemptions, as in 1901 (32%), 1902 (17%) and 1903 (13%). The loan revenuepayments balance has remained negative throughout the period 1890-1909. Only in 1901 did the loan revenue exceed payments. Indeed, the actual difference was so great that it could be considered an important factor for fiscal divergence. As can be seen in Table 6, the clear debt outflows during 1890-1911 were especially important, both as a percentage of revenue and as a percentage of the GDP. Given the agricultural economy with its high level of self-consumption, this continuous (lasting more than 20 years) monetary and exchange outflow has been a serious problem and a factor of deterioration in the everyday life of inhabitants of rural areas. Already in 1903, especially in the second semester, there has been a shortage of coins and banknotes.16 Table 6. Debt Outflows17 Year 1890 1891 1892 1893 1894 1895 1896 1897 1898 1899 1900 1901 1902 1903 1904 Net Debt Outflows in Drachmas (Current Prices) -10,693,074.82 -21,429,916.29 -30,762,457.19 -22,204,457.63 -19,042,788.79 -23,222,341.84 -21,968,604.02 -7,903,577.93 -1,154,838.86 -24,129,686.28 -23,425,049.57 16,583,924.94 -11,322,445.72 -35,071,554.04 -19,372,780.06 As Revenue Percentage -13.44% -25.04% -32.49% -23.89% -19.10% -24.53% -23.06% -9.15% -1.12% -21.98% -21.56% 14.45% -9.90% -30.54% -16.72% As GDP Percentage -2.31% -4.23% -5.80% -4.03% -3.83% -4.47% -3.98% -1.54% -0.20% -4.45% -4.00% 2.50% -1.77% -5.62% -3.38% I. Kokkinakis, Currency and Politics in Greece 1830-1910, Athens, Alexandreia, 1999, p. 525, in Greek. 16 17 Net debt outflows are considered the annual differences in public debt income and debt payments as they appear in annual accounts. Sources of the table 6: Data processing from A. Antoniou, Les dépenses publiques en Grèce 1833-1939, op. cit., pp. 137-147. G. Kostelenos, Money and Output in Modern Greece 1858-1938, op. cit. G. Mitrofanis, Prices and Historical Ratios in Greece, pp. 211-230, unpublished essay, in Greek. 226 1905 1906 1907 1908 1909 1910 1911 Antonis A. Antoniou -28,050,492.4 -26,842,098.38 -26,061,850.4 -33,263,065.86 -28,998,791.52 6,524,430.53 13,665,159.37 -22.91% -21.32% -20.29% -27.05% -23.84% 4.88% 9.25% -4.84% -4.44% -4.03% -5.21% -4.21% 0.99% 1.61% Figure 1.18 The trade deficit constituted another aggravating factor for public deficits. In spite of the relative reduction of exports to imports deficit during the 1881-1919 period, the trade deficit reduction remained unattainable. The 18 Source of the figure 1: Data processing from the Greek newspaper Empros and the review Oikonomika Chronika, 1898-1910. From the State Default to War Conflict 227 exports were significantly inferior to the imports and the highest percentage achieved was no more than 72% (see Table 7). Table 7. Exports to Imports Percentages 1851-193019 Decade Average Exports to Imports Percentages 1851-1860 1861-1870 1871-1880 1881-1890 1891-1900 1901-1910 1911-1920 1921-1930 53% 54% 62% 71% 72% 71% 58% 52% The investment in the railway lines construction and relative supplies was quite extensive and the government made use of external lending. However, the profits from its use were minimal. The railway, same as in other countries, did not fulfil the expectation for profit.20 The rapid development of merchant shipping, both in steamboat count and tonal capacity, did not seem to correlate with some boost of public income.21 Increased financial hardships forced a large segment of the productive work force to emigrate. This resulted in the emergence of a new societal order in Greece. New social leaders and political alliances have begun to appear.22 This emerging new society had to bear the burden of debt and of military expenses. Source of the table 7: Data processing from General Statistical Service of Greece, Statistical Yearbook of Greece 1936, Athens 1937, p. 414-530, in Greek. 19 C. Brégianni, “Land Transport in Greece: Spacial Conseptions”, Neoellinika Istorika, Modern Greek History Research Centre of the Academy of Athens, 3 (2013), pp. 213-217, in Greek. 20 As demonstrated by the published annual accounts of the period 1881-1910. Cf. also General Statistical Service of Greece, Statistical Yearbook of Greece 1936, Athens 1937, p. 414-530, in Greek. 21 C. Brégianni, « Réformes agraires et changement rural en Grèce, du XIXe siècle à l'entredeux-guerres », Neoellinika Istorika, Modern Greek History Research Centre of the Academy of Athens, 4 (2016), pp. 245-284. 22 228 Antonis A. Antoniou III. Concluding Remarks The devaluation of golden currencies of other countries in relation to the drachma has confirmed the positive atmosphere created by the financial management of the International Financial Committee. It is an important fact which facilitated debt servicing (see Figure 1). After the agreement of 1898, Greece entered in a period of more than ten years with a focus on servicing loans.23 The picture has changed in 1910 when a loan of 150,000,000 French francs was concluded. The loan has been linked to development goals.24 The general image of the trends of financial indicators gives the researcher license to assert that after the enforcement of the IFC, even if the secondary production sector appeared strengthened, the dominance of the primary production remained indisputable. Additionally, public revenue has continued to be ineffective and has resorted to the unpopular policy of indirect taxation, while public expenditure has been crushed under the double pressure of military expenses and public debt service costs. During the period 1887-1910 there is a significant increase in public expenditure in relation to GDP, while since 1891 there has been an important decrease in the revenue from public borrowing. Consequently, the balance of the loans product and the loans payments is obviously negative. Henceforth, the national income had been burdened on a large scale. On the one hand, the ratio of exports to imports has remained constant from 1881 to 1910, but on the other the upcoming war period improved the balance of foreign trade. After the imposition of the international financial control in 1898, borrowing has reappeared with a significant contribution to public revenue in 1901 and 1910. Concluding, the IFC presence after 1898 has discouraged any development project through public expenditure. It led to a reduction in public works spending and to an increase in public debt payments. Nevertheless, it must be noted that the imposed financial order and the general financial flourishing after 1896 boosted the GDP. 23 Cf. table 5. Official Journal of the Kingdom of Greece issue A΄123, 28.5.1911, in Greek. Further reading, C. Brégianni, Modern Greek Currency, op. cit., ch. “Financial modernization, political transition and war conflicts effects”. 24 From the State Default to War Conflict 229 Annex: Published Annual Accounts of the Period 1881-1910 Ministry of Finance, Annual Office, 1897, in Greek. Ministry of Finance, Annual Office,1898, in Greek. Ministry of Finance, Annual Office, 1885, in Greek. Ministry of Finance, Annual Office, 1886, in Greek. Ministry of Finance, Annual Office, 1887, in Greek. Ministry of Finance, Annual Office, 1888, in Greek. Ministry of Finance, Annual Office, 1889, in Greek. Ministry of Finance, Annual Office, 1891, in Greek. Ministry of Finance, Annual Office, 1891, in Greek. Ministry of Finance, Annual Office, 1892, in Greek. Ministry of Finance, Annual Office, 1894, in Greek. Ministry of Finance, Annual Office, 1895, in Greek Ministry of Finance, Annual Office, 1896, in Greek. Ministry of Finance, Annual Office, 1897, in Greek. Ministry of Finance, Annual Office, 1897, in Greek. Ministry of Finance, Annual Office, 1899, in Greek. Ministry of Finance, Annual Office, 1900, in Greek. Ministry of Finance, Annual Office, 1900, in Greek. Ministry of Finance, Annual Office, 1902, in Greek. Account of the year 1881, Athens, National Printing Account of the year 1882, Athens, National Printing Account of the year 1883, Athens, National Printing Account of the year 1884, Athens, National Printing Account of the year 1885, Athens, National Printing Account of the year 1886, Athens, National Printing Account of the year 1887, Athens, National Printing Account of the year 1888, Athens, National Printing Account of the year 1889, Athens, National Printing Account of the year 1890, Athens, National Printing Account of the year 1891, Athens, National Printing Account of the year 1892, Athens, National Printing Account of the year 1893, Athens, National Printing Account of the year 1894, Athens, National Printing Account of the year 1895, Athens, National Printing Account of the year 1896, Athens, National Printing Account of the year 1897, Athens, National Printing Account of the year 1898, Athens, National Printing Account of the year 1899, Athens, National Printing 230 Ministry of Finance, Annual Office, 1903, in Greek. Ministry of Finance, Annual Office, 1904, in Greek. Ministry of Finance, Annual Office, 1908, in Greek. Ministry of Finance, Annual Office, 1912, in Greek. Ministry of Finance, Annual Office, 1912, in Greek. Ministry of Finance, Annual Office, 1913, in Greek. Ministry of Finance, Annual Office, 1914, in Greek. Ministry of Finance, Annual Office, 1916, in Greek. Ministry of Finance, Annual Office, 1918, in Greek. Ministry of Finance, Annual Office, 1919, in Greek. Ministry of Finance, Annual Office, 1920, in Greek. Antonis A. Antoniou Account of the year 1900, Athens, National Printing Account of the year 1901, Athens, National Printing Account of the year 1902, Athens, National Printing Account of the year 1903, Athens, National Printing Account of the year 1904, Athens, National Printing Account of the year 1905, Athens, National Printing Account of the year 1906, Athens, National Printing Account of the year 1907, Athens, National Printing Account of the year 1908, Athens, National Printing Account of the year 1909, Athens, National Printing Account of the year 1910, Athens, National Printing 8 SOTIRIS RIZAS Research Director, Modern Greek History Research Centre Academy of Athens DEBT CRISIS AND STRUCTURAL REFORMS IN THE EUROZONE THE INTERNATIONAL MONETARY FUND (IMF) IN THE GREEK PROGRAM AND THE IMPLICATIONS FOR TRANSATLANTIC RELATIONS Introduction The purpose of this paper is to explore the main political and economic aspects of International Monetary Fund’s participation in the Greek program, to review the assumptions that influenced its economic policy making and, finally, to explore the impact of the Greek crisis in the development of transatlantic economic relations. The main argument of this paper is that the IMF’s policy was underpinned by assumptions and preferences similar to those of its Eurozone partners. Although its presence was supposed to preserve the transatlantic links in the management of the Eurozone economies it marked in fact a process of assertiveness and autonomy of the Eurozone in the formulation and implementation of the latter’s response to the debt crisis. This process led eventually to the introduction of institutional arrangements that signify Eurozone’s autonomy. Ι. The Background The IMF has not participated for the first time in a European Community/ European Union emergency program in 2010-11. Being an integral part of the US-led international financial order set up in Bretton Woods in 1944, the IMF’s core mission is to provide financial assistance in countries with acute balance of payments problems.1 This function became more crucial after 1 H. James, International Monetary Cooperation since Bretton Woods, New York - Washington DC, Oxford University Press - IMF, pp. 50-51. 232 Sotiris Rizas the end of the fixed parities in 1971. In this context, the IMF had already provided loans in two advanced industrialized countries that were members of the European Community, the United Kingdom in 1976 and Italy in 1977.2 More recently it implemented rescue programs in Hungary, Romania and Latvia, member-states of the European Union after the European Union’s enlargement with the accession of the former Warsaw Pact member countries and the Baltic Republics. In each case, the IMF implemented a standard program of fiscal discipline with the aim of restoring competitiveness and thus the equilibrium of the balance of payments. Normally, an austerity cure was accompanied by a devaluation of the external parity of the national currency, a policy that may shorten their duration and make somewhat more palatable the drastic measures included in the emergency programs. Although full of political and social implications this basic program of the IMF was more successful in the 1970s, as it was implemented in two highly developed economies, and much more painful in the 2000s, as it was imposed on economies that had already gone through the transition from the central planning to the free market. The case of latvia was a model or a simulation of the relations of the Fund with its European partners when the debt crisis broke out in the Eurozone in 2010. The Fund had entered the stage in Latvia in November 2008. Although the country was not a Eurozone member it had its currency pegged with the euro within a very narrow band of 1%. The Fund recommended a depreciation no lower than 25% which met the strong resistance of the EU and the Latvian authorities. Unable to overcome their resistance, the Fund remained in the program and recommended alternatively a program of “internal devaluation”, that is a cut of wages and public expenditure that generated a considerable fall of living standards in the hope that the severity of the proposed measures would force a reversal of the monetary policy of the Eu and the latvian government. In this case the Eu displayed an unusual assertiveness which influenced the policy-making process of the IMF. Another factor that should not be disregarded was that the EU contributed funds considerably higher than the IMF’s. Thus the EU would gradually but steadily appear as the senior partner and evolve to a more solid regional bloc. It was valid that the Eurozone lacked adequate mechanisms and the expertise to handle an eventuality of the magnitude of the debt crisis of 2010. Nonetheless, the euro had accelerated the interdependence of the economies of the Eurozone and served as a framework of their institutional K. Burk, “The Americans, the Germans, and the British. The 1976 IMF Crisis”, Twentieth Century British History, 5/3 (1994), pp. 351-369. H. James, International Monetary Cooperation, op. cit., pp. 283-285. 2 Debt Crisis and Structural Reforms in the Eurozone 233 integration. The IMF, an organization of global reach, had a rather limited influence in the actual formulation of policy although it was at the forefront of strict enforcement of fiscal discipline and deregulation: shrinking of the public sector, cut of wages, raise of the value added tax were policies that affected the living standards of the entire population. Latvia’s GDP would fall by a spectacular 25% from the fourth quarter of 2007 to the third quarter of 2009.3 However, in the case of Greece and the other Euro-zone member-states, Ireland and Portugal, which were subjected afterwards to a stabilization program, there was a crucial difference that constituted a breakthrough in the implementation of IMF programs: As a consequence of their adoption of the Euro, the governments and the central banks of these countries were deprived of the option to depreciate a national currency and therefore were compelled to concentrate their efforts to internal devaluation: to downsize the public sector, cut wages and pensions and liberalize the labour market. ΙΙ. IMF’s Participation in the Greek Program Being the most important Eurozone member state with its fiscal position and public debt on a solid ground, Germany would influence decisively the issue of IMF’s participation in the Greek rescue. Berlin was initially divided on the issue. The Finance minister, Wolfgang Schauble, was in favour of a European management of the crisis. It was the chancellor, Angela Merkel, who was inclined towards inviting the IMF as she was rather distrustful of the European Commission’s ability to impose the necessary discipline on national governments. Moreover, as the urgency for a rescue package for Greece was becoming manifest, Merkel felt that only IMF’s contribution in the Greek program would convince the German public opinion that the money of German taxpayers would be spent wisely. Chancellor Merkel’s position ran contrary to the view of the French president, the European Central Bank and the Commission, who argued that IMF’s participation would be a blow to the prestige of the Euro-zone and would question its ability to handle its own affairs.4 P. Bluestein, Laid Low, Inside the Crisis that overwhelmed Europe and the IMF, Waterloo ON, Center for International Governance Innovation, 2016, pp. 65-70. 3 P. Bluestein, Laid Low, op. cit., p. 96. N. Irwin, The Alchemists, London, Headline/Business Plus, pp. 249-250. 4 234 Sotiris Rizas The Greek Government’s Policy over IMF’s Implication in the Greek rescue Program. The IMF was perceived negatively by the Greek public opinion as a result of its standard policies to cut down public expenditure and deregulate the labor market. Notwithstanding its policy aspects, the Fund’s involvement in Greek economic policymaking was an issue of psychological and symbolic importance. Participation in the European Community was evaluated positively in the Greek public debate as an irreversible accession of Greece to the rank of the economically and socially developed countries. IMF was wrongly perceived as an organization destined to impose austerity only on emerging economies.5 Therefore, IMF’s involvement would be symbolically damaging to Greece’s image as a developed country of “the first league”. This perception was accentuated by Greece’s entry in the Economic and Monetary Union and the adoption of the euro: Euro-zone membership had not been presented in the public debate as a challenge to the country’s weak manufacturing base but as a permanent guarantee of its prosperity. The socialists under Georgios Papandreou acceded to power in October 2009 after their victory against the outgoing conservative government. Right after the election, it was relayed by the Bank of Greece that the fiscal deficit for 2009 would reach 12,7% of GDP, more than double than that projected till then. From 2000 onwards the Greek governments had enjoyed easy access to the markets. The interest rate for Greek public borrowing was comparable to the German one. Easy refinancing and additional borrowing to finance further the infinite public sector’s needs had induced Athens to a relaxed attitude towards public expenditure.6 Early warning from the International Monetary Fund in December 2008 that Greece was approaching a day of reckoning were easily disregarded as the markets did not give a sign of alarm and the Greek government was able to cover its borrowing requirements for 2009. Although not automatically, after the announcement of the revised forecast for the fiscal deficit of 2009, a process was set in motion leading Greece to an impasse with the Greek government unable to roll-over existing obligations during 2010. Thus, a Eurozone member-state was found on the edge of default with implications exceeding by far Greece’s actual economic This assumption was shared by the president of the French Republic, Nicolas Sarkozy who reiterated to the Greek Finance minister Papaconstantinou that the IMF was not fit for European but for Third World countries. Cf. G. Papaconstantinou, Game Over, Livanis publications, Athens, Livanis, 2016, p. 127, in Greek. 5 B. Eichengreen, Hall of Mirrors. The Great Depression, the Great Recession, and the Uses-andMisuses of History, New York, Oxford University Press, 2015, pp. 342-346. 6 Debt Crisis and Structural Reforms in the Eurozone 235 weight within the Eurozone and the world economy. It is futile at present to guess whether the Greek government was in a position to refinance its debt in October, November or December 2009, before the prospect of a Greek default caught the headlines of international press. It is doubtful however that the Greek authorities would secure new loans at an acceptable interest rate since their hypothetical recourse to the market would take place at a time that the unreliability of Greek statistical data had been exposed and Greece’s fiscal position was deemed unsustainable. It was in mid-January 2010 that the Greek government, under the pressure of its European partners, submitted to the European Commission a new stabilization program in a vain effort to regain a degree of credibility so that the refinancing of its debt by the markets was secured. Available evidence suggests that it is at this juncture, at the end of 2009, that the Greek government contemplated whether there was an alternative in case Greece lost its access to the markets. At the end of January 2010, prime minister Papandreou and Finance minister Papaconstantinou met at Davos, at the margins of the World Economic Forum, with the then managing director of the IMF, Dominique Strauss Kahn. The main issue of the meeting was Greek concern over the refinancing of the Greek public debt. Strauss Kahn was forthcoming in principle.7 The IMF’s mission was to provide liquidity to countries that had lost access to the markets. However, this forthcoming attitude was qualified: Greece was a member of the Eurozone. Therefore, it had to secure the consent of its partners for the IMF to intervene. Moreover, the magnitude of Greece’s capital needs was such that IMF’s funds were not sufficient. A partnership of the Fund with the Eurozone was imperative in this respect. As a consequence of this, the Greek government could not use effectively the possibility of a Greek request to the IMF in order to press upon its Euro-zone partners the necessity to come to Greece’s rescue. Therefore, the efforts of the IMF, the Greek government and, concurrently, the Obama administration, were directed towards persuading the Euro-zone, and Germany in particular, to establish a mechanism that would undertake the refinancing of the public debt of Greece and any other Euro-zone member-state that would lose its access to the markets.8 France favored` the establishment of a mechanism to this effect.9 There were domestic and external political considerations at play that brought the Greek government to the decision to elicit support from the IMF. 7 B. Eichengreen, Hall of Mirrors, op. cit., p. 367. 8 G. Papaconstantinou, Game Over, op. cit., pp. 95-99. 9 F. Baroin, Journal de crise, Paris, J. C. Lattes, 2012, pp. 61-62. 236 Sotiris Rizas Strauss Kahn’s term as managing director was interpreted as bringing about changes in the IMF’s standard policies. It was expected that growth would be prioritized over austerity in the IMF policymaking. The Greek socialist government had also concluded that it lacked the necessary authority to impose structural reforms on a society steeped in clientelism and statism.10 It was a symptom of a profound but imperceptible change in the assumptions and beliefs of the Greek Socialists who, nonetheless, had remained publicly committed to laxist policies and thus lacked the legitimacy to bring about delayed reforms. But it did not matter much what Athens thought at the time. It was not the Greek government that prompted the participation of the IMF in the Greek program. The Greek Program Which were the policy assumptions underwriting the Greek program? From an economic policy perspective, the IMF’s analysis was practically identical with that of the Commission, the European Central Bank and Greece’s major partners in the Euro-zone. It was held unanimously, as the IMF had pointed out in June 2009 that is before the Greek election, that Greece’s competitiveness had been substantially eroded after its entry in the Economic and Monetary Union. That was the result of a lax income policy as the raise of wages surpassed the rise of productivity. Manifest also was the inability of the Greek political system to reign over the public sector. Pensions were higher than Greece’s revenues allowed, and public utilities accumulated vast deficits.11 These facts were not seriously disputed by anyone interested in the situation. What was at stake was the formulation of a concrete policy. Greece’s partners were slowly concluding that despite the commitment within the EMU framework that a member-state’s public debt should not be financed by the other member-states or the European Central Bank, a transfer of funds was necessary to avert the default of Greece. Support should be conditional though on the fulfillment of two fundamental criteria: the restoration of the fiscal equilibrium, through the raise of taxes and the cut of public expenditure and the recapturing of competitiveness by implementing a sweeping reform program: Privatization of public utilities, opening of regulated professions, dismantling of a legislative framework protective of the job market. There 10 G. Papaconstantinou, Game Over, op. cit. p. 175. IMF Country Report No 9/244: Greece: 2009 Article IV Consultation-Staff Report; Staff Supplement; Public Information Notice on the Executive Board Discussion and Statement by the Executive Director for Greece, August 2009. 11 Debt Crisis and Structural Reforms in the Eurozone 237 was prevailing an assumption that the restoration of fiscal discipline would be rewarded by the markets, that investment would come and thus the impact of austerity on the overall economy would be mitigated. Although the IMF’s basic conception of the stabilization and reform program did not differ from that of Greece’s Euro-zone partners, especially Germany,12 it diverged from the European views regarding crucial elements of the package. Germany, and its partners on Berlin’s insistence, were adamant that the solvent Euro-zone members had to lend Greece at an interest rate of 5%, only two percentage points lower than the rate which denied Greece its access to the markets. This would signify to the German parliament and electorate that the German taxpayers would not reward the irresponsible fiscal management of the Greek authorities and that Greece would be subjected to a vigorous program of rectification of its public finances and its overall approach to economic government. This concept, not only economic but also ethical in its foundation, was not acceptable to the IMF which had concluded that the most appropriate interest rate would be in the area of 3-3,5%. There was also a difference over the duration of the program as the German government favored a three-year period with the expectation that Greece would regain its access to the markets, partially in 2012 and fully in 2013. In contrast, the IMF estimated that a longer period of readjustment would be more feasible and expedient. IMF staff was not of the opinion that the program’s fiscal targets would have been attained and structural reforms would have been completed within a three-year period. They thought that five years would be a more realistic time frame. Furthermore, there was a policy imperative in advocating a longer period of adjustment as the IMF expected that the impact of austerity within a short period would be severe. A five-year period would mitigate the consequences of contraction and facilitate the undertaking of structural reforms. The assumptions of the program were optimistic. Nonetheless, from the perspective of Greece’s Euro-zone lenders, there were at play political and financial considerations that militated against a prolonged adjustment period. Politically, the Euro-zone members wished to project the concept of a short and vigorously implemented program that would not question the credibility of the euro. Financially, the prolongation of the program would mean further lending to Greece since the gap in the country’s fiscal requirements should be covered by its partners.13 M. Brunnermeier, H. James, J. P. Landau, The Euro and the Battle for Ideas, Princeton, Princeton University Press, 2016, pp. 61-67, 288. 12 13 P. Roumeliotis, The Unknown Background of the Recourse to the IMF, Athens, Livanis, 2012, 238 Sotiris Rizas The central element in IMF’s involvement in the Greek program was the sustainability of debt. The Fund admitted in 2015 what had been relayed by various sources immediately after the initiation of the Greek program. In May 2010, the Greek public debt was deemed sustainable but not in “high probability”. The program was based on internal devaluation, since there was no national currency to depreciate, and it could be expected that the GDP would decline and, as a result, future fiscal deficits would be added to the debt. The IMF adopted over-optimistic predictions for growth and the achievement of primary surpluses so that the Greek public debt was deemed sustainable. In the same fashion, over-optimistic predictions with regard to the expected revenue from privatization were adopted. However, the recession in 2011 and 2012 was deeper than expected: 7% in 2011 and almost 5% in 2012 and unemployment skyrocketed to over 25%. It was in fact economic collapse of an unprecedented scale which both the Euro-zone and the IMF, though to different degrees, failed to anticipate due partly to wrong assumptions and predictions.14 In January 2013 the chief economist of the Fund, Olivier Blanchard, would admit that the IMF had underestimated the impact of the cut down of public expenditure on the GDP. It was the issue of “the fiscal multiplier” in the jargon of the econometrics.15 However, it was not a position unanimously adopted within the Fund, as IMF mission’s members and its head, Poul Mathias Thomsen, tended to hold accountable for the program’s failure the Greek authorities that were unwilling to deliver fully the reforms agreed. The IMF mission pointed out also that there were political hurdles intensified by the clientelist ethos of the Greek party system whereas the increase of bank deposit outflows should also be taken into account.16 It is accurate that early on the IMF and its managing director, Dominique Strauss Kahn, had relayed confidentially the view that restructuring of the Greek public debt was necessary if the Greek program was to succeed. Still, as Paul Bluestein showed, the IMF was divided over the issue of a restructuring of the Greek debt. The Strategy, Policy and Review Department emphasized unsustainability as Greece should achieve incredibly high primary surpluses in order to prevent the soaring of its debt. Conversely, at the European Department, the prevailing view was that the program had a chance of success and that the risks involved in the restructuring of debt would be pp. 91-92, in Greek. P. Bluestein, Laid Low, op. cit., p. 111. 14 B. Eichengreen, Hall of Mirrors, op. cit., p. 347. O. Blanchard, D. Leigh, IMF Working Paper: Growth Forecast Errors and Fiscal Multipliers, WP/13/1, January 2013. 15 16 P. Bluestein, Laid Low, op. cit., pp. 346-347, 350-351. Debt Crisis and Structural Reforms in the Eurozone 239 enormous.17 The European Central Bank reacted adversely projecting an argument of credibility and simultaneously implying an apprehension that the banking sector would be destabilized. The exposure of Euro-zone banks to the Greek public debt was over 95 billion euros. With regard to the US policy, American officials, although not in full control of the IMF’s workings, could influence to a degree the Fund’s policy-making process. Washington was the main architect of the international financial system in the aftermath of World War II. The IMF was an integral part of this system. In the early 2010s though the Obama administration fully realized that the US accounted for less than a quarter of the global GDP. In this context, US pre-eminence had been weakened and this was reflected in the workings of the IMF with the Europeans being more assertive and influential. Moreover, as emerging centres of economic power became more important in the foreign exchange market, Washington had to adopt a more consensual approach in its dealings with them in order to avoid what it called “irresponsible behavior” that is to avert the possibility of competitive devaluations. The IMF remained the preferred framework for the retaining of US influence in the international financial system with the Obama administration careful to engage the emerging centres of economic power and especially the Eurozone.18 In April 2010, US policymakers believed that for lack of an adequate mechanism to shore up the indebted Euro-zone members, a cut of the Greek debt would have a destabilizing effect.19 In October 2010, five months after the initiation of the Greek program, a cut down of debt was accepted in principle, on German insistence, in the Franco-German summit in Deauville. This decision had an adverse effect in the markets. The matter was deferred but the development of the Greek program was not promising since early 2011. Thus, it was in mid-2011 that the IMF would see its European partners in the Greek program coming round to the conclusion that the restructuring of Greek debt was unavoidable. Apart from the IMF staff, David Lipton, the Obama administration appointee for the post of the first deputy managing director of the IMF, had reached to the same conclusion.20 The defenders of the sustainability of Greek debt, on the assumption that the program had a chance of success, amongst them the IMF’s mission chief, Poul Thomsen, and the European Department were now in a minority against a majority influenced by the Strategy, Policy and Review Department and the chief 17 Ibid., p. 127. 18 J. Lew, “America and the Global Economy”, Foreign Affairs, 95/3 (2016), p. 60. 19 P. Bluestein, Laid Low, op. cit., pp. 114-117, 145, 241. 20 Ibid., pp. 240-241. 240 Sotiris Rizas economist, Olivier Blanchard.21 A semblance of debt sustainability had to be restored for the IMF to continue its participation in the program. Despite the fact that the writing down of the private-held Greek debt at 53,5%, in February 2012, was successful the free fall of the Greek economy continued. In November 2012 Greece’s Euro-zone partners undertook the obligation to review the sustainability of debt and receive additional measures, only after the achievement of a primary surplus and provided this was deemed necessary.22 The debt was still rising as a percentage of the GDP for the years to come. It was a consequence of the continued recession and in 2016-17 or even later, in May 2018, with the end of the rescue program in sight, it was still doubtful whether the debt would be serviceable. This casts a shadow over the expectations of the markets, undermining the possibility of investments coming in. Apart from the deficiencies of the policy formulation process, the IMF’s problems in Greece were possibly exacerbated by a factor which only recently was taken into account in the analysis of its policy implementation process. This factor is the relative autonomy enjoyed by the IMF’s staff from the Fund’s member-states. Stephen Nelson has underlined the importance of the IMF’s bureaucracy “at the apex of the system of global economic governance”.23 Nelson pointed out that economic policy makers at the international and domestic levels hold common views and beliefs, a fact crucial in situations of extreme uncertainty. In the 1990s these assumptions and beliefs are epitomized as neo-liberalism.24 As it was made plain in the period preceding the conclusion of the memorandum on the Greek program, the IMF’s bureaucracy acquires a degree of importance which is not being fully realized by elected governments and officials. In the case of Greece, the IMF mission shared fully the assumptions and aims of Greece’s Eurozone lenders despite differences of emphasis.25 The staff of professional economists influenced considerably the Fund’s policy validating the thesis of the substantial autonomy enjoyed by the bureaucracies of international organizations vis-à-vis their member-states.26 21 P. Bluestein, Laid Low, op. cit., pp. 216-217. 22 B. Eichengreen, Hall of Mirrors, op. cit., pp. 368-369. 23 S. Nelson, The Currency of Confidence. How Economic Policy Beliefs Shape the IMF’s Relationship with the Borrowers, Ithaca and London, Cornell University Press, 2017, p. 2. 24 S. Nelson, The Currency of Confidence, op. cit., pp. 28-48. 25 P. Bluestein, Laid Low, op. cit., pp. 106, 108-109. 26 M. Brunnermeier, H. James, J. P. Landau, The Euro, op. cit., p. 287. Debt Crisis and Structural Reforms in the Eurozone 241 ΙΙΙ. A Critique of Neo-liberalism and the Divergence of Views between the IMF and the Europeans on the Greek Debt At times, it seemed that the IMF would initiate a revision of its policy. In June 2016 three IMF staff members published an article that criticized the main assumptions of the Fund’s policy.27 The neoliberal agenda, the authors of this article pointed out, rested on two foundations: increased competition through deregulation and the opening of domestic markets, a smaller role of the state through privatization and a limited ability of the governments to run fiscal deficits and accumulate debts. There were though aspects of the neoliberal agenda that have not delivered as expected. The authors reviewed specifically the impact of the unhindered movement of capital across the globe and of fiscal consolidation, “sometimes called austerity”. The authors remarked that the benefits for growth were at best limited for a broad group of countries and inequality was exacerbated to an extent that undermined the prospects of growth. With regard to the movement of capital, the authors distinguished between foreign direct investment, which was beneficial to growth, and portfolio investment and banking, which were inclined frequently to speculative investment. Whereas indications of growth were weak the cost of volatility was evident. Moreover, speculative investment was often followed by a crash which tended to increase inequality. In this context, the authors argued that the introduction of capital controls might have a beneficial effect on the economy. They were also skeptical of the impact of deflationary policies which aimed to reduce the debt burden. They pointed out that the IMF insisted on the need to reduce debt mainly as insurance against future shocks. They did not think imperative for countries like Germany, the United States and Britain, which they felt had a margin of latitude, to reduce their debt. They did not disregard the view that financial crashes might occur and that low debt would provide a room for policymaking if at the time of their eruption the debt ratio to GDP was reduced. It was also certain that the markets were attentive to the debt ratio when assessing growth prospects. It was in this connection that their approach displayed its limits. As they made plain, their analysis was not applicable to the indebted countries of Southern Europe. It was certain, they pointed out, that the countries of Southern Europe had no alternative but to consolidate their fiscal position since the markets would not allow them to borrow. It is therefore clear, that their argument was based exclusively on the view J. D. Ostry, P. Loungani, D. Furceri, “Neoliberalism: Oversold?”, Finance and Development, 2016, pp. 38-41. 27 242 Sotiris Rizas of the markets. Their analysis did not try to explore the way the markets formed their views. They went on that austerity should not be imposed on every country, it was not “one size fits all”. If the country in question had a good record of “responsibility” it would be afforded time by the markets. The reduction, they argued, of the ratio of debt from 120% to 100% of GDP over a few years would not reduce the country’s risk substantially. They concluded that after taking into account the damage to growth incurred by increased inequality “governments with ample fiscal space will do better by living with the debt” and “policymakers should be more open to redistribution”. These recommendations amounted to a moderate social democratic approach which, nonetheless, was not prevailing in the European Union. The paper on neo-liberalism was probably an attempt of the IMF staff to suggest to German policymakers that there was a way to reinvigorate growth without waiting for the trimming down of the public debt. Still, the implied distinction between “promising” and “hopeless” countries from the point of view of indebtedness was somewhat questionable. Although Germany, Britain and America were showcased as countries that should enhance the side of demand of their economies, France and Italy were omitted. The chief economist of the IMF, Maurice Obstfeld, almost de-politicized the recommendations by pointing out that this policy re-evaluation “has not fundamentally changed the core of our approach which is based on open and competitive markets, robust macro-economic policy frameworks, financial stability”. Referring in particular to the Southern European context the chief economist remarked that “some countries let public debt rise to such high levels that they risk losing market access, and have no choice but to tighten their belts even when their economies are doing badly”. Thus, the basic position of the IMF did not differ substantially from that of Greece’s Eurozone partners, notably Germany. There was though a degree of difference as the chief economist acknowledged that “there are limits to the pain economies can or should sustain, so in especially difficult cases we recommend debt re-profiling or debt reduction…That is the approach we are currently recommending for Greece”.28 IV. The Greek Program and its Implications for Transatlantic Relations In apportioning responsibility for the defects of the Greek program in 201415 the IMF was critical of the Greek political class. It criticized the Greek Chief Economist Interview, Evolution Not Revolution: Rethinking Policy at the IMF. IMF Survey Magazine: Policy, 2.6.2016. 28 Debt Crisis and Structural Reforms in the Eurozone 243 governments for failing to secure broad political support. The reader of IMF reports gets the impression though that this issue of political support is seen as a technical or a secondary one whereas in fact it is related to the key issue in a democratic regime, the legitimacy of public policies. The IMF sees the beginning of trouble in mid-2014, initially with delays in the conclusion of reviews and reversals of policies after January 2015. This is a reference to the elections for the European Parliament in May 2014 that compelled the conservative-led coalition to proceed with caution after the Coalition of Radical Left became the largest party at the polls for the European Parliament. This development nonetheless should also be understood in the context of the realignment in Greek politics, brought about by the widespread reaction to austerity and social dislocation. IMF’s analysis refers also to the national legislative elections of January 2015 that led to the formation of a coalition of the Radical Left and Independent Greeks committed to the renegotiation of the rescue program with the consequent reversals according to the IMF’s report of May 2016. Notwithstanding the analysis of Greek politics, there are contradictions in the shaping of the policy prescriptions by the IMF. The Fund is critical of policies that raise taxes. Nonetheless, its criticism is focused on the additional tax burden imposed upon the upper income centiles and not on the middle and the lower salaried or non-salaried middle classes that are overburdened by income, real estate and indirect taxes. Moreover, the Fund is critical of the failure to arrest tax evasion which is a fair point. But it should be borne in mind that tax evasion thrives in the upper centiles which the Fund feels they should be spared from tax hikes. Finally, the IMF is disapproving of the pension reform since it protects present pensioners at the expense of future ones.29 These, nonetheless, are political, not factual, points, they imply political preferences not technical ones. Overall, it is a negative assessment that laid the ground for the Fund’s recommendation to the Euro-zone in 2016 that the burden of the Greek public debt should be relieved. There were no doubt points in the IMF’s report that might vindicate this negative assessment: The rate of collection of taxes is falling and there is therefore a possibility of lower-than-expected tax returns. Consequently, targets may be missed, and the newly adopted mechanism of fiscal adjustment might or might not cover the shortfall although this has not materialized at least till 2017. Still, these are possibilities that were not taking into account the improvement in Greek competitiveness, the stabilizing effect of the conclusion of the first, in 29 IMF Country Report No 16/130: Greece. Preliminary Debt Sustainability Analysis-Updated Estimates and Further Considerations, May 2016. 244 Sotiris Rizas 2016, and the second, in 2017, evaluations of the third Greek program and the prospect of at least a modest return to growth. It was only in the autumn of 2018 that the Fund admitted that Greece had achieved the fiscal targets of the rescue program. In this context, the Fund held the view that it would be advisable for the Greek authorities to examine measures that would alleviate the tax burden.30 The IMF’s emphasis on the need for debt re-structuring, although the basis of the Fund’s policy was not radically different from that of Germany’s, led Berlin to a review of its policy with regard to the desirability of IMF’s participation in future bail-outs. It is not only a tactical difference but also the manifestation of a more fundamental divergence between the two sides of the Atlantic. The Obama administration defined as a part of its “global priority” the improvement of IMF’s capacity “to deal with evolving challenges”. Moreover, the IMF had to remain “a first responder” to a financial crisis and in order to promote its “core mission” it had “to intensify its analysis… and raise its voice on such critical issues as exchange rates, current account imbalances, and shortfalls in global aggregate demand”.31 The uS Treasury secretary serving in the Obama administration, Jack Lew, referred also to the enhancement of the IMF’s resources. Still, there was another aspect not to be disregarded: The Fund did not contribute much in terms of financial aid in the Eurozone debt crisis. The Europeans tended to take advantage of the IMF’s technical expertise in the supervision of economies under a program and ignored the IMF’s advice on the strategic aspects of economic policy making. Two facts underline this policy shift for the part of the Germans and their EU partners: The first is emanating from the success of the European Stability Mechanism (ESM) which musters or can mobilize easily sufficient funds to sustain Eurozone’s indebted countries without risking the recurrence of a crisis. This of course is not applicable to economies of the size of Italy or Spain. The ESM has the capability though of dealing with small economies the size of Greece, Portugal and Ireland. In this connection, the managing director of the ESM, Klaus Regling, pointed out in August 2015 that the ESM’s “firepower” outstripped by far that of the IMF.32 Moreover, Regling reminded the IMF that the ESM and its precursor, the EFSF, had disbursed 174 billion euros for Greece. The cost of servicing Greek debt would remain low for a Cf. the interview of the Greek representative to the IMF, Professor M. Psalidopoulos, in the Athens newspaper To Vima, 28.10.2018. 30 31 J. Lew, “America and the Global Economy”, op. cit., p. 64. http://www.politico.eu/article/esm-imf-regling-klaus-regling-lagarde-draghi-greek-crisis [accessed 12 September 2017]. 32 Debt Crisis and Structural Reforms in the Eurozone 245 long time since the ESM was able to borrow on behalf of Greece at a very low rate. This was a fact that the IMF “had not integrated to its analysis”, Regling pointed out. The ESM was committed to the Greek debt for a further thirty years after the envisaged expiration of the bail-out program in 2018. The ESM would offer additional aid if the need arose provided that Greece sticks to its side of the bargain. This was the main difference, the managing director pointed out: Greece as a Eurozone country was entitled to ESM aid, an advantage not enjoyed by other recipients of IMF loans.33 The second fact, which probably accelerates developments, was Donald Trump’s election. The Trump administration put the transatlantic relationship and the institutions that cement this relationship under a new light. The IMF is, by definition, an organization of global reach. It is though, a very different sort of organization from the EU and the Eurozone. The latter are groupings based on and simultaneously promoting further the integration of their economies. The IMF’s policy is rather counter-productive in terms of integrating these groupings to the institutional nexus of international financial governance. It tends rather to enhance tendencies of autonomy of these regional groupings. Although Germany and its partners would not severe transatlantic ties it is apparent that a strategy of increased “self-reliance” is in the cards. In this context, the German Finance minister made plain in early July 2017 that the IMF will not be invited to participate in future bail-outs in the Eurozone. Schauble drew Klaus Regling’s thought a step further: IMF’s rules, the German Finance minister argued, were applicable to a country with its own currency not to one which is a member of a monetary union. The IMF, he went on, is not operating in California.34 It would be an exaggeration to talk about “de-coupling” of the European Union and Germany in particular from America. That provided that domestic political developments in key Euro-zone countries, France or Italy, the latter being the most urgent case in point, did not undermine the cohesion of the Euro-zone. Still, this development, along with the halt of ratification of the Transatlantic Trade and Investment Partnership (TTIP), could be a step in a long process of European self-assertion in the context of the international financial system. K. Regling, “Solidarity with Greece will Render its Debt Sustainable”, Financial Times, 10.02.2017. 33 34 Cf. Wolfgang Schauble’s interview in the Athens daily Ta Nea, 1.7.2017. 9 DIMITRIOS K. APOSTOLOPOULOS Senior Researcher, Modern Greek History Research Centre Academy of Athens LONDON AGREEMENT ON GERMAN EXTERNAL DEBTS (1953) THE ACTORS AND THE CONSEQUENCES* Introduction: Historical Context The Agreement on German External Debts, signed on 27 February 1953, known internationally as the London Debt Agreement (LDA), was a debt reduction agreement between the Federal Republic of Germany and its creditors. At the end of World War II in 1945 and especially with the escalation of the Cold War, the handling of financial claims towards Germany shifted to the three Western powers, the USA, Great-Britain and France. The foundation of the “Bank deutscher Länder” in March 19481 and the currency reform in June of the same year were the west-German prerequisites for the beginning of the first talks in November 1948 concerning the outstanding debts. From January 1949 on, the generally termed “Deutscher Ausschuss Für Internationale Finanzbeziehungen” was the competent organ for the discussions. It was chaired by Herman Josef Abs, an economist and big banker, an emblematic figure of post war Germany.2 Meanwhile the A shorter version of this article was presented in the Conference Acteurs du développement économique et financier entre global et local. Un aperçu par le biais des réseaux personnels, durant l'entre-deux-guerres et au-delà/Actors in Economic and Financial Development, between Global and Local. Through the Optic of Personal Networks, during the Interwar Period and beyond, TransMonEA project, Academy of Athens - HFRI and the UMR D&S/University of Paris I, Paris I, 9th and 10th of October 2020. 1 ursula Rombeck-Jaschinski, Das Londoner Schuldenabkommen: Die Regelung der Deutschen Auslandsschulden nach dem Zweiten Weltkrieg, London, Veröffentlichungen des Deutschen Historischen Instituts London, 58, 2005, p. 81. * The first meeting of the Committee was held on 14 January 1949 in Frankfurt, and chaired by Herman Josef Abs. See Minutes of the meeting of January 14, 1949 on matters related to standstill issues (Protokoll über die Sitzung vom 14.1.1949 in Angelegenheiten im Zusammenhang mit 2 248 Dimitrios K. Apostolopoulos Marshall Plan, officially known as European Recovery Program (ERP), aimed at supporting the long- term reconstruction and stabilization of Europe. ERP included foreign aid and reform programs with dual objectives: the establishment of market-based economic activities and the containment of the communist threat. While the Marshall Plan aid amounted to a total of 13 billion USD from 1948 to 1951, the aid provided to Germany was relatively small (approx. 1.2-1.4 billion USD) in comparison to the amounts given to the uK and France.3 Still under foreign occupation by the United States, the United Kingdom and France during those years, the Federal Republic of Germany was formed in 1949, having the mission to demonstrate that it was radically different from the Third Reich. In this endeavour the personality of Konrad Adenauer played a major role. Indeed, on 15 September 1949, with the election of the first Federal Chancellor, the effective legal capacity of the west-German government was ensured. This increased the pressure exerted by the Three Powers for a settlement of the debt issue. At the same time, the Allies were getting visibly alarmed over the everincreasing power of the Soviet Union, as they watched the countries of Eastern Europe joining the Soviet coalition one after the other. Thus, the Allies began to consider the possibility of supporting West Germany, since it would play the role of a bulwark, if Stalin decided to expand further West. Consequently, because of the circumstances of the Cold War at the end of 1950, a new phase was already about to unroll in the relations between the three Western Occupying Powers and the Federal Republic of Germany. Redeeming its importance to a wider European recovery after World War II and, mostly, to counteract threats of the Cold War, Bonn held a unique position as the only west-government in the center of Europe expecting help.4 Besides, as to the Soviet occupied zone which was increasingly detaching itself from the other German zones, the Soviet Union did not officially strive for a settlement of the former debts. Rather, it had been decided as of May 1950 that the total amount of reparations owed to the German Democratic Republic would be reduced.5 Finally, in a Protocol signed by the U.S.S.R. on 22 Stillhaltefragen), Historisches Archiv der Deutschen Bundesbank, B 330-3809. 3 Gregori Galofré-Vilà, Christopher Meissner, Martin McKee, David Stuckler, “The Economic Consequences of the 1953 London Debt Agreement”, European Review of Economic History, 23 (2018), p. 4. 4 Ibid., p. 6. The Tripartite Agreement by the United States, the United Kingdom and Soviet Russia, also known as the Potsdam Agreements of 2 August 1945, stated at point 8 that the U.S.S.R. “renounces all claims in respect of reparations to shares of German enterprises which are located in the 5 London Agreement on German External Debts 249 August 1953, the Soviet Union decided to waive all claims on financial and economic obligations from all German zones.6 I. Facts and Background Given the Cold War climate, preparations were made for the Federal Republic to acquire “the full authority of a sovereign State over its internal and external affairs” – as mentioned in Article 1 (2) of the Convention on Relations between the Three Powers and the Federal Republic of Germany.7 In this new phase, the attention of the Western Powers had to be turned towards the question of Germany’s foreign debts, for two reasons: for nearly two decades there had been no payments at all on German a) external debts, public or private, and b) after 1945, the Three Powers and especially the United States of America, had to spend vast sums in economic assistance for the Western zones of occupation. A general framework for the negotiations had to be set first. The German debts were roughly divided into three categories: First, there were the obligations of the interwar period, including the outstanding payments from the Dawes (1924) and Young (1929) plans, two reparations-related loans scaled down to ensure the payment of the reparations for World War I by the German Reich.8 Another special category of loans –the so-called Stillhalteschulden or Standstill-credits– would also play an important role from 1931 on, since Western Zones of Germany as well as to German foreign assets in all countries”. Concerning the reparations, the Potsdam Agreements were complemented on 16 August 1945 by the Agreement signed in Moscow between the USSR and the Provisional Government of National Unity of Poland Concerning the Reparation of Damage caused by the German Occupation. Protocol Concerning the Discontinuance of German Reparations Payments and Other Measures to Alleviate the Financial and Economic Obligations of the German Democratic Republic Arising in Consequence of the War signed by the U.S.S.R. on 22 August 1953. Kordula Kühlem, “Wie die Bundesrepublik kreditwürdig wurde. Das Londoner Schuldenabkommen 1953”, Die Politische Meinung, 520 (Mai/ Juni 2013), pp. 62-63. 6 7 Exchange of Letters embodying the Agreement of 6th March, 1951, between the governments of the French Republic, the United Kingdom of Great Britain and Northern Ireland and the United States of America and the government of the Federal Republic of Germany. Report of the Conference on German External Debts, London, February-August 1952, Appendix A in https://treaties.un.org/doc/Publication/UNTS/Volume%20333/volume-333-I-4764-English.pdf. Timothy W. Guinnane, “Financial Vergangenheitsbewältigung: The 1953 London Debt Agreement”, Center Discussion Paper, no 880, Yale University, Economic Growth Center, New Heaven, CT, 2004, pp. 12-14; Ur. Rombeck-Jaschinski, Das Londoner Schuldenabkommen, op. cit., p. 11. 8 250 Dimitrios K. Apostolopoulos Germany would not service the current loans, first because of economic inability due to the Great Depression and later on based on political reluctance by the Nazis.9 Secondly, two other programs arising out of assistance to post-war Germany by the Allies –and in particular by the United States of America– were also included in the negotiations. These were the Government and Relief in Occupied Areas (GARIOA) providing for immediate relief after the war in the form of basic necessities; also the above mentioned Marshall Plan (the European Recovery Program) in operation from 1948 on. Third, the discussions on the reparations for World War II for which Germany was held responsible were added to the negotiations.10 In a letter to the German Chancellor on 23 October, 1950, the Allied High Commission requested a full recognition of responsibility by the Federal Republic as a prerequisite to the discussions on the revision of the sovereign authority of the Three Allied Powers.11 On its side, West Germany wanted to show goodwill in settling the whole issue. On March 6, 1951 an exchange of letters took place between the German Federal Chancellor and the Allied High Commissioners on behalf of the governments of France, the UK and the USA. Konrad Adenauer accepted West German responsibility for the pre-war external debt of the Reich, including debts to private entities and debtors, as well as for any debt incurred by Austria during the Anschluss to Germany. He also acknowledged the debt arising from the economic assistance given to Germany by the Three Powers since May of 1945. The Federal Government expressed its readiness to give priority to the obligations arising from this economic assistance over all other foreign claims against Germany.12 9 T. W. Guinnane, “Financial Vergangenheitsbewältigung”, op. cit., p. 15. Meeting of the Federal Chancellor with the American High Commissioner McCloy in Rhöndorf on September 24, 1950 / Nr. 48, Besprechung des Bundeskanzlers mit dem amerikanischen Hohen Kommissar McCloy in Rhöndorf vom 24. 9. 1950, in AAPBD, Adenauer und die Hohen Kommissare, vol. 1: 1949-1951, p. 154. 10 letter to Federal Chancellor on agreement on certain pre-war and post-war external debts. Kirkpatrick to Adenauer, 23. 10. 1950, in PRO, FO 311-85032. Ur. Rombeck-Jaschinski, Das Londoner Schuldenabkommen, op. cit., p. 20, 115. 11 Exchange of Letters embodying the Agreement of 6th March 1951, between the governments of the French Republic, the United Kingdom of Great Britain and Northern Ireland and the United States of America and the government of the Federal Republic of Germany. Report of the Conference on German External Debts, London, February-August 1952, op. cit., Appendix A. 12 London Agreement on German External Debts 251 In summer 1951, the “Tripartite Commission on German External Debts” representing the Three Powers,13 held preliminary discussions with a German Delegation on External Debts. The first talks, which took place in Bonn in June 1951, aimed at establishing the exact debts and their amounts which would be covered as well as Germany’s ability to make payments. Following these discussions, private creditor representatives and several central banks as well as representatives of German private debtors joined the Tripartite Commission and the German government in the negotiations which took place in London in July 1951.14 In December 1951 the Commission informed West Germany of the amounts and terms of payment which the Three Powers were prepared to accept in full settlement of their claims in respect of post-war economic assistance, on the condition that a satisfactory and equitable settlement of Germany’s pre-war debts was achieved. Contrary to the 1921 Reparations Commission, the creditors initiated the negotiations intending to ensure the short-term welfare of the West Germany’s people as well as the long-term ability of its economic reconstruction. Toward these targets, some of the debt should be forgiven, and long repayment schedules for the remaining debt as well as re-negotiation terms should be foreseen.15 The United States, France and the united Kingdom were willing to accept reduced sums in full settlement of their claims. On this basis, with the participation of interested governments, creditors and debtors, it was agreed that a plan ought to be formulated in order to achieve a settlement of public and private claims. A possible settlement had to observe two parameters: a) The normalization of the economic and financial relations of the Federal Republic of Germany with other countries should align with the general economic position of West Germany, i.e., the increase of its burdens and the reduction of its economic wealth. b) The settlement would be provisional in nature and subject to revision as soon as Germany was re-united, and the final peace treaty would have become possible. In the Tripartite Commission, the three Governments were represented by M. François-Didier Gregh (France), Sir George Rendel (United Kingdom), and Ambassador Warren Lee Pierson (United States) ; their alternates were M. René Sergent (France), who was later replaced by M. A. Rodocanachi and M. H. Davost, Sir David Waley (United Kingdom) and Minister J. W. Gunter (United States). Report of the Conference on German External Debts, London, February-August 1952, op. cit., Appendix B. 13 14 T. W. Guinnane, “Financial Vergangenheitsbewältigung”, op. cit., p. 26. 15 Ibid., p. 24. 252 Dimitrios K. Apostolopoulos As described in the introduction of the Report of the Conference on German External Debts, the final Agreement should: a) eliminate the state of default for Germany by suitable treatment of matured and maturing debts and of arrears of interest, b) lead to a situation which would permit a return to normal debtor-creditor relationships, be of such character as to contribute to the recovery of Germany’s c) international credit by restoring confidence in her financial standing and reliability as a borrower; giving all the while reasonable assurances, that Germany would never again default on her outstanding debts, d) be compatible with and as far as possible facilitate the Federal Republic's eventual compliance with obligations which members of the International Monetary Fund and the Organization for European Economic Co-operation have assumed with regard to the transfer of payments for current transactions, including interest and earnings on investments.16 The necessary gold standard and currency conversions were a big challenge for the negotiators since, in the meantime, the debtor nation’s currency had changed in the 1948 currency reform and the international monetary system had been transformed by the Bretton Woods system of monetary management established in 1944. II. The Actors and the Negotiations On this basis, the way was opened for negotiations for the final Agreement. The International Conference on German External Debts was held in London from 28th February, 1952, to 8th August, 1952. The governments of France, UK and USA were represented by the Tripartite Commission on German Debts and the private creditors of these three countries were represented by separate delegations. More than twenty creditor countries17 sent national delegations composed of governmental and, in many cases, private creditor representatives. The 16 Report of the Conference on German External Debts, op. cit. The Governments of Belgium, Canada, Ceylon, Denmark, the French Republic, Greece, Iran, Ireland, Italy, Liechtenstein, Luxembourg, Norway, Pakistan, Spain, Sweden, Switzerland, the Union of South Africa, the United Kingdom of Great Britain and Northern Ireland, the United States of America, and Yugoslavia. (Agreement on German External Debts, London, February 27, 1953, Presented to Parliament by the Secretary of State for Foreign Affairs by Command of Her Majesty, March 1959, London Her Majesty's Stationery Office, https://assets.publishing. service.gov.uk/government/uploads/system/uploads/attachment_data/file/269824/German_ Ext_Debts_Pt_1.pdf (German_Ext_Debts_Pt_1.pdf (publishing.service.gov.uk). 17 London Agreement on German External Debts 253 Bank for International Settlements was represented as a creditor in its own right. All those countries, which were involved in the agreement, consented to the reduction of the then German debts. It should also be mentioned that the Eastern Bloc countries did not take part in the negotiations, with the exception of Yugoslavia, which adopted under Tito, a neutral policy during the Cold War by trying to maintain smooth relations with the united States and Western European countries. The Allies –especially the United States of America– and their positive attitude towards Konrad Adenauer's Germany played an important role in the negotiations. The Great Western powers had learned from WWI past experiences that excessive reparation demands in the aftermath of the Great War had led to the demise of the Weimar Republic. Indeed, the Treaty of Versailles, signed on 22 June 1919, followed the example of the peace-treaties so far, whereby the outcome of war would invariably entail that defeated countries paid reparations to the victors.18 The rationale that Germany had to be penalized for her war responsibilities stemmed from the following state of affairs: “the European Allies were deeply in debt to each other, to their citizens, and most of all to the United States”.19 At the same time and in the Cold War context, the Western Powers wanted a strong West Germany as a bastion against communism. Under this premise “a settlement of German external debts could be achieved only by a single overall plan which would take into account the relative positions of the various creditor interests, the nature of various categories of claims and the general situation of the Federal Republic of Germany”.20 As mentioned before, the negotiations with the creditors on behalf of Germany were made by Herman Josef Abs. The result of the negotiations was to a great extent his personal success at a critical time for Germany. Abs had to deal not only with the creditors but also with the West German public opinion. Indeed when he undertook the negotiation, the Federal Finance Thus, it came as no surprise that the Treaty of Versailles stated in its article 231, in its Part VIII on “Reparations”, that “The Allied and Associated Governments affirm and Germany accepts the responsibility of Germany and her allies for causing all the loss and damage to which the Allied and Associated Governments and their nationals have been subjected as a consequence of the war imposed upon them by the aggression of Germany and her allies”. See the text of the Treaty of Versailles, at the Library of Congress: https://www.loc.gov/law/help/us-treaties/ bevans/m-ust000002-0043.pdf. 18 19 T. W. Guinnane, “Financial Vergangenheitsbewältigung”, op. cit., p. 6. 20 Agreement on German External Debts, op. cit., preamble. 254 Dimitrios K. Apostolopoulos Minister Schäffer told him “if you do it badly you will be hung up from a pear tree and, if you do well, from an apple tree”!21 In a Conference Report of August 8, 1952, two particularly important recommendations were made, thus determining the final agreement: The first, in paragraph 21 of the Report, stated that there was a principle a) to be adhered to; payments should be financed by foreign exchange receipts from visible and invisible transactions, in order to avoid drawing on monetary reserves of the Federal Republic. b) And the second, in paragraph 23 of the Report, stated that no discrimination or preferential treatment should be permitted by West Germany nor sought by the creditor countries, in the fulfillment of the terms agreed upon as among categories of debts or currencies in which they were payable or in any other aspects. This Report was recited in the preamble and reproduced as Appendix B to the final Agreement.22 III. The Agreement The final Agreement was signed with the desire by all parties “to remove obstacles to normal economic relations between the Federal Republic of Germany and other countries and thereby to make a contribution to the development of a prosperous community of nations”.23 As mentioned above, the London Agreement concerned various types of German debts, which had arisen both from the First and the Second World War, but also from the interwar period. The latter were mainly debts from loans that the US had given to Germany in order to be able to face the huge reparations to European countries from the First War and the Treaty of Versailles. Furthermore, during the 1930s, Hitler's Germany had stopped paying reparations for the First War, which Konrad Adenauer's West Germany decided to take over, in order to restore its reputation. Hence Germany’s pre-war debt amounted to 22.6 billion marks including interest. Its post-war debt was estimated at 16.2 billion. In the agreement signed Hermann Josef Abs, “Das Londoner Schuldenabkommen”, [Summary presentation from lectures, held between September 11 and November 26, 1952 / Zusammenfassende Darstellung aus Vorträgen, gehalten in der Zeit vom 11. September bis 26. November 1952], Zeitfragen der Geld- und Wirtschaftspolitik, Frankfurt 1959. 21 22 Appendix B, Report of the Conference on German External Debts, London, FebruaryAugust 1952, https://treaties.un.org/doc/Publication/UNTS/Volume%20333/volume-333-I4764-English.pdf. 23 Agreement on German External Debts, op. cit. London Agreement on German External Debts 255 in London on 27 February 1953 these sums were reduced to 7.5 billion and 7 billion respectively.This amounts to a 62.6 % reduction, which was accepted as “reasonable in the light of the general situation of the Federal Republic of Germany and as satisfactory and equitable to the interests concerned”.24 The debt reduction was achieved by settling Germany's debts related to World War I and by suspending –according to article 5, paragraph 2– the payment of war reparations to attacked, occupied or annexed countries (and to their citizens) for World War II.25 The settlement of those debts was postponed for the future when a new peace treaty would be negotiated. This was the result of two considerations: the total amount owed was overwhelming; it also corresponded to reparation issues over which the Ministers of the Four Powers could not come to an agreement. This last point was a benefit of huge economic value granted by the Western powers to West Germany, as very large credits acquired by Germany on clearing accounts with occupied countries were deferred till the final settlement of the German Question and the reunification of the two German states. The rationale behind article 5, paragraph 2 of the London Debt Agreement was that the war debts of the Third Reich should be claimed by post-war Germany as a whole and not just West Germany.26 If we take into account the growth rates of the West-German economy since the 1950s, the repayment of the German debts after the whole “haircut” would mean a minimal burden for its economy. More specifically, the creditors accepted: • First, that Germany should in most cases repay debts in its national currency (Deutsche Mark), and only marginally in strong currencies such as dollars, Swiss francs, pounds sterling.27 Moreover, the exchange rates should not be a problem for the Federal Government. Claims expressed in Goldmark or in Reichsmark with a gold clause, would be converted 24 Agreement on German External Debts, op. cit., Article 1. “Consideration of claims arising out of the second World War by countries which were at war with or were occupied by Germany during that war, and by nationals of such countries, against the Reich and agencies of the Reich, including costs of German occupation, credits acquired during occupation on clearing accounts and claims against the Reichskreditkassen shall be deferred until the final settlement of the problem of reparation” (Agreement on German External Debts, ibid., Article 5, Paragraph 2). 25 On an analysis of Article 5 paragraph 2 and further bibliography, cf. Ur. Rombeck-Jaschinski, Das Londoner Schuldenabkommen, op. cit., pp. 8-10. 26 “Claims expressed in Reichsmark shall be settled after the foreign creditor has declared his agreement to his claim being converted into Deutsche Mark at the same rate as would apply in the case of a similar claim of a domestic creditor” (Agreement on German External Debts, op. cit., Annex IV, Section B, Article 6 and 7). 27 256 Dimitrios K. Apostolopoulos into Deutsche Mark at the rate of 1 Goldmark, or 1 Reichsmark with a gold clause = 1 Deutsche Mark.28 In the case of debts expressed in gold dollars or gold Swiss francs, the debts would be computed on the basis of 1 currency dollar equaling 1 gold dollar and 1 currency Swiss franc equaling 1 gold Swiss franc. All new contracts would be expressed in currency dollars or currency Swiss francs respectively.29 • Second, according to Article 17 of the Agreement, in case of disputes with creditors, German courts were declared competent.30 In this sense, German courts could refuse to enforce a judgment by a foreign court or an arbitral body, for instance when the enforcement of the decision would be contrary to public policy. • Third, while in the early 1950s, the country still had a negative trade balance (importing more than it exported), the creditors agreed that Germany should reduce importations and could manufacture those goods that were formerly imported at home. In allowing Germany to replace imports by home-manufactured goods, creditors accepted to reduce their own exports to this country. Here is worth mentioning that at that time almost half of German imports came from Britain, France and the united States. If one were to add the share of imports coming from other creditor countries participating in the conference (Belgium, Netherlands, Sweden and Switzerland) the total amount reached almost 70%. Furthermore, creditors allowed and even supported Germany in selling her products abroad so as to restore a positive trade balance. By importing German products, a fact that boosted the German economy, the creditors would get their money back. Nevertheless, the most significant aspect was that the debt service depended on how much the German economy could afford to pay, taking into account the reconstruction of the country and the export revenues. The debt service/export revenue ratio was not to exceed 5%. This meant that West Germany was not to use more than 1/20 of its export revenues to pay its debt. Obviously, if the German economy did not have a trade surplus, it would not proceed with debt repayments. This basic premise of the Agreement created a “fixed pool of possible creditors”31 since the 28 Agreement on German External Debts, op. cit., Annex IV, Section B, Article 6, Paragraph 2. 29 Agreement on German External Debts, op. cit., Annex IV, Section B, Article 7. “The Federal Republic of Germany will afford the creditor the right, within the limits of the present Agreement and the Annexes thereto, to enforce through German courts and authorities”. Agreement on German External Debts, op. cit., Article 17, Paragraph 1. 30 Hermann Josef Abs, Entscheidungen 1949-1953: Die Entstehung des Londoner Schuldenabkommens, Mainz, von Haese und Kohler, 1991, pp. 120-121. 31 London Agreement on German External Debts 257 different classes of creditors, especially the private ones, had to wait for the surplus available resources.32 In any case, since a large portion of the German debts were paid in Deutsche Mark, the German central bank could issue money, or in other words monetize the debt. To the above one ought to configure that interest rates were substantially low (between 0 and 5%). All these were fundamental points for the debt relief, highlighting the willingness of the Western Powers to help for the recovery of a country, by setting the first priority: giving it a chance to breathe, without actually burdening it. This exactly was the case with West Germany after World War II. IV. The Consequences The radical reduction of the German debt was achieved through the political will of the creditors, mainly the US that wanted a strong West Germany in the centre of Europe. Being particularly favorable to Germany, the creditors accepted that half of the debts would be paid only from surpluses in the economy. The final provisions of the London Agreement were also formulated thanks to the efforts of the German delegation and Hermann Josef Abs himself, who constantly stressed that the new German Federal Republic should not be overburdened with debts. In order to ensure that the West German economy would effectively thrive and Bonn would represent a stable factor in the Western bloc against the East, allied creditors granted West-German authorities and companies, major concessions that exceeded by far what is known as “debt relief”. The starting point was that Germany had to be able to pay everything back while maintaining a high level of growth and improving the living standards of its population. Paying claims while maintaining a level of prosperity, would ensure that debt relief would be sustainable in the long run.33 The achievement of a most favourable agreement benefitting WestGermany received positive comments from the international press at the time. For example, the Economist stated on August 16, 1952, that: The agreed terms promise a more satisfactory settlement than many observers of the London Conference had expected. Until quite recently, these discussions had been viewed with caution, and even scepticism, owing to the immense complexity of the problem, to the ominous start given to the discussions by 32 T. W. Guinnane, “Financial Vergangenheitsbewältigung”, op. cit., p. 25. Gr. Galofré-Vilà, Ch. Meissner, M. McKee, D. Stuckler, “The Economic Consequences”, op. cit., p. 5. 33 258 Dimitrios K. Apostolopoulos Germany’s first and derisory offer, and to the subsequent development of deep differences of views between various national groups of creditors (…) If agreement could none the less be reached, it was due to a spirit of co-operation and conciliation that very few expected to find at a conference of this kind.34 The London Agreement of 1953 (in combination with the US grants of the Marshall Plan) indeed contributed significantly to the growth of the post-war German economy and the so-called “German economic miracle”. Nevertheless, the Wirtschaftswunder could not have been anticipated during the negotiations or during the first years following the Agreement, which had then been criticized in a number of areas.35 The Agreement was a key element for the reintegration of Bonn into short-term commercial credit and long-term investment capital, that is, into international capital markets in general. The successful conclusion of the Debt Agreement certainly represented an important step aimed at stabilizing and normalizing the financial flows internationally. Fairly soon after WWII, West Germany became a world economic power, eventually absorbed East Germany in the early 1990s and is today by far the strongest economy in Europe. V. Then and now: a Comparison to the Greek-debt-case of 2010 In the wake of the recent European debt crises, the history of Germany’s default and its settlement has attracted considerable attention. Historical irony is often cited when one considers the treatment Germany itself received after the Second World War, in comparison to the treatment of Greece concerning its recent debt crisis.36 As described above, it is obvious that the German balance of payments benefited from the currency reform of 1948 writing down the country’s debts, and especially from the London Agreement of 1953.37 In the Greek public debate, the history of the 1953 Agreement gives rise to strong reactions for two reasons. • First, as per the London Agreement, no Greek government could raise claims for war reparations until 1990 and the German reunification, 34 The Economist, 16.8. 1952, p. 408. Gr. Galofré-Vilà, Ch. Meissner, M. McKee, D. Stuckler, “The Economic Consequences”, op. cit., p. 5. 35 36 Cf. among others Philipp Kessler, Early Foreign Investment into West Germany after the Second World War, PhD thesis, University Mannheim, 2019, p. 73. Barry Eichengreen, Albrecht Ritschl, “Understanding West-German Economic Growth in the 1950s”, SFB 649 Discussion Paper 2008-068, Economic Risk, p. 32. 37 London Agreement on German External Debts 259 even though the brutal German occupation during the WWII years had totally destroyed Greece. With regard to Article 5 (paragraph 2) of the London Debt Agreement, the German side was not obliged to enter into an examination of the issue.38 This was the basic argument of the Federal government against any reparation claims made by the Greek governments until the end of the 1980s. A note by the West German ambassador in Athens to the Auswärtiges Amt, in 1969, clearly expresses the west-German perspective of the issue: Thanks to the London Debt Agreement of our American friends [...] it was possible to postpone the enormous reparation demands of the enemy states [...] until a Peace Treaty was concluded, i.e. to put off our opponents’ claims of the last World War ad kalendas graecas. It should be our interest to maintain this intermediate state of non-conclusion of a Peace Treaty for as long as possible in order to make these demands fail by the passage of time. In other words, you shouldn't wake sleeping dogs.39 This very characteristic note summed up Germany’s reasoning on the effects such an Agreement would have on the reparation claims of former harmed states by Nazi-Germany. For those states, the German reunification should indeed have opened the way to a Peace Treaty, hence allowing them to reach agreements on reparation claims. Instead of this expectation and although it was foreseen by the london Debt Agreement, war reparations were never discussed nor paid after the reunification of Germany.40 • Secondly, not only did Germany avoid the reparations issue based on the stipulations in the 1953 Agreement, but this same country that received a favourable treatment concerning its own debts, was the one displaying the most rigid attitude towards the Greek debt after 2010. This argument is constantly repeated in diplomatic documents. See for example among others: Letter from the Ministerial Director Dr. Reinhardt from the Federal Ministry of Economics to the Greek Prime Minister Georgios Papandreou, on September 30, 1964, in Bundesarchiv (Koblenz-Germany), Ref. B102, Vol. 135788 or Note from the Greek Ambassador of May 25, 1965, Aide-Mémoire of the Ministry of Foreign Affairs of December 8, 1965, as well as Appendix 1 to the letter from the Foreign Office of October 21, 1966, in Politisches Archiv des Auswärtigen Amtes-PA AA (Political Archive of the German Foreign MinistryBerlin/Germany), Ref. III A 5, Vol. 504. 38 39 Professor Hagen Fleischer, WDR, 17.6.1998, cited by Norman Paech, “Wehrmachtsverbrechen in Griechenland”, Kritische Justiz (KJ), 32 (1999), Nomos Verlag, p. 391. Ur. Rombeck-Jaschinski, Das Londoner Schuldenabkommen, op. cit., p. 8-10. Albrecht Ritschl, “Germany Owes Greece a Debt”, The Guardian, 21.6.2011. 40 260 Dimitrios K. Apostolopoulos The contrast between the treatment received by Germany by means of the London Debt Agreement and the one that Germany exhibited vis-à-vis the Greek debt elicited strong reactions in the international public debate. Having a closer look at the way Greece was confronted recently and the dealings with Germany after the Second World War, the differential treatment becomes obvious: 1. Proportionally the debt reduction granted to Greece in March 2012 was far smaller than the one granted to Germany.41 2. The debt relief did not support Greece’s economic recovery, unlike the German example. 3. Greece had to privatize many assets to foreign investors, whereas Germany maintained the control of key economic sectors along with a fast-expanding public sector. 4. Greece’s bilateral debts to countries participating in the Troika “rescue” were not reduced; only those to private banks. German bi-lateral debts on the other hand were reduced by 50% at least, even toward countries that had been invaded or annexed by the Third Reich. 5. Greece had to make payments in Euros while its trade balance with European partners was negative, whereas Germany paid most of its debts with a strongly devalued Deutsche Mark. 6. The Greek Central Bank was not allowed to lend money to the Greek government, while the Deutsche Bank did lend to the German government and ran the printing press. 7. As mentioned above, Germany was allowed not to use more than 5% of its export revenues to pay its debt, while no limit has been set for Greece. 8. The new securities on Greek debt that have replaced the previous set of securities owned by the banks were no longer within the jurisdiction of Greek courts, but of courts in Luxembourg and the United Kingdom. According to the London Agreement the German courts were declared as having jurisdiction. 9. The London Agreement included the possibility of suspending payments in the event of a substantial economic downturn that diminished available resources. The same clause did not apply to Greece. Germany’s World War II debts nearly equaled its gross domestic product for 1938, the last pre-war year. According to the analysis of Al. Ritschl: “the debts racked up by the struggling Eurozone economies –Portugal, Italy, Ireland, Greece and Spain– were equal in size to Germany’s current gross domestic product. In other words, debt cancellation for the Eurozone would be equivalent to the debts that were cancelled by the Allies after World War II”. Al. Ritschl, “Calling Germany on its Hypocrisy in the Eurozone Debt Crisis”, LSE Report, 2014, p. 2. 41 London Agreement on German External Debts 261 10. The agreement on the German external debt explicitly mentioned that the country could produce goods it formerly imported, so as to achieve a trade surplus and support local producers. The rationale behind the agreements forced upon Greece however, and the rules of the EU prohibited such support, whether in farming, manufacturing, or services, since this would contravene ‘fair competition’ with other EU countries, which are Greece’s main trading partners. VI. Concluding Remarks The London Debt Agreement signature on 27 February 1953 and its entry into force on 16 September 1953 took place at a particular historical moment. “West Germany's economic miracle, the stability of the deutschmark and the favorable state of its public finances were all owed to [the] massive haircut”42 of the London Debt Agreement, which essentially led to a broad settlement of multiple issues, including financial ones. Most importantly, considering the international context of the Cold War, both the three occupying States –USA, Great-Britain and France– and the Federal Republic shared a mutual interest to ensure the full integration of West-Germany into the western community of States. Moreover, the negotiations of the London Debt Agreement went hand in hand with the negotiations on the occupation status of the Three Powers. Similarly, as the Reparations Agreement between Israel and West Germany, signed on 10 September 1952, explicitly showing Bonn’s effort to restore not only the financial, but also the political and moral credibility of the new German State. Hermann Josef Abs himself saw the benefit of the settlement of outstanding foreign debt in restoring German creditworthiness and reputation abroad.43 The German banker even admitted that “thanks to the debt arrangement, not only did the Federal Republic restore its international creditworthiness, but the world also began to trust Germany once again”.44 This connection between creditworthiness and trustworthiness as stated then could also appear to be the guiding principle to contemporary situations. In the recent economic turmoil, though the historical context is certainly not identical, it clearly appears that Greece was not treated with a similar “empathy”, as the one expressed towards post-war Germany by its creditors. This is particularly striking considering that Greece, a victorious allied 42 Al. Ritschl, “Germany Owes Greece a Debt”, op. cit. 43 Ph. Kessler, Early Foreign Investment into West Germany, op. cit., p. 73. 44 H. J. Abs, Entscheidungen 1949-1953, op. cit., p. IX. 262 Dimitrios K. Apostolopoulos power, also sent a national delegation as a creditor country to the Conference on German External Debts. Thus, Greece was part of the agreement offering significant advantages to Germany’s economic reconstruction, in what truly was “an exercise in debt forgiveness to Germany on the most generous terms”.45 45 Al. Ritschl, “Germany Owes Greece a Debt”, op. cit. 10 SIMONE SELVA Assistant professor University of Naples L'Orientale, Italy BOLSTERING THE US DOLLAR AND STABILISING WORLD TRADE AND PAYMENTS THE LIMITED ROLE OF BRETTON WOODS INTERNATIONAL ECONOMIC INSTITUTIONS FROM THE 1960S TO THE 1970S Introduction The history of the international financial system from the second half of the 1960s through to the landmark decision by the newly appointed chairman of the Federal Reserve System Paul A. Volcker in late 1979 to staggeringly alter the cost of money in order to fight the inflationary strains of the 1970s by means of an unprecedented monetary stringency, was marked by a string of peculiarities. In first instance, the incapability of U.S. governments over the course of the 1960s and at the dawn of the 1970s to stem the outflow of dollars from regulated U.S. capital markets to unregulated and highly liquid short-term international money markets, better known as Eurocurrency markets, triggered a divergence in interest rates between the international credit markets and the dollar denominated long-term private assets, as well as the Eurocurrency markets. By and large such divergence turned into a growing differentials in interest rates between the American and European capital markets. The European markets, and more specifically the money markets, steadily grew more lucrative and attractive to international investors. In second instance, insofar as the flows of dollars from the United States to Western Europe drove such capital markets developments, this particular dynamic bolstered a long-term outflow of dollars from the United States to the international capital markets. In turn, this process accelerated the sharp decline of the dollar and worsened the u.S. balance of payments deficit. Those two trends marked the U.S. international payments position all through the 1960s. From the postwar u.S. commitment to provide economic and balance of payments assistance to both Western European partners and 264 Simone Selva the less developed countries, to U.S. overseas military expenditures from the early 1950s through the following decade, to the increase in the foreign direct investments and portfolio investments of u.S. banks and corporations since the early 1960s thereafter, transnational private capital movements under the form of capital flight from the United States to the European non-resident markets had begun. This massive flow of capital staggeringly increased long before the growth of largely unregulated Eurocurrency markets. In this respect, the outflow of capital from the United States dates back to the 1950s and took many ways. Such early developments lies at the origins of the development of dollar-denominated short-term private assets that accumulated on non-resident European markets, widely known as Eurodollars, by definition dollar deposits on either European banks or European branches of American banks that were not converted into local currencies.1 Thirdly, and crucial to the research trajectory and argument of this contribution, one of the consequences of all these developments was the unfettered growth in the dollar component of world money supply, and a consequent decline of the dollar in international exchange markets. As an alternative to it, the growth of dollar holdings in international markets and by western central banks was used to repeatedly carry out a destabilizing run on the U.S. gold stocks, as the French attitude during the 1960s and the international gold crisis of 1968 unmistakably tracks. This run led to a world increase in the gold stocks of dollar holding countries around the world.2 As per the Bretton Woods fixed exchange rates system, either a decline in the u.S. gold stocks or a growth in the dollar component of world money supply jeopardized the dollar convertibility into gold and put pressure on the dollar stability and value in foreign exchange markets both during the 1960s and from the time the Nixon administration suspended the inter-convertibility between dollar and gold through to the second energy crisis. Such monetary and capital markets developments had stunning effects on the stability of not only the dollar and the U.S. international payments position, but also, at large, on the stability of the international trade and payments system On the origins of the Eurodollar markets during the 1950s, cf. C. Schenk, “The Origins of the Eurodollar Market in London: 1955-1963”, Explorations in Economic History, 35/2 (1998), pp. 221-238. Gary Burn, The Reemergence of Global Finance, Basingstoke, Palgrave, 2006. 1 On the rise of gold stocks from the March 1968 gold crisis through the end of that year, cf. Presidential Measures on Balance of Payments Controls, prepared by G. Haberler and T. Willett, Washington DC, American Enterprise Institute, 1968. For an account from the viewpoint of international economic relations, S. Selva, “Gold, Dollar, International Trade and Monetary Integration in u.S. Foreign Policy: From the Interwar Years through the Height of Bretton Woods”, Review of Business and Economic Studies, 5/2 (2017), pp. 23-35. 2 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 265 based on it. The growing imbalance in the international payments position of the non oil least Developed Countries (lDCs) that continued throughout the time frame covered in this chapter and peaked up since the first oil shock of the 1970s helps chart such upheavals on the system of world trade and payments. These three developments forced American foreign economic policymakers to consider the consequences of it on the international economy and prompted them to devise ways of recasting the dollar's strength as the prerequisite to a smoothly functioning international trade and payments system based on the u.S. currency as both the reserve currency and the means of international payments and exchange markets operations. During the second half of the 1960s, the debate on the reform of the international monetary system and the creation of the Fund's currency, the Special Drawing Rights (SDRs),3 were thought to cope with the monetary and financial consequences affecting the dollar. They were also meant to address the international payments of wobbling fixed exchange rates and soaring posted prices of commodities in international markets. Amid the two oil shocks of the 1970s, the accumulation of oil revenues by the largest oil producing countries fuelled the transnational flows in capital underway since the previous decade. During both periods the u.S. elites discussed the issue of how to reduce the growing dollar share in world monetary aggregate. This was decided in order to best strike the balance between unfettered transnational flows in capital and teetering aggregate demand and growth rates that would otherwise lead to a deflationary spiral and to a shrinking international confidence in the U.S. currency. In either case, Washington paid attention both to the advanced industrial economies, and the non oil producing LDCs. The American elites established a sequential connection between the increase in the size of dollar-denominated assets in international markets and in currency holdings at foreign central banks. They also saw the connection between the depreciation of the dollar in exchange markets, and the ensuing inflationary strains that stemmed from the uptick in the price of oil, commodities, instrumental and consumer goods traded in U.S. dollars. This was a cost-push inflation that since the deterioration of cheap oil prices and deteriorating fixed exchange rates in the late 1960s hit the competitive position of European and other western manufacturing and caused the plummeting of the purchasing power of the non oil lDCs in foreign markets. The latter ones were suffering from both the uptick in oil prices and the declining competitiveness of West European consumer 3 For a detailed study of the SDR, cf. Christopher Wilkie, Special Drawing Rights. The First International Money, Oxford - New York, Oxford University Press, 2012. 266 Simone Selva goods in world trade markets. This chain of developments accelerated since the first oil shock but were well underway since the second half of the 1960s. In order to address this and to restore equilibrium in international trade and payments, the U.S. federal and monetary authorities worked on drawing on such growing dollar-denominated private assets to recast the international payments position of both the u.S. and other advanced industrial economies, as well as the non oil LDCs. In the late 1960s a way in the pursuit of such target was to prevent dollar liquidity in international markets from further financing the development policies of the International Bank for Reconstruction and Development (IBRD) and other institutions. In this respect, bolstering the stability of the dollar meant preventing from further expansion dollar denominated international borrowings and lending, as well as investment-related or balance of payments development finance programs. In the second case, during the 1970s, the issue was to curb the expansion in dollar denominated assets held by the oil producers' central banks and by private investors and to make any possible effort to dry it up as much as feasible. During that decade, the U.S. monetary and federal authorities worked on getting both the IBRD and the International Monetary Fund (IMF) involved in serving as intermediaries between the OPEC surplus countries and some surplus advanced industrial economies, and the borrowing LDCs and least developed industrial economies. In either case, during both the 1960s and the 1970s the Washington elites planned the involvement of the Bretton Woods international economic institutions and the Bank for International Settlements to carry out such redirecting of the growing transnational capital markets in the aim of forestalling the growth of dollars in world capital markets and central banks holdings. In contrast to this American strategy, over the course of the two decades the involvement of the Bretton Woods economic institutions in the implementation of this strategy paved the way for a larger and more important role of the largest American and European commercial and investment banks in carrying over such reshaping of transnational capital flows and world money supply. Though significantly and explicitly revamped in the late 1970s through extended partnership with western commercial and investment banks in reflowing the OPEC oil revenues, the role of the World Bank Group institutions and the IMF was rather more limited than that planned in Washington, owing to both the ill-functioning of the reflowing mechanism, and the reaction of some leading funding institutions; first and foremost the OPEC oil supplying countries, as well as a muchpressing need to face up to the skyrocketing external debt and balance of Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 267 payments adjustment problems of most LDCs. A string of issues that in the late 1970s led to the establishment of a long-standing involvement of private commercial banks with additional resources for development finance assistance from the IMF. The chapter focuses mostly on the attempt to reduce the dollar component of world money supply through such institutionalization of balance of payment deficit financing assistance programs to the non oil LDCs over the course of the two decades. This is attempted in order to chart and explain such limited contribution of the institutions of Bretton Woods in striking the balance between transnational capital flows, the dollar stability in international payments, and its trajectory over time. The case study of the assistance programs to the non oil LDCs, by and large Latin American countries, is remarkable and worth charting for two reasons. In first instance, the assistance programs to the advanced industrial economies that suffered the most from the declining purchasing power of their manufacturing systems in foreign markets and from oil price-induced balance of payments deficit were largely successful and depended mostly, though not exclusively, on the IMF draw on its member quotas and reserve tranche position and only to a limited extent on additional borrowing. Both during the 1960s and amid the stunning balance of payment crises that hit leading industrial nations like the UK and Italy in the following decade, the Washington institutions borrowed from either wealthy non-member nations or private capital markets. The IMF oil facility, a financial assistance facility funded through additional contributions from the IMF richest members and private investors, was the only exception to this dependence of the institutions of Bretton Woods on oil producers or private capital markets to finance the external equilibrium of the advanced industrial nations. In striking contrast to it, in second instance, private capital markets contributed to fuel development finance set in motion by the Bretton Woods institutions to resurrect the international payments position and foreign trade balance of the non oil lDCs. This was much the case of a deep-seated commitment by the u.S. authorities to get the u.S. commercial and investment banks involved in financing the IBRD president McNamara's giant war on poverty development assistance. This is analyzed in the first section along with the role of the IMF in shaping a sound reform of the international monetary system. The case study of this path-breaking new borrowing policy of the IBRD helps tracing the dependence of the Bretton Woods institutions as to the source of funding external to its member countries and institutional subscribers. This was done to help offset the impact of the ongoing uptick in the cost of money and commodity prices on the external equilibrium of the LDCs and their 268 Simone Selva purchasing power in foreign markets. Therefore, this contribution asserts that the role of the Bretton Woods institutions in containing or reducing dollar assets in world markets was substantially implemented in connection to their development programs toward the LDCs. In fact, the balance of payments deficit financing programs of the two institutions towards the industrial nations as instruments to reduce dollar denominated assets in world markets were rather limited. For this reason, this chapter bases its reconstruction of the u.S. policies on a closer analysis of the programs aimed at bolstering the lDCs. These policies were meant to prop up the dollar and to stabilize international payments through international economic institutions. The U.S. policies failed to channel through the IMF and its sister institution the bulk of recycling the OPEC revenues to developing nations. The idea was to defray the foreign debt and the balance of payment deficit of the non-oil producing lDCs which had been hardest hit by the oil crisis and the soaring rates of dollar denominated loans. Since the early 1970s, this failure is confirmed by recurring dependence on private external funding throughout the decade. Therefore, it is one of the arguments of this chapter, that this continued dependence on external lenders, either oil producing states or private capital markets, by the Bretton Woods institutions in order to finance development assistance to the LDCs, was ongoing throughout the 1960s and the 1970s. The second section tracks such dependence on the oil producers; it also pinpoints the limited capability of the Bretton Woods institutions to attract their financial assets in the so-called scheme of recycling the oil revenues during the 1970s decade. Specifically charged by Washington with reflowing the oil revenues of the oil producers into the least developed countries, the IMF encountered the recalcitrance of the OPEC countries to lock their funds into reportedly Washington dominated institutions, as well as with growingly worrisome scarce debt service capacity of the lDCs. Such ill-functioning institutionalization of the oil revenues recycling mechanism evolved quite early during the 1970s, into direct initiatives by the oil producing countries to provide balance of payments deficit financing assistance to the LDCs. Through the establishment of the OPEC Special Fund, a financial entity set up within OPEC in 1976, the Vienna-based organization institutionalized the attitude of the Middle East oil producers, carried out in the past by means of bilateral aid programs, to directly finance the non oil LDCs. Along with the deep involvement of leading commercial banks in such a process, direct financial assistance from OPEC to the LDCs helps chart the limited and well-below expectation role of Bretton Woods institutions in implementing the defense of the u.S. currency in international markets Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 269 all along the two decades arrayed in this chapter. Besides, the contribution explores the shaping of shared balance of payments and external debt financial assistance programs from the second half of the 1970s to the pathbreaking new scenario that erupted at the start of the new decade as a result of the international financial consequences of the landmark decision by the u.S. Federal Reserve System to tighten the cost of money. This monetary turn was intended to curb the unrelenting inflation that plagued the advanced industrial economies all along the decade of the 1970s. At that time, borrowing by the IMF from oil producers and continued involvements of commercial banks were combined to face up to the path-breaking and challenging new international debt and financial environment. After an almost decade-long recalcitrance by most leading commercial banks to bear the risk of financing or guaranteeing international lending to the non-oil LDCs, the U.S. monetary authorities favored cooperation between the largest commercial banks involved in redirecting into the international markets the financial wealth of the oil producers since earlier in the decade, and the institutions of Bretton Woods. The second section also suggests that even though the role of IMF was revamped, private commercial and investment banks continued to be prominent and played a pivotal role. The IMF shaped a partnership with those banks when the debt crisis broke out and a new international financial environment emerged in the 1970s decade. This occurred due to improved surveillance by central banks of international capital flows, and the removal of national control and legal constraints on it in most western financial systems: both of these conditions made the oil producers and international investors feel more comfortable with placing their dollar assets with private commercial and investment banks. Moreover, the persistent pivotal role of private capital markets in reflowing the investable surpluses of the largest oil producers stemmed from the decisive tendency of oil rich nations to move their investments from dollar area public and private assets such as U.S. Treasury certificates and the U.S. equity market, as well as the U.S. real estate market, to various Eurocurrency markets, western public debt assets, and current account deficit all denominated in non-resident Eurodollar and European currencies. Mostly traded by individual commercial or investment banks, or private banking syndicated loans, they were to finance not only the public debt of and fixed capital formation, as well as the foreign trade of the LDCs, but also bond and securities issued by international corporations operating in Europe and Japanese corporations.4 4 National Archives and Records Administration, Archives II, College Park (MD), Record Group 270 Simone Selva I. Averting Dollar Expansion in Trade and Payments: Financing Development Assistance and Fighting the Decline of the Dollar in the 1960s Funding the IMF Balance of Payments Assistance and IBRD Development Policies, and U.S. Objective of Stabilising the Dollar in the 1960s. An Ill-functioning Strategy A large majority of accounts on the role of the international economic institutions, first and foremost the World Bank Group and the IMF, but also the Bank for International Settlements (BIS), in stabilizing the postwar international economy and its system of exchanges in goods and capital, was based on two widely-shared assumptions. First, the two international economic institutions would have carried out their activities based on a clear cut division of commitments, since at least the early 1960s, between the IBRD and the IMF in respectively providing assistance to the LDCs and the industrial nations.5 Secondly, they made the argument that the largest share in their source of funding was based on their member countries' permanent quota and reserve tranche position. Most works underestimate the financial dependence of the two sister institutions on external funding and additional resources: this is mostly the case of studies on the IMF.6 Considering the implications of the two-fold oil price hike and the decline of the dollar in international exchange markets with the ensuing growth in the rates of dollar loans in capital markets and the impact of rising dollar denominated loans and oil posted prices on the international payments 40, General Records of the Department of Commerce (henceforth RG40), Office of the Assistant Secretary for International Affairs (henceforth OASIA), Office of Regional and Resource Policy, Briefing Books 1975-1982, b. 1, fold. Visit by D. Regan, J. M. Newman “OPEC Placements”, May 5, 1981. 5 Concerning the IMF relations with the Western European countries cf. Chris Rogers, The IMF and European Economies, London, Palgrave, 2012. Regarding the IBRD cf. among other studies E. Helleiner, “The Development Mandate of International Institutions: Where Did it Come from?”, Studies in Comparative International Development, 44 (2009), pp. 189-211. M. Gavin, D. Rodrik, “The World Bank in Historical Perspective”, American Economic Review, 85/2 (1995), pp. 329-334. Sarah Babb, Behind the Development Banks. Washington Politics, World Poverty, and the Wealth of Nations, Chicago, The University of Chicago Press, 2009. NARA, Record Group 56, General Records of the Department of the Treasury (henceforth RG56), Office of the Assistant Secretary for International Affairs (henceforth OASIA), Office of the Deputy to the Assistant Secretary for International Affairs, Records Relating to International Financial Institutions 1962-1981, b, 6, fold. 9-I Reform International Monetary 1978-1980, C. Dallara (Department of the Treasury ) to Deputy Assistant Secretary Ledding, inter-Office Memorandum “Issues Related to IMF Borrowing in the Private Markets”, August 29, 1980. 6 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 271 position of the industrial countries, this scholarship mostly focused on the efforts by the IMF in offsetting payments imbalances of advanced industrial economies during the 1970s. At the time, the Fund provided balance of payments assistance to the industrial nations that depended the most on foreign oil supply and suffered from capital outflows as a result of growing interest rates gap, particularly from the end of fixed exchange rates through to the end of easy money at year-end 1979.7 This thesis was based on a concept of conditionality in the IMF financial assistance programs based on a trade-off between the implementation of orderly domestic fiscal and economic policies by the beneficiary member countries in return for balance of payments assistance required to make the international payments position of the IMF members attractive to foreign private capital. This argument mostly revolved around the case study of the series of financial assistance programs additional to the normal appropriations of the institution, based on drawing by member countries on their quota. In particular, that was the case of the additional programs set off from the 1974 IMF oil facility through to the end of the decade aimed at coping with the impact of international inflation and decreased competitiveness among its members affected the most by the international meltdown of the decade.8 By and large, such perspective underestimated the IMF involvement in financing the non oil LDCs external debt and current account deficit; besides, this thesis never took into account the issue of its financing and its impact on the implementation of such programs.9 As a matter of fact the IMF borrowing was deeply intertwined with the international debate about the international reinvestments of the OPEC dollar denominated oil revenues, the bulk of which The most cited case studies are about the uK and Italy. Cf. B. Stallings, “The IMF in Europe: Inflation Fighting in Britain, Italy and Portugal”, in Richard Medley (ed.), The Politics of Inflation: A Comparative Analysis, New York - Oxford - Sidney - Paris, Pergamon Press, 1982, pp. 77-101. On the British case cf. Duncan Needham, UK Monetary Policy from Devaluation to Thatcher 1967-1982, Palgrave, London, 2014. Margaret G. De Vries, Balance of Payments Adjustment 1945 to 1986: The IMF Experience, Washington DC, IMF, 1987, pp. 133 et seqq. 7 Jeffrey Chwieroth, Capital Ideas: The IMF and the Rise of Financial Liberalization, Princeton, Princeton University Press, 2010. Susan Park, Antje Vetterlein (eds.), Owing Development: Creating Policy Norms in the IMF and the World Bank, New York, Cambridge University Press, 2010. B. Simmons, Z. Elkins, “The Globalization of Liberalization: Policy Diffusion in the International Political Economy”, American Political Science Review, 98/ 1 (2004), pp. 171-189. C. W. Dietrich, “Oil Power and Economic Theologies: The United States and the Third World in the Wake of the Energy Crisis”, Diplomatic History, 40/3 (2016), pp. 500-529. 8 For a rather different perspective stressing the role of the IMF financing schemes on the nonoil LDCs external deficit, cf. T. Cutler, “Petrodollars to the Third World: A Critique of the IMF Oil Facility”, World Affairs, 139/3 (1976-1977), pp. 189-205. 9 272 Simone Selva was channeled to the non oil LDCs. The debate about the creation of the IMF oil facility took place within the broader framework of borrowing by the IMF from the OPEC oil producers to finance its worldwide balance of payments deficit financing programs: in contrast to mainstream literature on the oil facility so far appeared, it is worth stressing that since the beginning it was thought as a financing scheme based on borrowing on OPEC to finance the oil crisis' impact on the balance of payments of both industrial nations and non oil lDCs.10 Similarly, the literature on the development policies of the IBRD failed to stress the involvement of the World Bank in financing investmentrelated international borrowing by some of the least developed industrial nations: a case in point among others is the Italian economy where the Bank was involved in fuelling the development of capital-intensive manufacturing sectors until the early 1960s.11 Furthermore, the literature that focused on the development assistance programs provided by the IBRD since the end of its involvement in the advanced industrial economies of western Europe in the early 1960s, has tackled the launching of multiple-year development assistance programs to the non oil LDCs, a subject that has led the history of the IBRD under the presidency of former u.S. Secretary of Defence Robert McNamara to center stage in historical research.12 With a few rare exceptions, this historiography never explored the financing of McNamara's war on poverty, the financial burdens of which were beyond the scope of the Bank member countries. The case of McNamara's international financial relations was an important chapter in the history of the Bretton Woods institutions as to borrowing policies purported to finance the stabilization of the international trade and payments system at a critical time in its postwar history from the mid-1960s through the late 1970s. At the time, the deterioration of a stable international payments system and the teetering of the dollar led the two sister institutions of Bretton Woods to draw upon a variety of private capital markets from a number of currency S. Selva, Before the Neoliberal Turn. The Rise of Energy Finance and the Limits to US Foreign Economic Policy, London, Palgrave, 2017, chapter 4. 10 S. Selva, “Technological Advance, Transatlantic Trade, External Equilibrium: American Financial Assistance to the Italian Nuclear Power Programmes from the 1960s through to the First Oil Crisis”, in Knud Andresen, Stefan Muller (eds.), Contesting Deregulation. Debates, Practices and Developments in the West Since the 1970s, New York - Oxford, Berghahn Books, 2017, pp. 169-185. 11 Patrick A. Sharma, Robert McNamara's Other Way. The World Bank and International Development, Philadelphia, The University of Pennsylvania Press, 2017. Devesh Kapur, John Lewis, Richard Webb, The World Bank: Its First Half Century, Vol. 1, Washington DC, Brookings Institution Press, 1997. Katherine Marshall, The World Bank: From Reconstruction to Development to Equity, London - New York, Routledge, 2008. 12 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 273 areas complementary, if not alternative to the United States and the dollar, in order to reduce the dollar component in world financial markets. This pattern entailed a shift in the borrowing policies of IBRD from institutional borrowing from the central banks of its members and the united States to private investors through the intermediation of the largest American and European commercial and investment banks. First and foremost, IBRD borrowed from the U.S. and German banking that traded assets denominated in currencies other than the U.S. dollar. In so doing, the two sister institutions of Bretton Woods shifted the financing of a set of balance of payments deficit programs from the quotas of member countries to private capital markets. These financial assistance programs aimed at offsetting the repercussions of a weakened dollar affecting the purchasing power of oil-crisis stricken advanced and less advanced economies. The two institutions also worked on either averting the expansion of dollar denominated international transactions by borrowing in capital markets other than that of the united States, or on reducing the dollar component in world capital markets. This was a growing dollar component that stemmed from the increased financial wealth of the OPEC countries as a result of dollar oil payments. The former was certainly the case of the IBRD borrowing from western central banks and capital markets other than the United States during the late 1960s, whereas the latter one was the case of the IMF and BIS involvement in the reflowing of the OPEC oil revenues amid the two oil shock of the 1970s. The chapter cast light on the limits of such involvement and the scarce effects it had on redressing the international payments system and in rebounding the role of the u.S. currency due to a set of multiple causes larger than the rather narrowed sphere of impact of the borrowing policies of the two institutions. The overlapping of multiple causes undermining the dollar's strength and the ill-functioning of such techniques to dry up the dollar share in world money supply prevented the IBRD from halting the ongoing weakening of the dollar leadership in the international financial and monetary system. One ought to point to the u.S. policies designed to forestall and revert the inconvenient outflows of private capital flows from the United States since the early 1960s through the end of the decade in order to defend the dollar and the international payments system. Then it would be possible to comprehend that the Bretton Woods institutions implemented a set of financial assistance programs designed to offer assistance both to the advanced industrial nations and to the LDCs. It follows as well as that such programs became even more dependent on private capital markets and external borrowers. In the mid-course of financing, their lending policies jeopardized the effort of drying up the dollar component of 274 Simone Selva world money and capital markets and of stabilizing international transactions and payments. This occurred mostly either by means of relying on the dollar as the sole unit of account and international reserves and the increase in quota for the IMF members, or by heavy borrowing by the IBRD from its member central banks and private capital markets. This was not quite the desired effect that the U.S. monetary and federal authorities had hoped to achieve through their policies; namely halting the expansion of dollars in world capital markets. The two Bretton Woods institutions relied heavily on foreign loans and this dependence contributed to ravaging the u.S. currency as early as the 1960s. This underlying objective underpinned the borrowing policies of the two institutions and it also prompted the debate regarding the reform of the international monetary system as early as the second half of that decade. U.S. Policies to Stem the Decline of the Dollar and to Stabilize International Payments in the early 1960s The debate and search for arresting the expansion in the dollar share of world money supply began since as early as the beginning of the 1960s. Since those years the mounting international run on the U.S. gold stocks, coupled with dollar outflows, resulted in a substantially shrinking U.S. current account position; also with the beginning of declining international confidence in the u.S. currency that continued over the decade and coincided with a declining competitive edge of u.S. manufacturing in foreign markets.13 In addition to a variety of foreign economic policy measures that ranged from increasing export and curtailing foreign military and civilian expenditures, or pressing capital surplus West European partners to improve trade liberalization and disband residual restrictive business practices toward the dollar area, the Kennedy administration focused on the monetary way to prop up the dollar and the U.S. balance of payment through the IMF. As a matter of fact, the Kennedy administration placed importance on the monetary aspects that jeopardized the stability of the u.S. balance of payments and the dollar. In this framework, since the first half of 1961 the U.S. government offered its full support toward increasing the financial resources of major currencies other than the dollar and British Pound available to the IMF. In making a case for raising the IMF quota of some western European members of the Fund, Washington aimed at setting the conditions to meet the requests for 13 For details on this interconnection cf. S. Selva, Before the Neoliberal Turn, op. cit., chapter 1. Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 275 drawing by the united States.14 Clearly, such policy was thought to lessen pressure that balance of payments deficit financing measures exerted on the two leading currencies of the international economic system. Washington could successfully conclude new arrangements to finance its drawing on the Fund in currencies other than the dollar and the British Pound in early 1962.15 Meaningfully, at the time the U.S. Executive Director of the Fund urged the use by other countries of convertible currencies other than the dollar or the British Pound to avoid an increase in foreign dollar holdings caused by excessive drawings from the Fund.16 Therefore, the share of dollar assets in world total supply, which would have been the subject of u.S. debates and policies resulting from the skyrocketing increase in dollar denominated assets amid the two oil crises of the 1970s, was already on the top of Washington's foreign financial agenda at this early stage. Along this line of action, the U.S. government opted for resorting to the right that each IMF member country retained of converting a percentage of its quota into convertible foreign currencies. Clearly, this variety of measures were aimed at reducing the volume of financial transactions and exchanges in goods and commodities traded in u.S. dollar or British Pound. Irrespective of these initiatives, certainly one of the most important measures adopted by the United States was a firm call on the capital surplus western European countries to commit to early repayments of outstanding loans and debts. This American pressure put on the European partners drove the U.S. effort to increase Washington's holdings of convertible foreign currencies. This policy contributed in restoring balance of payments equilibrium in 1962.17 Letter from Secretary of the Treasury Dillon to the Belgian Finance Minister (Dequae), August 21, 1961; Department of State, Current Economic Developments, “Move to Expand IMF Resources Wins Baking at Vienna Meetings”, September 26, 1961. Both in Office of the Historian, Foreign Relations of the United States (henceforth FRuS), 1961-1963, Volume IX, Foreign Economic Policy, eds. Evans Gerakas, David S. Patterson, William F. Sanford, Carolyn Yee. Washington DC, GPO, 1995, Document 197, https://history.state.gov/historicaldocuments/ frus1961-63v09. 14 John Fitzgerald Kennedy Presidential Library and Museum, Boston, Mass. (henceforth JFKPL), President's Office File, Treasury, Memorandum from Secretary of the Treasury Dillon to President Kennedy, “Fourth Quarterly Report on Balance of Payments”, March 12, 1962. 15 Report from Secretary of the Treasury Dillon to President Kennedy “Report to the President on Balance of Payments”, March 20, 1961, in Office of the Historian, FRUS, op. cit., document 3, https://history.state.gov/historicaldocuments/frus1961-63v09. 16 Federal Open Market Committee (FOMC) Meeting Minutes, August 21, 1962, in FOMC, https:// fraser.stlouisfed.org. For a general appraisal about the positive impact of debt-prepayments on the U.S. balance of payments, cf. Department of the Treasury, 1963, p. 79. Aaron Major, Architects of Austerity: International Finance and the Politics of Growth, Stanford, Stanford University Press, 2014, p. 37. 17 276 Simone Selva Besides, as Secretary of the Treasury Dillon pointed out, as far as the accumulation of balance of payments surpluses by western European allies increased dollar reserves in these countries, it created a potential gold demand on the united States.18 In Washington it was a widelyaccepted view that whenever the Japanese or the Europeans purchased gold from the United States, the gold reserves held by foreign central banks increased. As a result of such increase in gold reserves those foreign central banks reduced the dollar portion of their monetary reserves with negative impact on the value of the U.S. dollar in exchange markets. Therefore, from 1962 to 1963 the U.S. monetary authorities worked on concluding arrangements for early repayments with these European countries to avert a potential run on U.S. gold stocks with its deteriorating effects on the convertibility between gold and dollar. These repayments were useful both to finance Washington's holding of foreign currencies required to finance foreign exchange transactions and foreign trade, and to reduce foreign run on u.S. gold reserves in order to preserve the stability of the u.S. currency in foreign exchange markets. From 1962 to 1963, the aggregated special foreign transactions of the federal government roughly increased by fivefold: they included early repayments from European trading partners, advances on military sales and the Treasury sales of medium-term, and non-marketable securities.19 Therefore, this set of measures implemented as early as the first half of the decade to protect the dollar and to counteract the plunging of the u.S. balance of payments by a variety of means specifically designed to reduce the amount of dollars in world liquidity suggests that the U.S. authorities resorted to foreign financial and monetary measures to restore a balanced international payments system attached to a stable u.S. currency since the first half of the 1960s. In so doing, they charged the IMF with contributing to such commitment. This line of action to restore the dollar's strength and stability in world payments anticipated somewhat the borrowing policies of the two institutions of Bretton Woods from the second half of the 1960s to the meltdown of the following decade. This happened however before the combined teetering of the fixed exchange rates system since the Department of the Treasury, Annual Report of the Secretary of the Treasury on the State of the Finances for the Fiscal Year Ended June 30, 1961, Washington DC, GPO, 1962, p. 82. 18 Elmer B. Staats Acting Director, Executive Office of the President (Bureau of the Budget), Memorandum for the President “International transactions of the Federal Government, fiscal years 1962 to 1965”, August 26, 1963, p. 1, in CIA e-reading room, https://www.cia.gov/library/ readingroom. 19 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 277 British Pound devaluation of 1967 and the upward pressure on oil prices in world markets that followed the Suez crisis. The u.S. elites and the economic institutions that complemented the government of Washington in fuelling international financial and economic assistance programs aimed at stabilizing the international system did not establish a clear linkage between the capital outflows from the United States, the impact on the balance of payments and international interest rates, the growing pressure on the dollar value in international exchange markets, and the impact of such financial developments on the competitive edge of the American and other western manufacturing system in world trade. During the 1960s this misapprehension about the competitive and commercial effects of monetary and capital markets developments prevented the elites of Washington from fully perceiving the weakening position of the least developed and developing economies that imported both oil from oil producers and low-capital intensive consumer goods from the industrial nations, in the international trade system. In contrast to the 1960s, this issue was at stake in the U.S. foreign financial policies of the 1970s designed to shape the international investments of the OPEC oil producers. During the latter decade the oil revenues recycling policies devised in Washington as a way of fuelling the purchasing power of the non oil LDCs through multilateral financial arrangements set up under the aegis of the IBRD and the IMF, were clearly aimed at easing pressure of developmental assistance to the non oil lDCs on the u.S. balance of payments. Furthermore, they were thought to reduce the net outflow of dollars from the United States for balance of payments deficit financing purposes that were to hit the dollar value in foreign markets. As such, during the 1960s the issue of U.S. balance of payments deficit was neither coherently linked to the defence of dollar nor placed within the context of a much-needed stabilization of international payments. To put it another way, the outflows of dollars were interpreted in Washington as a matter of U.S. balance of payments deficit, domestic capital supply, and American purchasing power in foreign markets. It was only during the second half of the decade that the u.S. authorities and the institutions of Bretton Woods established such clear-cut linkage and took measures designed to diminish or contain the growing amount of dollar assets held at foreign central banks or in the international financial markets, be it either the booming international money markets, the credit or bond markets, in order to counteract such decline in competitiveness and to support the purchasing power and current account position of non-oil LDCs, accustomed to import from advanced industrial economies. Against this backdrop, at the time the 278 Simone Selva crucial target of the u.S. administrations and the international economic institutions born out of the Bretton Woods conference was to prevent international investors from further saturating international capital markets with dollar assets.20 Similarly, the evolving policy of borrowing diversification by the Bretton Woods institutions clearly points to the timeline of the 1960s. In particular, the IBRD was specifically designed to increase borrowing from central banks and currency areas other than the U.S. dollar area. If one charts such path in the IBRD financing policies it is easy to detect that its change intersected with the evolution of the debate within the monetary and federal authorities of Washington about the course, nature and consequences of the unfinished U.S. balance of payments deficit, the foreign run on U.S. gold stocks and capital flight from the United States, just mentioned, as well as the impact of such course of events on the inter-convertibility between dollar and gold. At the same time, such turn in the high-ranking discourse brought to center-stage the issue of the implications of the weakness of the dollar for the non-oil lDCs. In a matter of few years this issue would be the center piece of American policies to make the IMF and its partner American and European commercial banks lock and reflow to those resource-scarce developing countries the dollar assets of the oil producing countries in order to support the purchasing power of non-oil producing economies in world trade markets. To summarize it, a different understanding between the early 1960s and the period from the late 1960s through the following decade about the effects of capital outflows from the United States on both the dollar position in international exchange markets and the stability of world payments, had a couple of remarkable implications. It changed both the borrowing policies of the two sister institutions of Bretton Woods, particularly the IBRD, and their attention to the consequences on international trade and exchanges of competitively declining manufacturing of advanced industrial societies. Therefore, one should consider first the case of the World Bank borrowing strategies against the backdrop of the broader debate at the highest u.S. federal level about the nature and dynamic of the external imbalance of the country to better understand how the Bank developed its borrowing policies within that broader framework. As just remarked, the issue of capital outflows from the U.S. markets as a cornerstone in the balance of payments problems of the country was a striking issue as early as the first half of the 1960s. At the time the incumbent Johnson administration Library of Congress, Manuscript Division, Washington DC (henceforth LOC), Elliot L. Richardson papers, part 1, b. 292, fold. OECD, Statement by Undersecretary Elliot L. Richardson at the OECD Ministerial Meeting, Paris, February 13, 1969. 20 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 279 increased u.S. attention to the capital account position compared to the Kennedy administration. As mentioned, Kennedy focused attention onto capital outflows and the potential role of the IMF in stemming them with a constant focus on cutting foreign military and civilian expenditures and expanding exports as a means of targeting the current account position.21 Since 1964 a number of legislative measures aimed at reversing the outflow of capital were passed in the Congress. The ratification of the so called Interest Equalization Tax, enacted in 1963, was aimed at deterring capital outflows through a tax on acquisition by Americans from foreigners of foreign debt and equity securities, both new and outstanding, maturing in 3 years or more.22 Such policy was consistently carried over under the new Johnson administration. As early as he took office, the new President made use of an amendment to the Tax Equalization Act to apply it to bank loans of 1 year or more. At the same time he called the U.S. Congress to extend it for 2 years beyond the end of 1965, and to broaden its coverage to non-bank credit of 1 to 3-year maturity.23 As U.S. Secretary of the Treasury Dillon himself pointed out, such measures to resurrect the balance of payments on capital account, combined with military export and a reduction in overseas public expenditures, all contributed in the decrease of the U.S. deficit.24 Afterwards, the Johnson administration pushed forward this balance of payments deficit financing policy revolving around the capital account position. In early 1965 the president of the United States presented the comprehensive program to reduce deficit in the balance of payments based on two linchpins: the Foreign Direct Investment Program (FDIP), and the Voluntary Foreign Credit Restraint Program (VFCR). The first was designed to reduce foreign direct investments by U.S. corporations; the second sought to decrease the volume of foreign loans made by u.S. commercial banks. Consistently with this stream of measures, Washington also expanded the Interest Equalization Tax first implemented under the Kennedy presidency.25 21 For further insights on the Kennedy administration policies to recast the current account position, S. Selva, Before the Neoliberal Turn, op. cit., chapter 2. Department of the Treasury, Annual Report of the Secretary of the Treasury on the State of the Finances for the Fiscal Year Ended June 30, 1963. Washington DC, GPO, 1964, pp. 52, 335346. 22 23 L.B. Johnson to the Congress of the United States, February 10, 1965, in CIA e-reading room, http://www.foia.cia.gov/search. Department of the Treasury, Annual Report of the Secretary of the Treasury on the State of the Finances for the Fiscal Year Ended June 30, 1964, Washington DC, GPO, 1965, p. 47. 24 Peter Dombrowski, Policy Responses to the Globalization of American Banking, Pittsburgh, The University of Pittsburgh Press, 2006, chapter 3. A cutting-edge new perspective on this 25 280 Simone Selva Certainly, all of these measures help track such policy shift by the Johnson administration and its increased attention to the international monetary and payments consequences of continued dollar outflows. Therefore, prior to the second half of the decade, the Johnson administration altered the approach to the problem of balancing the u.S. international payments position and the drain in the dollar value. However, the implications of international payments imbalance and of the dollar’s teetering in foreign markets on international exchanges of capital and goods were not fully understood in Washington. For instance, shortly after Johnson's coming to the White House, the U.S. monetary authorities failed to catch the linkage between capital outflows from the United States, the weakening of the U.S. dollar in foreign exchange markets, and its effects on the position of the industrial countries manufacturing system in foreign markets. In discussing the twin stunning increase in capital outflows and dollar sales to foreign countries, Alfred Hayes and other prominent members of the U.S. Foreign Open Market Committee made the argument that the U.S. external imbalance was a matter of capital flight. However, they did not associate such plummeting capital account position and its impact on the value of the U.S. currency with its effects on the American export and on international exchanges in goods and services. For instance, on the occasion of a FOMC meeting Mitchell, a committee member, maintained that “the [U.S.] balance of payments problem was one of capital flows, and not of the competitiveness of U.S. goods in world markets”.26 For his part, that same year the u.S. Secretary of the Treasury Douglass Dillon underestimated the linkage between the dollar tottering in foreign exchange markets and the U.S. balance of payments deficit. In reappraising the deficit, he insisted on the issue of the u.S. current account position but missed the very linkage between the U.S. balance of payments deficit, the weakening of the dollar and its likely negative impact on u.S. export. By focusing attention on the u.S. temporary commercial surplus, he failed to detect such linkage, stressing that “our own price stability is beginning to pay off in strengthening our world-wide competitive position”. Reasoning on this line, he suggested to the White House to target a variety of issues in order to bolster the u.S. string of regulatory measures in light of the 2008 financial crisis is provided in D. J. Elliorr, G. Feldberg, A. Lehnert, “The History of Cyclical Macroprudential Policy in the United States”, May 2013, Federal Reserve Board Washington DC, Finance and Economics Discussion Series, Divisions of Research and Statistics and Monetary Affairs, 2013/29, https://www.federalreserve. gov/pubs/feds/2013/201329/201329pap.pdf 26 Federal Open Market Committee Meeting Minutes, December 1, 1964, in FOMC, https:// fraser.stlouisfed.org. Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 281 current account. These issues ranged from increased overseas promotion of U.S. export to exploration of opportunities to develop iron curtain markets; also to policies aimed at reducing capital outflows, such as a tax policy that favored foreign purchases of u.S. securities or renewal of the Interest Equalization Tax. In spelling out this number of measures he never pointed to them as multiple means of resurrecting the dollar and propping up the competitive position of u.S. and other western manufacturers operating in the dollar trade area.27 Then, cheap oil prices in world commodity markets became unavailable and the devaluation of the British sterling in 1967 caused wobbling of the fixed exchange rates. Prior to the above circumstances though, the two sister institutions charted by the Bretton Woods conference had not drastically diversified the borrowing and investment policies toward countries and currency areas other than the dollar and the u.S. capital markets. Neither had they influenced the international lending policies designed by the U.S. governments. As a matter of fact, since the early 1960s the United States strove to get the European partners involved in providing concessionary assistance to the least Developed countries in order to prompt them to undertake liberal trade policies and to increase commercial bonds with the western world as a way to deter Soviet trading influence, particularly in Latin America.28 Within that framework, the Department of State placed outmost importance on the role of institutional arrangements such as the Development assistance Group and, since 1962, the Development Assistance Committee (DAC) established within the Organization for European Cooperation and Development (OECD). As other multilateral or supra-national organizations as the EEC, the IBRD was represented on the DAC but did not play at that time a prominent role. In the early 1960s the United States worked on shaping a DAC common aid pledge basically aimed to produce improved economic and social conditions in the LDCs. However, at that time the united States did not bring to center stage the issue of how to best combine development finance with stable international monetary and financial relations and a strengthened dollar position in international Douglass Dillon to the President, December 9, 1964, in Lyndon B. Johnson Presidential Library and Museum, Austin (henceforth LBJPL), Papers of L. B. Johnson, Presidential Papers, CF, b. 49. 27 28 NARA, RG56, OASIA, Office of the Deputy Assistant Secretary for International Monetary Affairs, Briefing Books 1971-1980, b. 1, fold. Atlantic Declaration Under Secretary Volcker May 1973, subfolder 2 (Sum 2/14/73 Flanigan Memo re Econ. Objectives Paper), Peter M. Flanigan, Memorandum for Jack Bennett John Hennessey, “US-European Relations Economic Objectives”, February 14, 1973. 282 Simone Selva markets as a prerequisite to the implementation of development lending programs. Basically, at the time the long-term objective was mostly to strengthen and to improve economic relations and commercial bonds with those countries.29 Therefore, prior to the last few years of the decade the role of the Fund and the Bank was rather limited and scant. In fact, the two Bretton Woods institutions gained a prominent role by the time the debate on the reform of the international monetary system and the creation of the IMF' currency, the so-called Special Drawing Rights took place. This drew growing attention within the united States and among western elites about a much-pressing need to establish and introduce in the international monetary system a reserve currency complementary to the u.S. currency as a means of payments. This currency would cover foreign exchange operations in order to curb the growing share of dollars in world markets in defence of the American currency. As mentioned, prior to these developments the Fund and the Bank played a limited role. For instance, during the 1964 capital account crisis that shook the external position of the United Kingdom, the IMF provided the London government with a stand-by arrangement. This financial package was just one out of many credit lines implemented as per the terms of a $ 3 billion multilateral assistance program offered to London by the U.S. Federal Reserve and European central banks to stem speculative attacks on British sterling.30 In these circumstances, Gardner Ackley, then Chairman of the Council of Economic Advisers, stressed the limited independence of the IMF in extending credit to London, explaining that it had to resort to the European central banks to finance its credit line to the United Kingdom. He warned the White House that British reserves losses were likely to trigger a run on u.S. reserves.31 A few years later, amid the British balance of payments crisis of 1967, the U.S. government downplayed the potential role of the IMF in providing London with financial support. In the Fall of 1967, prior to the devaluation of British sterling, the situation of the UK appeared to be on the verge of an external collapse as a result, among other structural factors, of sluggish economic growth in most West European countries that prevented london from propping up its balance of payments by means of sustained export. Against such backdrop, two financial assistance plans were drafted. Cf. for instance JFKPL, Papers of John F. Kennedy, Presidential Papers, NSF, Country File: Italy, b. 120, Dean Rusk to the Amembassy in Rome, Amembassy in Paris, April 26, 1962. 29 30 Catherine Schenk, The Decline of Sterling: Managing the Retreat of an International Currency 1945-1992, Cambridge, Cambridge University Press, 2010, pp. 158-159. LBJPL, Papers of L.B. Johnson, Presidential Papers, Confidential Files, b. 43, Gardner Ackley, Memorandum for the President “The Crisis of the Pound and US Policy”, November 22, 1964. 31 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 283 On the one side, the European central banks, convened in Basle, suggested that the IMF be charged with providing London with a $3 billion standby arrangement. In contrast to this solution, which charged the Fund with playing a crucial and predominant role in offsetting the crisis of the sterling, Washington gained a true perspective of the role of the Fund. According to U.S. Secretary of the Treasury Henry Fowler, the IMF, surplus Western European governments as Germany and Italy, and some private commercial banks, should cooperate in establishing a comprehensive financial package to avert the devaluation of British sterling.32 Based on this position, it is straightforward that still in 1967 the united States underestimated the role of the two sister institutions of Bretton Woods in the task of keeping under control the international system of trade and payments from the arrays of monetary and commodity factors that were to destabilize it compared to the long post war era of smooth functioning. Likewise, in light of the UK balance of payments crisis of 1967, Washington proposed to its western partners a financial assistance package in which the IMF was supposed to provide a contribution to London's external equilibrium much less than the amount proposed by the governors of central banks. Central bankers proposed an IMF credit for $ 3 billion credit line, whereas the U.S. Secretary of the Treasury had suggested a contribution from the IMF worth up to $ 1.4 billion as part of a multilateral assistance package involving both $ 1 billion guaranteed sterling partially covered by Germany and Italy, and some private banks credit.33 It was only in the context of the debate about the reform of the international monetary system and the effect of the 1968 gold crisis on the international confidence in the U.S. currency that the authorities of Washington began charging the IMF with bearing more responsibility and assuming a more vital role in stabilizing the dollar and the international payments system that revolved around it. At that time the U.S. Department of the Treasury argued that the 1967 devaluation of British sterling caused losses in global reserves. These losses accelerated international monetary arrangements to create a new reserve unit. Against this backdrop, in 1968 the creation within the IMF of the Special Drawing Rights (SDRs), conceived as a new international reserve unit to supplement dollar- LBJPL, Papers of L.B. Johnson, Presidential Papers, National Security File, Gold Crisis, b. 54, Henry Fowler, Memorandum for the President “Sterling Crisis”, November 12, 1967. 32 Henry Fowler, Memorandum for the President “Sterling Crisis”, November 12, 1967, in Declassified Documents and Reference System, http://www.gale.com/us-declassifieddocuments-online/ (henceforth DDRS). 33 284 Simone Selva denominated international liquidity,34 was thought to reduce dependence of the international system on gold for market purposes. Furthermore, the SDRs were supposed to ease off the pressure that international run on the u.S. gold reserves put on the dollar.35 By supporting the creation of the SDRs Washington placed much more attention on the potential role of the IMF in contributing to revert the depreciation of the U.S. currency in foreign markets and to recast international monetary and trade stability.36 On the other hand, along this line since the appointment of former U.S. Secretary of Defence Robert McNamara to the presidency of the IBRD, the Washington-based development institution shifted its borrowing and lending policy so as to contain the share of dollar-denominated assets in world capital markets. As anticipated, if one keeps an eye on the ways the IBRD changed the financing of its loan operations and lending to the LDCs prior to the end of the decade and the term of McNamara's appointment, the linkage between the limited role of the Bretton Woods institutions in contributing to dry up the quantity of dollars in world money supply and the underestimation by the united States of this issue is all the more striking. The united States perceived this issue as an inextricable problem to avert the decline of international confidence in the dollar and its centrifugal effects on the international exchanges in goods and capital, specifically for the non-oil lDCs. Since it was established, the IBRD could count only on 20 percent of its member countries' capital subscription in order to finance its lending operations. To put it another way, 80 percent of its members' capital subscription was uncalled and served as a security guarantee to back its borrowing. The IBRD had not such uncalled 80 percent capital subscription on hand, but it was expected to be paid in by member countries anytime the bank had to meet its obligations. In addition to the principle of profitability on which the IBRD lending operations were relying, such security guarantee represented by the unpaid capital, coupled with the two basic principles underlying the bank loans, “the soundness of the particular project the bank 34 Howard Wachtel, The Money Mandarins. The Making of a Supranational Economic Order, London, Pluto Press, 1990, p. 78. Harold James, International Monetary Cooperation since Bretton Woods, New York - Washington DC, Oxford University Press - IMF, 1996, p. 172. Graham Bird, IMF and the Future. Issues and Options facing the Fund, London - New York, Routledge, 2003, p. 267 et seqq. C. Wilkie, Special Drawing Rights (SDRs), op. cit., p. 34 et seqq. 35 Department of Treasury, Talking Paper on the Basic Pledge, in Position Paper for Gold Pool Negotiations, “Reserve Policies During the Interim Period Prior to Activation of Special Drawing Rights”, March 26-27, 1968, in DDRS. 36 E. Fried (Department of the Treasury), “Resolving the Gold Issue”, 1968, in DDRS. Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 285 was asked to finance”, and the effect of the loan on the internal economy of the borrowing country, made the IBRD borrowings a kind of highly reliable and quite secure investment asset to any external private investor. Therefore, owing to such 80 percent uncalled capital subscription, since the beginning the IBRD called for funding on external lending institutions to place its bonds and securities: it did so with both the central banks of member countries and private investors.37 However, over the course of the 1950s and early 1960s the Washington institution increased its borrowing from private investors and from currency areas other than the U.S. dollar, albeit slowly and to a limited extent. During the presidency of Eugene Black, former senior Vice President of Chase National Bank, the Bank certainly established and expanded the market for the IBRD securities in the world's investment centres. He himself strove to develop the IBRD financial bonds with the European investment centres and the European currency areas. For instance, at the start of the 1950s the IBRD and the Swiss government entered into a relationship under which the Bank was granted tax reductions in connection with the issue of IBRD bonds in the Swiss private capital market.38 By coupling such expansion of borrowing by the Bank from the international financial centres with the sales of returns on its loans, under the presidency of Black, the IBRD could raise funds in the private markets for an equivalent sum of $ 2 billion roughly. More than half of its borrowing, according to the internal correspondence operations of the Bank, were raised outside of the United States.39 under Eugene Black’s presidency the IBRD embarked upon a number of attempts to diversify the currency composition of borrowing while struggling to issue a growing number of bonds and securities into private markets. Despite such attempts, in the early 1960s the IBRD was still substantially relying on the u.S. capital markets and borrowed largely from u.S. investors. For instance, at the beginning of that decade the IBRD neglected to offer bonds to west European national capital markets: this was much the case World Bank Group Archive (henceforth WBGA), Records of Office of External Affairs, Mendels, M. Morton M-Articles and Speeches (1948-1965), “The Role of the International Bank for Reconstruction and Development”, Address by Morton M. Mendels (Secretary, IBRD) to the 52nd Annual Convention, Maryland Bankers' Association, Atlanta City, May 28, 1948. 37 WBGA, Records of the Office of the President, Records of President Robert S. McNamara, Contacts-Member Countries Files, Contacts with member countries: SwitzerlandCorrespondence 01, R. McNamara, Memorandum for the Record “Switzerland”, May 15, 1968. 38 WBGA, Records of the Office of the President, Records of President Eugene R. Black, President Eugene R. Black Papers-Congratulations Correspondence-Volume 6-1953, 1958, IBRD Press Release n. 541, June 27, 1958, Background Statement. 39 286 Simone Selva of the Italian currency area, where in 1962 the Bank of Italy failed at arranging the sales of IBRD bonds with the Italian financial community.40 On the other hand, significantly, in 1964 U.S. private investors snapped up the largest portion of $ 200 million offering of bonds issued by the IBRD that year.41 In the late 1950s the U.S. balance of payments plunged while attempts were being made to restore equilibrium through implementation of balance of payments deficit financing policies. These policies revolved around the current account position under the Kennedy administration. In this context the IBRD financial relationships with the international capital markets were neither overtly aimed at contributing to prevent the expansion of dollar denominated assets in world capital markets, nor did they contribute to any u.S. foreign monetary policy aimed at dealing with the capital account deficit in order to resurrect the U.S. balance of payments and to restore international confidence in the American currency. Financing the Bretton Woods Institutions in the Private Capital Markets and Closer U.S. Attention to Currency Stability Against this backdrop, since the two linchpins in the smooth function of the international trade and payments system, namely fixed exchange rates and fairly stable cheap oil prices in international markets began crumbling, the course of the debate on the reform of the international monetary system and the borrowing policies of the IBRD best highlights the u.S. increased preoccupation with the need to tailor international development assistance to the defense of the dollar in foreign exchange markets. Within this framework, since 1967 onward the borrowing policies of the IBRD changed inordinately: a marked effort to shift its borrowing from the dollar to other currency areas was registered. In turn, such change took place through increased heavy placement of the Bank bonds and securities with private commercial and investment banks, which implemented this policy of investment diversifications through their investment portfolios. This diversification of the IBRD investment portfolio eased off pressure on the U.S. currency from bearing the cost of financing development finance, so far conducted through either borrowing from dollar-denominated holdings 40 WBGA, Records of the President Eugene Black. NARA, Record Group 82, General Records of the Federal Reserve System, (henceforth RG82), Division of International Finance and Predecessors, International Subject Files 1907-1974, b. 327, The Staff of the Board of Governors of the Federal Reserve System, Current Economic and Financial Conditions. Prepared for the Federal Open Market Committee, January 27, 1965, pp. 3-8. 41 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 287 from the central banks of members of IBRD, or through a U.S. government development assistance policy based on a u.S. foreign economic assistance that strained the American balance of payments. As a matter of fact, from the late 1960s through to the 1970s, although the DAC still played a role,42 on the one side the IMF and the multilateral development banks engaged in a continuous commitment to help restoring equilibrium in the balance of payments of deficit countries; on the other, the IBRD led the way in shaping development assistance programs.43 Such institutional shift was accompanied by a different direction in the borrowing policies of the Bank: from public financial contributions from Western governments and institutions to increased bond sales to the Western capital markets. Since the appointment of former Secretary of Defense Robert McNamara to the presidency of the IBRD, at the end of the decade the Washington-based Bretton Woods institution repeatedly resorted to the German, British, and United States capital markets to finance its development assistance programs. A few months after the appointment of McNamara to the head of the IBRD, some of the World Bank's high-ranking officials met representatives from the largest U.S. banks to discuss their participation in financing the new president's ambitious plans to expand the Bank’s lending operation to finance development policies across the globe. If one dismisses some arguments by these bankers about the very low lending rate that the World Bank offered to the American banking system, the very issue that emerged from these conversations was the currency denomination of the bonds and securities the Bank offered on the market. Representatives of Bank of America and officials of Brown Brothers Harriman for instance, called attention to the implications of U.S. balance of payments deficit on the bankability of bonds issued by the IBRD and denominated in u.S. dollars.44 WBGA, Records of the Office of the President, Records of President Robert S. McNamara, Contacts with Member Countries: United Kingdom, General Correspondence 02, D.H. Rickett, Memorandum for the Record “The United Kingdom”, October 4, 1971. 42 43 NARA, RG56, National Advisory Council on International Monetary and Financial Policies (henceforth NAC), NAC Alternates Minutes and Agenda, NAC Principal Minutes and Agenda, NAC Steering Committee Minutes, NAC Semi Annual Debt Review 1971-1975, b. 1, fold. NAC Alternates-Minutes, Meeting N. 75-1 through Meeting N. 75-8, January 16, 1975-December 3, 1975. National Advisory Council Alternates Meeting Minutes, Meeting 75-1, January 16, 1975, Review of IBRD/IDA Program and Financial Policies. WBGA, Records of General Vice Presidents and Managing Directors, Records of Sir Denis Rickett, Oil and Energy, Memos and Reports 1973 through 1974, Volume 3, Sir Denis Rickett (IBRD Vice President), “The Provision of Additional Resources to Developing Countries and the Respective Role of the Fund and the Bank”, undated. 44 LOC, Manuscript Division, Robert McNamara Papers, Part 1, b. 21, fold. 1 (Bennett, William 288 Simone Selva One year later, while leading U.S. financial institutions such as Morgan Stanley stressed “the need for the Bank to renew and broaden its contacts in the investment community in the United States; and for McNamara to become better known to that community”,45 the IBRD had issued a substantial portfolio of bonds to currency markets other than the dollar. In particular, from late summer 1968 to late summer 1969 the Bank pursued a diversification policy by offering both public and private bond issues in the German markets and in the Swiss capital market.46 Later on McNamara turned to draw on the oil producing countries of OPEC to finance its bonds: such a policy was favored by the United Kingdom and other Western European partners but irritated the u.S. governments.47 As of 1968 the IBRD had borrowed in the London market on three occasions,48 while by fiscal year-end 1969 over half of the Bank's gross borrowing had been raised in the German and U.S. private capital markets.49 Within the framework of this contribution, the case of German private capital markets is particularly noteworthy. Over the course of the decade some world-class German banks purchased an increasing volume of bonds issued by the IBRD; Memoranda of McNamara Trips 1968-1971), W.L. Bennett to Mr. Clark, Memorandum “Summary of New York Visits. October-November 1968”. LOC, Manuscript Division, Robert McNamara Papers, Part 1, b. 21, fold. 1 (Bennett, William Memoranda of McNamara Trips 1968-1971), William Bennett to Mr. Clark, Memorandum “Visit to New York City-March 1969”. 45 WBGA, Records of the Office of the Presidents, Records of President Robert S. McNamara 1968, Correspondence with Member Countries: Germany. Correspondence 01, fold. Contacts Germany 1968, Memorandum of Conversation McNamara-Aldewereld-Guth-Klasens, June 6, 1968. Memorandum of Conversation Dr. Henkel-Mr. Aldewereld, June 7, 1968. Memo of Conversation Lipfort-Schneider-Schmidt-Anders-Aldewereld, June 10, 1968. 46 47 WBGA, Records of the Office of the President, Records of President Robert S. McNamara, Contacts with Member Countries: United Kingdom, General Correspondence 03, John Morrian to Robert McNamara, Office Memorandum, “R. McNamara interview with Douglas Ramsey, Economic Development and Raw material correspondent of the Economist”, July 28, 1975. Ibid., “Meeting with Chancellor of the Exchequer, October 1, 1974 (present: McNamara, Denis W. Healey, Derek Mitchell, Richardson, Wass, Rawlinson, France, Cargill)”, October 2, 1974. 48 WBGA, Records of the Office of the President, Records of President Robert S. McNamara, Contacts with Member Countries: United Kingdom, General Correspondence 02, W.M. Van Saagevelt to Mr. D. Love, “Memorandum on the Bank Group's Relationship with the United Kingdom”, August 11, 1967. Cf. respectively WBGA, Records of the Office of the President, Records of President Robert S. McNamara, Contacts with Member Countries: United Kingdom, General Correspondence 01 (1968-1969), Summary Memo of conversation D.S. Rickett-R. McNamara-The Governor of the Bank of England), “Annual Meeting 1968-United Kingdom”, October 9, 1968. And ibid., D.S. Rickett (IBRD Vice President), “Annual Meeting 1969. Meetings with Governors of Part I Countries. United Kingdom”, September 24, 1969. 49 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 289 Giro Zentrale (GZ) and Deutsche Bank, for instance, bought a significant portions of World Bank-issued bonds and securities and pledged to make public and private placements in the German markets.50 The involvements of German banks in financing the IBRD development programs was a means of easing the burden of the IBRD development assistance programs on the U.S. balance of payments, as well as of supporting the value of the dollar in foreign exchange markets. Notwithstanding this policy of diversification, a string of international monetary and financial developments weakened further the dollar and jeopardized the international system of trade and payments. On the one side the devaluation of British sterling left the U.S. currency as the sole leading currency for international payments for oil and most commodities. This sustained the expansion in the dollar component of world trade and financial transactions and dollar holdings at foreign central banks. On the other, consistently with a decade-long French international monetary policy aimed at promoting the use of gold as the only international reserve, and at instigating other Western countries to convert large amount of their dollar holdings into gold, in 1968 Paris contributed to the weakening of the gold parity of the U.S. dollar by questioning agreements on, and adoption of, U.S. proposals for increasing world reserves through the creation of a new international reserve asset to be established under the auspices of the International Monetary Fund.51 As a result of this tangle of developments, over the course of calendar year 1968 the u.S. monetary gold stock in millions of dollars declined by roughly over 12 percent compared to its 1967 average (see table 1). WBGA, Records of the Office of the President, Records of President Robert S. McNamara, Contacts with member countries: Germany-Correspondence 01, fold. Contacts Germany (1968), Memorandum of conversation McNamara-Aldewereld-Lipfart (GiroZentrale), June 6, 1968. Memorandum of conversation McNamara-Aldewereld-Guth-Kalusens (Deutsche Bank), June 6, 1968. On the role of Deutsche Bank in underwriting bonds for the IBRD cf. A.Nützenadel, “Between State and Market, 1914-1989”, in Werner Plumpe, Alexander Nützenadel, Catherine Schenk, Deutsche Bank. The Global Hausbank 1870-2020, London, Bloomsbury, 2020, p. 422. 50 CIA Directorate of Intelligence, Intelligence Memorandum “French Actions in the Recent Gold Crisis”, March 20, 1968, in DDRS. 51 290 Simone Selva Table 1. U.S. Gold Stocks in millions of Dollars52 Year-month 1967 1968-January 1968-February 1968-March 1968-April 1968-May 1968-June 1968-July 1968-August 1968-September 1968-October 1968-November 1968-December US Gold stocks in millions of dollars 11,982 11,984 11,883 10,484 10,484 10,384 10,367 10,367 10,367 10,367 10,367 10,367 10,367 This trend contributed to push forward the depreciation of the dollar. Therefore, the combined seemingly intractable international gold issue, the effects of the closure of the Suez Crisis, and the inefficacy of the U.S. balance of payments deficit financing policies in recasting the current account position, all account for the gloomy external balance of the United States and the pressure put on the dollar as early as 1968. By drawing attention to the hypotheses that circulated in Washington when the world-scale gold crisis hit the U.S. gold stock, it is easy to find further confirmation that American foreign exchange and financial policies were unsuccessful in stabilizing the international payments position of the united States. Based on data available on exchange rates of major currencies against the u.S. dollar from the early 1960s through the crisis pertaining to the convertibility of the dollar into gold around 1968, it is easy to identify a correlation between the impending gold crisis and the depreciation of the U.S. dollar. This was particularly the case, with the exception of the British pound against the American currency, in the three-month forward exchange rates of major currencies against the dollar from 1967 to 1969.53 Naturally, Source of table 1: Federal Reserve System, Annual Report of the Board of Governors of the Federal Reserve System, Washington DC, GPO, 1968, Table 16, pp. 384-385. 52 53 For an overview if this trend cf. Board of Governors of the Federal Reserve System, Federal Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 291 any time American dollar holders sold their dollar holdings, this process also contributed to the outflow of dollars from the United States. Therefore, the closer to the end of the decade, the more the inefficacies of the U.S. balance of payments policies on the current and capital account overlapped with the deterioration of the fixed exchange rate in putting pressure on the dollar and its full and stable convertibility into gold. Within this framework, neither the introduction of a new unit for reserve assets and international payments as the SDRs, nor the new borrowing policies inaugurated by the IBRD under the presidency of Robert McNamara altered this development fundamentally. The inefficacy of the new measures implemented by the two Bretton Woods institutions to reduce the dollar component in world trade and payments is best charted by the plummeting of the dollar in foreign exchange markets and by the staggering downswing in the U.S. balance of payments deficit from 1969 to 1972. From 1969 to the very beginning of 1972, driven by the exodus of U.S. private capitals fleeing the country,54 the outflow of liquid private capital doubled, while nonliquid short-term private capital outflows grew eightfold, with the balance on the current account and long-term capital –the so-called basic balance– registering by 1972 a deficit somewhat greater than the deficit of $9.3 billion recorded in 1971.55 Reserve Bulletin, 54/12 (1968), Table A-90 (Foreign Exchange Rates). For the time period from 1967 to 1968 cf. Board of Governors of the Federal Reserve System, Division of International Finance Europe and British Commonwealth Section, Selected Interest and Exchange Rates for Major Countries and the US. Weekly series of chart, 431 (December 3, 1969), Washington DC, GPO, 1970, Table 2A and 2B. pp. 5-6. US Department of Commerce, Historical Statistics of the United States Colonial Times to the Present, Part 2. Washington DC, GPO, 1975, Chapter U, International Transactions and Foreign Commerce, Series U 1-25, p. 866. 54 Federal Reserve System, Annual Report of the Board of Governors of the Federal Reserve System for the Year 1972, Washington DC, GPO, 1973, pp. 59-60. Council of Economic Advisers, Economic Indicators, Prepared for the Joint Economic Committee by the Council of Economic Advisers, Washington DC, GPO, 1971, p. 25. 55 292 Simone Selva II. Bringing the Bretton Woods Institutions to Center Stage in the Fight to Reverse the International Payments Imbalances in the 1970s. A Short-Lived Route Export Oriented Policy, the Middle East, and Support for the Dollar in Exchange Markets Within such macroeconomic and financial framework, the more the dollar declined in exchange markets and the U.S. balance of payments deficit plummeted, the more Washington strove to devise a comprehensive set of foreign economic policy measures designed to reverse this trend. The start of the new decade was marked by a variety of foreign policy initiatives all designed to achieve this goal. Although the bulk of U.S. commitment to defend the dollar by containing the size of dollar denominated assets in world money supply revolved around a set of consistent foreign financial and monetary measures, it also included and shaped other fields such as foreign trade and investment policy. According to the Department of State, the investments of U.S. oil corporations in the Middle East oil producing countries brought an ongoing contribution toward reducing the U.S. balance of payments deficit on capital account. According to a 1967 study of the Department of State, about 65 percent of the oil produced in the Arab countries was the result of American investments there. These investments returned an annual profit of about $1.5 billion to the American oil industry and made a net contribution of over $1 billion per annum to the U.S. balance of payments, that according to U.S. diplomatic officers deserved to be fully adopted within the framework of a broader U.S. balance of payments deficit financing strategy.56 As regards the U.S. foreign trade side of this strategy, as early as 1970 the Department of Commerce brought before the White House a comprehensive foreign direct investment program tailored to regulate the foreign investment and borrowing of American corporations and companies doing business either in dollar currency areas economies or with the u.S. capital markets. Specifically, the program advised that U.S. corporations operating in capital surplus countries should be forced to borrow from assets denominated in currencies other than the U.S. dollar. The American corporations were supposed to borrow from the national capital markets of those countries NARA, Records of the Department of State (henceforth RG59), Bureau of European Affairs, Office of OECD, European Community and Atlantic Political Economic Affairs, Records Relating to Economic Matters 1953-1975, b. 13, fold. FSE-OECD-Petroleum 1967-1969, Department of State, “Western Interests in Arab Oil”, November 1, 1967. 56 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 293 in which they operated.57 This was suggested in order to prevent the u.S. companies operating in Europe from favoring either the outflow of dollar assets from the united States or the nurturing and development of the Eurodollar markets. As a matter of fact, by borrowing Eurodollars, the foreign branches of u.S. corporations encouraged overseas dollar holders not to repatriate their u.S. currency holdings. This investment path would clearly be at variance with any commitment to support the value of the dollar in international markets. On the other hand, as long as the financial wealth of the OPEC and non-OPEC oil producing countries increased as a result of the uptick in the posted price of crude oil from the turn of the decade, the Department of Commerce developed its export program in support for the export of u.S. manufacturing to the oil producing economies. According to Washington such export policy should serve as a means of arresting the decline of the u.S. currency by reducing foreign dollar holding and the transnational flows of dollar denominated private capital assets. Within this framework, prior to the quadrupling of oil prices, U.S. export earnings to the Middle Eastern oil producers had begun soaring. The two largest Middle Eastern importers of U.S. consumer goods and services, Iran and Saudi Arabia, are a noteworthy case in point. Just before the first oil crisis, compared to 1972, Iran had increased its import of U.S. products by roughly 50 percent in 1973, whereas from the first oil shock to the end of the decade the U.S. sales to Near East Arab oil producing countries and to Iran in 1973 totalled approximately $ 2 billion, up about 50 percent from the 1972 figures.58 This new u.S. export promoting tactic to oil-rich dollar holding countries was quite consistent with the late 1960s Department of State design of using overseas activities of u.S. corporations as an instrument to prop up the u.S. balance of payments on both the current and capital account. The creation of bilateral economic and trade commissions, established as early as 1974 between the U.S. government and its major Middle Eastern trade partners, would be linked to this longer U.S. objective to improve the American current account position in support for the dollar. Compared to the 1960s, at this later time the very objective underlying such export-oriented current account policy, mixed up with 57 NARA, RG40, Office of the Secretary, Executive Secretariat's Subject File 1953-1974, b. 181, fold. Foreign Direct Investments Comm., The Director of the Office for Foreign Direct investments to the Under Secretary of Commerce, “Report on 1970 Program Interagency Meeting”, September 22, 1969. NARA, RG40, Office of the Secretary, Executive Secretariat's Subject File 1953-1974, b. 309, fold. Commerce Action Group on the Near East (BIC), p. 50, “The Near East Markets: a Report to US Business. Prepared by BIC Near East Study Group”, May 17, 1974. 58 294 Simone Selva favoring overseas borrowing from non-dollar foreign capital markets, was to forestall and revert the decline of the u.S. currency in foreign markets. Such course of action was conducted not only to improve the u.S. international payments position. It was also designed to avert the consequences on the competitive edge of u.S. and western manufacturing trading in u.S. dollar from suffering from the depreciation of the dollar and from the consequences of such depreciation on the purchasing power of western-consumer goods importing lDCs.59 This foreign trade policy was quite consistent with the ongoing policy by the IBRD to issue its bond and securities into the non-dollar national capital markets from the late 1960s through the beginning of the new decade elaborated in the previous section. By the beginning of 1974, when the oilinduced balance of payments imbalance began afflicting the non-oil LDCs, in the pursuit of its development assistant programs to halt these effects on international payments, the World Bank had already borrowed $388 million in Kuwaiti dinars, $129 million in Libyan dinars, $25 million in Lebanese pounds. Furthermore, the Washington-based institution was negotiating a bond issue denominated in Venezuelan bolivares in the amount of about $25 million. Although most American authorities instructed that the Bank ought to convert these bonds into SDRs to protect borrowers from exchange rate risks, this policy of currency diversification clearly demonstrates the World Bank policy to reduce the dollar component in its public placements.60 After the first oil crisis, some leading oil producing countries supported this American effort to dry up the dollar component in international liquidity by pouring their everexpanding dollar-denominated oil revenues into the debt of the IBRD: in 1974 the OPEC countries increased their holding of bonds issued by the IBRD from 5 to 10 percent over the preceding seven years.61 Therefore, the borrowing policy of the World Bank in the private and public markets traces its involvement in the Nixon administration policy to halt the depreciation of the dollar in exchange markets through measures aimed at reducing the dollar share in both liquid and non-liquid international financial assets. 59 S.Selva, Before the Neoliberal Turn, op. cit., chapter 4. LOC, Manuscript Division, Robert McNamara Papers, Part 1, b. 27, fold. 5, IBRD, “Possible Means of Channeling OPEC funds through the World Bank”, February 15, 1974. On the use of SDRs to denominate the Bank's interest-yielding bonds see LOC, Manuscript Division, R. McNamara Papers, Part 1, b. 27, fold. 5 (Energy Crisis), I.P.M Cargill to Mr. M. Shoalb, “Aid Memoire for Mr. Shoalb”, July 19, 1974. 60 NARA, RG56, OASIA, Subject Files of the Office of International Monetary Affairs 19681978, b. 6, fold. Oil (2), Background paper “United Nations General Assembly Special Session”, April 1974, “Proposal for Use of Surplus Oil Revenues of Petroleum Exporting Countries”. 61 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 295 This set of policies aimed at propping up the u.S. international payments position and the dollar. However, a constant and uncontrolled depreciation of the dollar in foreign exchange markets had persisted from 1974 to 1979. There was only one notable exception shortly after the 1975 recession that impacted the advanced industrial economies. The u.S. government and the Federal Reserve System as a result, made a resolution to involve the largest u.S. commercial and investment banks in reflowing the ever-growing dollar denominated assets that had since early in 1974 saturated the international capital markets. Table 2. Exchange Rate Movements 1970-1978, percentage change62 Value in terms of dollar Swiss franc German mark May 29, 1970, to June 2, 1978 March 20, 1973, to June 2, 1978 Yearend 1974 Yearend 1975 Yearend 1976 Yearend 1977 September 1977 to June 2, 1978 +130.1 +72.3 +27.7 -3.1 +6.9 +22.0 +24.4 +74.7 +35.7 +12.2 -8.1 +11.0 +12.0 +12.4 Dutch guilder +62.8 +29.4 +12.7 -6.8 +9.4 +8.2 +10.2 Japanese yen +63.5 +20.2 -7.0 -1.4 +4.2 +22.2 +20.9 French franc +20.4 -1.4 +5.9 -0.9 -9.7 +5.7 +6.9 -4.1 -10.9 +0.5 -2.5 +0.7 -7.6 -4.1 Canadian dollar Pound sterling -24.3 -26.2 +1.1 -13.8 -15.9 +11.9 -4.1 Italian lira -27.0 -34.4 -6.4 -5.0 -21.9 +0.5 +2.5 Short-term Capital Markets, the Stabilization of World Trade and Payments, and the Dollar: the Role of the IMF and the IBRD in the 1970s If one points to the interconnection between OPEC oil revenues and the dollar value in foreign exchange markets, a negative correlation can be established between the growth in the OPEC dollar assets and the strength of the dollar. With the exception of the 1975 recession, which triggered a short fall in world demand for crude oil, reduced the expansion in OPEC oil revenues and eased international pressure on the U.S. currency in exchange markets, the U.S. currency plummeted among other reasons, because of the ever-increasing Rate sources: London mid-day rates, in NARA, RG56, Office of the General Counsel. Assistant General Counsel, Records Related to OPEC Financial Affairs 1974-1979, b. 1 fold. F, Part 1 of 4, 1978-1979. 62 296 Simone Selva share of dollar assets in world money supply that resulted from the uptick in prices of crude oil in world trade markets.63 Against this macroeconomic dynamic, prior to the landmark decision of the U.S. monetary authorities to initiate a path-breaking monetary tightening in 1979, it is worth noting the U.S. strategies to reconfigure the dollar and the limited extent to which the international economic institutions of Bretton Woods were involved in it, as well as the limited impact that they had on the planned redress of the u.S. currency. As briefly charted, over the course of the 1960s the unfettered outflows of capital from the u.S. markets and the growth of unregulated non-resident Eurocurrency markets had induced the u.S. authorities to implement a number of banking measures designed to reverse such tendency. In that context, such outflow was linked to the decline of the dollar since the twin deterioration of fixed exchange rates, stable oil and commodity prices in world markets. However, it was also caused by the increased dollar denominated international transactions due to the decision by the oil producers not to accept oil payments in British Sterling since london's decision to devalue the Sterling in 1967. Over the course of the decade the u.S. authorities viewed the development of short-term capital markets in non-resident European national markets, a large component of which was in dollar, the so called Eurodollar markets, as a threat to the stability of U.S. international payments position and world trade. It was only when the suspension of dollar convertibility into gold and the skyrocketing increase in the amount of dollar denominated investible surpluses of the oil producers that u.S. authorities changed their approach to it. At the time they endeavored to alter the investment patterns of the oil producers from short-term inflation sensitive Eurocurrency markets to longer international credit markets much more suitable to restore the oil crisis-wrecked supply side of the production chain across the advanced industrial economies.64 It was in this context that the u.S. monetary authorities worked on devising a reflowing mechanism aimed at making short-term capital markets an instrument of stabilizing trade and payments, rather than a multiplier for the depreciation of the U.S. currency. Against this backdrop, Washington charged the largest u.S. commercial banks that traded in the Euro-currency markets, and the IMF, with implementing such strategy to tailor short-term highly liquid and inflation sensitive capital markets to the much pressing 63 S. Selva, Before the Neoliberal Turn, op. cit., chapter 5. Documentation in NARA, RG56, Office of the General Counsel. Assistant General Counsel, Records Related to OPEC Financial Affairs 1974-1979, boxes 1-3. 64 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 297 need to reduce the ever-expanding dollar share in world money supply. This strategy was also designed to finance the recasting of purchasing power in foreign markets of oil shock-hit developing countries through a set of lending policies. As a matter of fact, since 1974 the Fed and the U.S. Treasury turned to favoring and shaping the international investments of the oil producers in short-term capital markets. This was in order to offset the worsening purchasing power of the non-oil lDCs and the restructuring of demand side conditions in advanced industrial economies that resulted from the declining dollar value and peaking oil prices.65 A commitment to reflow the OPEC dollar denominated investible surpluses from the Eurocurrency markets to the non-oil LDCs through the intermediary role of the IMF and the IBRD served the three-fold purpose of reducing the dollar component in world capital markets that had peaked since the first oil shock; it also eased off pressure of balance of payments assistance to the LDCs on the U.S. foreign aid policy and the U.S. dollar. Furthermore, it helped strike the balance between capital supply and aggregate demand within the advanced industrial economies by which over supply on demand side conditions was likely to trigger a deflationary spiral and a downward sloping trend in the cost of money at least before the 1975 recession. Since the spring of 1974, the u.S. monetary authority shaped a recycling mechanism that revolved around the pivotal role of both the IBRD and the IMF, as well as the largest u.S. commercial and investment banks. Basically, since the very beginning of 1974 the OPEC countries began accumulating a large amount of oil revenues: they placed a substantial share of them into the bank accounts they held at the largest New York-based commercial banks. The American banks accepted dollar-denominated Arab deposits and poured that money into the Eurocurrency markets and other short-term international money markets. Giant American banks such as Citibank or Chase Manhattan Bank had long been involved in the national credit markets of important OPEC member 65 NARA, RG56, OASIA, Office of the Deputy to the Assistant Secretary for International Affairs, Records Relating to International Financial Institutions 1962-1981, b. 8, fold. IM-138, International Monetary Country Risk 1978-1980, 1 of 3, p. 3, “American Banks during the 1970s and Beyond”, Remarks by Henry Wallich (Member, Board of Governors of the Federal Reserve System) at the Roundtable on Credit Systems in the 1970s Sponsored by the Ente per gli Studi Monetary Bancari e Finanziari Luigi Einaudi, September 3-7, 1980. Cf. also NARA, RG56, OASIA, Office of the Deputy to the Assistant Secretary for International Affairs, Records Relating to International Financial Institutions 1962-1981, b. 8, fold. IM-ID International Monetary: International Capital Flow 1979, Statement by the Honorable Anthony Solomon Under Secretary of the Treasury for Monetary Affairs before Subcommittees of the House Banking, Finance and Urban Affairs Committee, July 12, 1979, pp. 4 and 6. 298 Simone Selva states mostly either to underwrite import credit requirements or to finance national industrial or economic ventures as it was the case of Iran since as early as 1959. Since the end of 1973, the OPEC governments received payments in New York dollar deposits held at the five largest U.S. commercial banks residing in Wall Street. These funds were invested into the circa 30 banks they trusted in the Eurodollar market, primarily in extremely short maturities: call money, seven-day money, one-month money or three-month certificates, available to oil importing countries that suffered from liquidity problems. For instance, in early January 1974 Chase Manhattan Bank received and reflowed through deposits of Arab countries a number of accounts of Arab agency banks it held.66 The reflowing of these funds from these Wall Street-based foreign agency bank accounts to the banks in the Eurodollar markets was the way in which the oil revenues surpluses were poured into the Euro-money market. These Euro deposits were backed by New York dollar deposits “so that the original underlying dollar deposits never leave New York or the U.S. domestic money supply, even though their ownership changes from that of a U.S. oil company to that of an Arab government or Eurodollar bank”.67 Thereafter, these deposits were used to a great extent to lend short and to a rather limited amount to finance some long-term capital markets, mostly the Euro-bond market.68 Therefore, the very mechanism on which the process of reflowing oil money was based essentially contrasted with the American policy to draw on the capital surplus of OPEC countries to finance productive investments and to sustain aggregate demand. This because it technically poured petrodollars into liquid investments.In this context, the U.S. monetary authorities intervened to make the oil producers shift their investments from short-term Eurocurrency assets to longer-investment. A rough analysis confirms this change of investment patterns that the largest American banks effected on their OPEC deposits. Federal Reserve Bank of New York Archive, New York City (henceforth FRBNYA), Presidential Papers, Papers of Paul A. Volcker (1975-1979), Annual Report-President's Office to Survey of 1978, b. 142572, fold. President's Office. Chase Manhattan Bank 1961-1977, H. Willey (Federal Reserve Bank of New York), Memorandum “The Chase Manhattan Bank”, January 28, 1974. 66 NARA, RG56, Office of the General Counsel. Assistant General Counsel, Records Related to OPEC Financial Affairs 1974-1979, b. 1, fold. E Part 1 of 2 1974-1979, Thomas Willett to Undersecretary Bennett and Assistant Secretary Cooper, Memorandum “Report on discussions with New York Bankers Concerning Prospective Problems in International Financial Markets”, August 7, 1974, p. 5. 67 NARA, RG56, OASIA, Chronological Files of the Office of Financial Resources and Energy Finance 1974-1977, b. 2, fold. TEFRP: Office of Financial Resources Policy CoordinationPermanent Chron. File, December 1975, “US Estimates of OPEC Investments”, undated. 68 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 299 The foreign branches of the six largest American banks operating in the Eurocurrency markets began reflowing the expanding capital surplus of OPEC countries and continued through the 1975 recession. Since its inception, this process of reflowing the OPEC financial assets through Wall Street showed a string of palpable shortcomings. A few months later these concerns and hindrances led the u.S. government to change the way in which Washington made use of the recycling process of oil revenues to confront the u.S. capital account deficit through pressure on the OPEC countries to move to longterm investments. The six largest U.S. banks that poured the financial assets of OPEC countries in their foreign branches operating in the Eurocurrency market, and mostly in the Eurodollar portion of it, were Chase Manhattan Bank, Bank of America, Chemical Bank, Citibank, Manufacturers Hanover, and Morgan Guaranty.69 As of April 1974 the bulk of oil payments deposited in the Eurocurrency markets was mainly in dollar and British pound.70 In the aggregate, during the first eight months of the year, Eurocurrency lending by U.S. banks including both lending by domestic offices and portfolio investments by foreign subsidiaries located in the Eurocurrency markets increased by roughly over 3 percent a month.71 If one disaggregates this data by foreign subsidiaries specializing in short-term lending and U.S.-based domestic offices trading in long-term financial instruments, it is possible to deduce that the recycling of financial assets of OPEC nations in short-term Euro-money markets peaked during the first quarter of the year. Thereafter, U.S. domestic offices took the lead in shaping the international investments of the largest American banks in longer and less inflation-sensitive capital markets.72 Therefore, the investment shift was paired with a shift from foreign branches to domestic FRBNYA, Central Files, Meetings of Secretary of Treasury with New York Financial Men 1958-1981. 69 At year-end 1974 the share of OPEC's dollar denominated investments in the United States and that of sterling denominated investments excluding the Euro-banking market in the United States on total OPEC placements amounted to 19 and over 10 percent respectively, cf. NARA, RG56, OASIA, Chronological Files of the Office of Financial Resources and Energy Finance 1974-1977, b. 2, fold. TERFP: Office of Financial Resources Policy Coordination Permanent Chron. File, December 1975, Department of the Treasury, “US Estimates of OPEC Investments”, undated (1975). 70 Board of Governors of the Federal Reserve System, Federal Reserve Bulletin, 61/1 (1975), p. A72. 71 NARA, RG56, Office of the General Counsel. Assistant General Counsel, Records Related to OPEC Financial Affairs 1974-1975, b. 2, fold. G Part 1 of 3 1974-1975, “Outlook for International Lending by Banks in 1975”, March 24, 1975. Cf. also Treasury Bulletin, March, and April 1976. 72 300 Simone Selva offices of U.S. banks. It is worth placing the shift in the investment patterns of U.S. private financial actors in the context of this contribution on the initiatives of the international economic institutions to absorb the share of dollar assets in total world money supply with the aim of supporting the dollar in international markets. The shift from short-term investments into longer placements took the form of capital flows from the foreign branches of American banks that operated in the Eurodollar markets, to the domestic branches inclined to fuel fixed capital formation and productive investments. This move, promoted by the Federal Reserve Bank of New York, was consistent with American aim to strengthen international confidence in U.S. currency. As a matter of fact, long-term investments were predicated on a substantial absorption of capital supply. By contrast, short-term investments managed by overseas branches would imply a growing share of non investable inflationsensitive liquidity that would add to the dollar component in world liquidity and jeopardize further the u.S. currency in international exchange markets. Within this framework, Washington made a twin bet on the U.S. commercial and investment banks, on the largest brokerage houses, and on the IMF financial facilities, in order to favour such a process. Since the spring of 1974, even as the OPEC nations heavily pumped money into Eurodollar and other Eurocurrency deposits through the Wall Street banks, the creation of a number of multilateral recycling arrangements under the institutional umbrella of the IMF and IBRD was extensively discussed. Over the course of the summer of 1974 such discussions on the international investments of OPEC and the contribution of private banking to the recycling process led Washington and its Western partners to devise a string of projects aimed at getting the commercial banks involved. For instance, following a first proposal, which appeared as early as March of that same year, in July the Shell Oil Company discussed with the BIS a plan to have the BIS serve as a sort of clearing house for oil payments that would prevent the oil surpluses from going into the hands of commercial banks and would reduce the volume of dollar-denominated oil payments, thus curbing the effects of oil trade on the international supply of dollars and its stability in exchange markets.73 Certainly, statistical reports about the deposits of oil producers with the largest private banks point to their full involvement in this undertaking and the issue of international flows and deposits denominated in U.S. dollar, a International Monetary Fund Archive, Washington DC (henceforth IMFA), Middle Eastern Department Fond (henceforth Medai), Medai Subject Files, b. 71, fold. 3 (June 1974-August 1974), G. Gunter to Witteveen “Proposed Recycling Scheme through BIS”, August 1, 1974. Ibid., Shell Oil Company, “Aid Memoire”, March 13, 1974. 73 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 301 persistent problem for the American campaign to prop up the dollar through the institutions of Bretton Woods. A 1975 report by the Fed to the Senate Subcommittee on Multinational Corporations brought forth that the six largest U.S. banks (Chase Manhattan Bank, FNCB, Hannover Trust Corporation, Morgan Guaranty, Bank of America, Chemical Bank) had $11.3 billion in deposits from Middle East and North African oil producers, equal to 4.5 percent of the banks' total assets, in addition to the roughly $2.57 billion in deposits from other members of OPEC, including Venezuela and Indonesia. The total deposits of the six largest banks from oil producers were roughly equal to their total deposit liabilities to the financial centres of non-oil producing countries, including Panama, the Bahamas, Singapore and Switzerland.74 Therefore, there was an early involvement of U.S. private banks in reflowing the dollar assets of oil producers as a way of both decreasing the volume of dollar assets in international liquidity to support the U.S. currency, and providing vital support to oil deficit developing countries. However, since the quadrupling of oil prices cast a grim shadow on the international payments position of the LDCs and the least advanced industrial nations, the IMF got involved in the process of balance of payments deficit financing and contributed to such dollar-adjusting techniques. In light of projected current account deficit for the LDCs, since the beginning of 1974 the managing director of the IMF Witteveen fine tuned the establishment of an oil facility to provide temporary and limited assistance for developed and less developed countries facing difficult financial prospects due to the oil price rise.75 From the view point of this contribution, it is worth noting that since its creation the oil facility was to borrow a large portion of its funding from the oil producers. More importantly, borrowing would be denominated in SDRs to minimize the financial strains of the oil facility on the U.S. currency and in order to prevent it from plummeting further in exchange markets compared to the past decade or so.76 74 “Fed Shows Scope of US Deposits from Oil Lands”, The Wall Street Journal, March 12, 1976, p. 4. NARA, RG56, OASIA, Office of the Deputy Assistant Secretary for International Monetary Affairs, Briefing Books 1971-1980, b. 1, fold. Briefing Material G-10 Deputies' Meeting, November 20-21, 1974, A.K. Rawlinson (the British Embassy in Washington) to W. Simon (The US Secretary of the Treasury), note, September 17, 1974. 75 A.D. Crockett, Memorandum for the Files “Financing the Oil Facility” March 22, 1974. J.Witteveen to G.Shultz (US Secretary of the Treasury), March 21, 1974, both in IMFA, Office of Managing Directors Series, Witteveen Files, Chronological Files, b. 1, fold. 76 302 Simone Selva Bypassing the Bretton Woods Institutions and U.S. Banks: OPEC Finance and Direct Lending to Developing Countries Thus, since its establishment the oil facility and the institutional reflowing of the dollar assets of the OPEC oil producers through the IMF was specifically aimed at reducing the quantity of dollar assets in world financial markets. Although the IMF was involved in such clear-cut international monetary approach to resurrect the competitiveness of the u.S. economy and that of any other country that purchased commodities and consumer goods traded in U.S. dollars, the IMF was largely unsuccessful in contributing to such strategy. In fact, on the one side some OPEC producing countries showed their inclination to finance the two sister institutions of Bretton Woods as a way of strengthening their bilateral diplomatic and economic bonds with Washington. On the other, however, as a community OPEC resisted such institutionalization aimed at combining assistance to the non-oil lDCs with full support for the dollar through the Bretton Woods institutions. The former was the case of Iran's attitude to the creation of the IMF oil facility. On February 21, 1974, the Shah discussed with Robert McNamara, then still President of the IBRD, and Johannes Witteveen, Managing Director of the International Monetary Fund, three proposals for the recycling of OPEC oil revenues. On the one side he proposed to buy IBRD bonds and to finance the IMF oil facility whose creation Witteveen had recently brought before the international community and the public opinion. Such proposal for lending to the IBRD was immediately approved by the u.S. government and highlights Teheran's strategy to use oil revenues to strengthen its bilateral relations with Washington.77 The latter was the case of the increasing attempt by the oil producers to directly lend to the non-oil LDCs. In fact, it is true that in the aggregate, at year-end 1975 the OPEC investments in IBRD bonds and in the IMF oil facility had increased by 10 percent compared with 6 percent in 1974.78 However, the OPEC countries began resisting the placement of their dollar assets with any of the Washington-based Bretton Woods institutions and their inclination to lend to the lDCs directly began as early as 1974. Along this line of action, as soon as the fourfold oil price increase triggered NARA, RG56, National Advisory Council on International Monetary and Financial Policies, NAC Staff Committee Minutes 1974, b. 2, fold. Meeting n. 74-1 through 74-21, NAC, NAC Staff Committee Minuets, Meeting 74-14, March 19, 1974. 77 NARA, RG56, OASIA, Chronological Files of the Office of Financial Resources and Energy Finance 1974-1977, b. 2, fold. TEFRP: Office of Financial Resources Policy Coordination. Permanent Chron. File December 1975, Office of Financial Resources and Energy Finance, “US Estimates of OPEC Investments”, December 1975. 78 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 303 a rise in the investible resources of OPEC capital surplus countries, the government of Venezuela proposed that OPEC establish a special fund to help the LDCs meet higher petroleum costs. By the third quarter of 1974, Saudi Arabia, Iran and Kuwait bore the largest share of concessional aid to the non-oil LDCs; by that time Egypt and Syria received about 60 percent of total concessionary aid by the OPEC countries to non-oil exporting LDCs, followed by India and Pakistan.79 These early moves by the largest OPEC oil producers to connect the meteoric rise in their financial resources to the LDCs' imbalances caused by the oil crisis highlight their attitude towards directly extending loans across the globe and to bypass the Western world. Such an early move is quite important as it helps explain the way in which the OPEC countries reacted to the Western attempt to lock their fund in multilateral arrangements set up within the IBRD and the IMF and under U.S. leadership. According to IBRD estimates, during the first eight months of 1974 the OPEC countries had transferred a total of $ 16 billion to developing countries and international lending institutions, of which roughly over $ 7 billion had been appropriated directly to the lDCs.80 Therefore, the OPEC producers appeared determined early enough to bypass the process of institutionalization of reflowing their dollar assets through the Bretton Woods institutions. The u.S. strategies to absorb the outstanding dollar assets of oil producers in support for bolstering the u.S. currency met with the recalcitrance of u.S. commercial banks charged with reflowing dollar denominated oil revenues into the longer-term capital markets apt to fuel fixed capital formation: this was a further hindrance on the way to support the strength of the dollar in foreign exchange markets. To quote just a few, for instance in September 1974 Morgan's Vice President Rimmer de Vries made the argument that the rapid pace of expansion of foreign loans undertaken by the American banks in recent months (by some $12.5 billion over the first half of the year according to his calculations) were not to continue for two fundamental reasons. On the one side he declared that the normal prudent approach of the bank to risk management on the liability side of their balance sheets was increasingly inhibiting their acceptance of large short-term deposits from oil exporters, often accepted only at a discount. On the other hand, he pointed out that the bank deposit 79 Department of the Treasury, OASIA, “OPEC Aid Commitments to Non-Oil Exporting LDCs”, September 20, 1974, in DDRS. IMFA, Medai, Medai Subject Files, b. 75, fold. 1, Ernest Sture to the Managing Director, “Financial Arrangements of Certain Oil-Exporting Countries in 1974”, September 24, 1974. 80 304 Simone Selva to capital ratios was increasingly out of line, and banks were reluctant to expand their equity base at present price-earnings multiples.81 On his part, in the summer of that same year, Bank of America President Clausen went so far as to directly call on the IMF and other official institutions to find alternative channels for recycling oil money with the aim of using the surplus of the oil-producing countries to finance the deficit of oil-importing nations. Without calling into question the bank exposure of American banks committed to lending to the LDCs, he made the point that a larger involvement of the international institutions in the process would ease the pressure of the recycling process on the Euromarkets.82 Against this backdrop, the American policy to stem the shift in the investment patterns of the oil-producing countries to long-term financial instruments in support for the capital supply side coincided with a wide-ranging awareness about such growing reluctance and the unsuitability of private capital markets, as well as a pressing need to set up some form of capital controls and surveillance.83 In fact, American commercial bankers relentlessly repeated their unwillingness to bear the cost of recycling even as the Federal Reserve Bank of New York and the Comptroller of the Currency pressed them to adopt a much stricter lending policy and to scrutinize the creditworthiness of borrowers.84 Resorting once more to the Bretton Woods Institutions: the Carter Administration Response to OPEC Lending Policies In addition to this reportedly recalcitrance by leading u.S. commercial banks to channel the OPEC international investments into lDCs gradually unable to repay their external debt and borrowing, the recycling mechanism revolving around the short-term Eurocurrency markets and international credit markets, and the active role of leading international commercial banks, 81 NARA, RG56, OASIA, Office of the General Counsel. Assistant General Counsel, Records Related to OPEC Financial Affairs 1094-1979, b. 1, fold. G Part 2 of 3 1974-1975, D. Keyser to T. Willet, Memorandum “Recycling Petrodollars: Aspects of Financial Market Behavior”, September 23, 1974. Cf. also The Financial Times, September 24, 1974. 82 Euromoney, 1974, p. 4. NARA, RG56, OASIA, Office of the General Counsel. Assistant General Counsel, Records Related to OPEC Financial Affairs 1974-1979, b. 2, fold. F Part 4 of 4 1974-1978, Department of the Treasury, “Problems faced by banks”, September 4, 1974. 83 NARA, RG56, OASIA, Office of the General Counsel. Assistant General Counsel, Records related to OPEC Financial Affairs 1974-1979, b. 1, fold. G Part 2 of 3 1974-1975, D. Keyser to T. Willet, Memorandum “Recycling Petrodollars: Aspects of Financial Market Behavior”, September 23, 1974. 84 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 305 was widely called into question within the U.S. political system. When the resurgence of OPEC investable surpluses began accumulating from 1974 to about 1977, private bank lending to finance the balance of payments deficits of either the lDCs or the industrial nations hit by the oil crisis and capital market developments became the subject of intense political debate in the United States. In the spring of 1975 the Subcommittee on Multinational Corporations of the Foreign Relations Committee, the so-called Church Subcommittee of U.S. Congress, began collecting data from the largest U.S. commercial banks on their foreign assets and liabilities. This collection of data, that called American banking to disclose data on their involvement in reflowing dollar assets of oil producers, was relentlessly opposed by all five largest U.S. banks throughout the year. It shed light on the widespread concern in Washington about the possibility of OPEC withdrawals from their investments and deposits with the u.S. banking system.85 As the debate on banking disclosure continued over the course of 1976 and 1977, the U.S. political system and the American public opinion debated the broader issue of such financial dependence on Middle Eastern depositors in terms of its implications on the stability and soundness of u.S. foreign branches and subsidiaries of U.S. banks, their capital structure, the structure of their liabilities and their profitability, as well as the impact on their non banking activities.86 Widespread expectation for soaring posted prices of oil by OPEC in 1977 fuelled this concern in Washington: within the Department of the Treasury office charged with studying and managing the U.S. foreign financial relations, for instance, “the financing of 1977 deficits of oil importing 85 FRBNYA, Rosemary Lazenby, Mr. Kubarich 's Files, b. 114512, A. Burns (Chairman, Board of Governors Federal Reserve System) to Honorable Frank Church (Chairman, the Subcommittee on Multinational Corporations of the Foreign Relations Committee), March 9, 1975; Request by Church Subcommittee Chronology', November 11, 1975; P.E. Coldwell (Board of Governors member) to Sen. B. Rosenthal (Chairman, Commerce, Consumer, and Monetary Affairs Subcommittee of the Committee on Government Operations), July 13, 1979. See also NARA, RG56, Office of the General Counsel. Assistant General Counsel, Records Related to OPEC Financial Affairs 1974-1979, b. 3, fold. N Part 1 of 2 1977-1978, C. Cooper-G.Parsky, Memorandum for Under Secretary Yeo “Church Subcommittee Request for Bank Data”, undated [1975]. As for resistance to divulgate requested data by all major New York City banks (Manufacturers Hanover, Chase Manhattan Bank, Citibank, Morgan Guarantee) cf. the correspondence with bankers by the Board of Governors of the Federal Reserve System held in NARA, RG56, Office of the General Counsel. Assistant General Counsel, Records Related to OPEC Financial Affairs 1974-1979, b. 2. NARA, RG56, OASIA, Chronological Files of the Office of Financial Resources and Energy Finance 1974-1977, b. 2, fold. OASIA/OFREF Perm Chron Oct 1976, William Witherell (OASIA) to Assistant Secretary of the Treasury Parsky, “Study of International Banking Issues”, October 6, 1976. 86 306 Simone Selva countries could present some real difficulties. The assurance of continued expansion of private bank lending to the less creditworthy lDCs and certain DCs will not be easy to achieve”.87 Moreover, insofar as the recycling mechanism had been predicated upon smooth financial flows from the oil producers to the commercial and investment banks that served as intermediaries and brokers between investors and borrowers, such process met an obstacle in the so-called maturity imbalance issue. Maturity imbalance caused a variance between short term lending by OPEC countries and longer lending by banking intermediaries destined for lDCs. In this context, there were discrepancies between the oil producing investors, the western commercial banks charged with reflowing their dollar denominated assets, and the international economic institutions of Bretton Woods committed to tailor the process of recycling to the larger u.S. objective of reducing dollar assets in world money supply. under the Carter administration on the one side Washington shifted its strategy in support for the dollar from such foreign financial policy to monetary policy. On the other, it progressively revamped the role of the IMF and the IBRD to complement private banks in drying up the dollar component of world capital markets and in redirecting international investments and lending to the least developed and developing economies hit the most by the depreciation of the U.S. currency and international inflation. As a matter of fact, during the Carter administration the almost interminable depreciation of the dollar reduced the value of non-liquid assets of the OPEC countries. Whether those OPEC assets were deposited in either equity or security markets, the practice of international investment of oil revenues, in which the U.S. commercial banks had been involved since 1974, was deemed unstable. On the other hand, however, on average during these years the u.S. economy enjoyed a growth substantially higher than any other industrial economy. This growth triggered and accounts for the increasing demand for bank credit typical of the Carter years. Such booming bank credit market increased interest rates differential with most surplus countries, thus attracting investors from those countries. This permitted Washington to use interest rates to counteract its current account deficit.88 Nevertheless, as a NARA, RG56, OASIA, Chronological Files of the Office of Financial Resources and Energy Finance 1974-1977, b. 2, fold. OASIA/OFREF Perm Chron Oct 1976, Bil Witherell to Deputy Assistant Secretary Niehuss, “Petrodollar Recycling”, September 30, 1976. 87 NARA, RG56, OASIA, Office of the Deputy to the Assistant Secretary for International Affairs, Records Relating to International Financial Institutions 1962-1981, b. 2, fold. IM-5 Boards, Committees, Organizations, Panels, Working Groups 1977-1978, George H. Willis (US 88 Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 307 result of ever expanding Eurodollar markets, oil transactions in U.S. dollar, and the recent attitude of deficit countries toward borrowing dollars from surplus OECD countries, such attraction of foreign capital through interest differential was clearly not sufficient to sustain the value of the dollar in foreign markets and to calm loud complains to Washington by the OPEC investors about the depreciation of their dollar investments.89 Moreover, at the end of the decade, in particular in connection to the implications on international payments of the second oil crisis, direct assistance from OPEC to balance of payments deficit countries was expanded and was to lay the seeds for sustained oil payments and other commodity transactions in U.S. dollars. As a matter of fact, the OPEC Special Fund founded in 1976 to lend money to the non-oil LDCs directly, expanded its budget and increased the volume of its appropriations to the non-oil lDCs. In June 1979 the OPEC ministers decided to increase the resources of the Special Fund by $ 800 million from $ 1.6 billion to $ 2.4 billion, whereas during that year the Special Fund approved a stunning number of balance of payments support programs and development project loans to the most seriously affected LDCs.90 It was in the framework of these multiple factors that the united States made a case for revamping the role of the Bretton Woods institutions in promoting development assistance. In order to prevent -or at least contain- the oil producers from promoting direct assistance to the non-oil lDCs that was likely to increase the volume of dollar denominated international transactions, a path-breaking new policy was to make the IMF finance its balance of payments assistance programs to the developing and industrial countries most seriously affected by the two-fold depreciation of the dollar and the second oil price hikes. In this sense, the IMF was to resort to OPEC and its Special Fund. Since 1977 most leading members of OPEC had donated through the OPEC Special Fund their share of the profit of surplus value of the IMF gold sales to the OPEC Special Fund. The Special Fund transferred these profits to the IMF Trust Fund for the benefit of developing Department of the Treasury) to Deputy Assistant Secretary Widman, “Some Rough Thoughts for Talking Points for WP-3”, November 15, 1977. 89 S. Selva, Before the Neoliberal Turn, op. cit., chapter 5. Among other OPEC members that donated their profits to finance the development assistance activities of the IMF Trust Fund it is worth mentioning Iraq, Kuwait, Saudi Arabia: see Ibrahim F.I. Shihata to J. H. Witteveen (IMF Managing Director), December 16, 1977. The IMF Washington Dc to the OPEC Special Fund, cable, December 23, 1977. Briefing Papers of the Managing Director's Meeting with Dr. Ibrahim F.I. Shihata, Director General of the OPEC Special Fund, October 29, 1979. All documents are located in IMFA, Medai, Medai Subject Files, b. 75 (OPEC), fold 10 (OPEC Special fund 1976-1977). 90 308 Simone Selva countries.91 The Carter administration made a commitment to reposition the IMF and the IBRD at the center of u.S. policies. The objective was to halt the depreciation of the dollar through reduction of the portion of dollar assets in world capital supply and central bank holdings. This objective would also be achieved with continued support for the purchasing power of the non-oil lDCs in foreign markets. The contributions of the two Washington- based international economic institutions paved the way for the new international financial powers that rose on the world financial stage during the decade. III. Concluding Remarks Therefore, the failure of the IMF and the IBRD in bolstering the value of the u.S. currency and in stabilizing international trade and payments stemmed not only from the initiative of the OPEC oil producing countries. At the end of the time period reviewed in this chapter they took advantage of their booming dollar-denominated investable surpluses to increase their influence over the least developed economies. Also, the ongoing role of the largest U.S. and western commercial banks is worth considering. Despite their longstanding recalcitrance to bank exposure toward developing countries that featured a poor-debt service capacity, at the turn of the decade these banks still played a substantial role in the recycling of dollar-denominated assets92 that accrued to the OPEC nations. The combination of these two factors reduced the efficacy of the IMF and the IBRD programs and challenged the restructuring of the primacy of the dollar on the world system of financial transactions and exchange in goods and services. To sum it up, prior to the second half of the 1960s the U.S. governments had largely neglected the potential role of the two sister institutions of 91 IMFA, Medai, Medai Subject Files, b. 75 (OPEC), Briefing Papers of the Managing Director's Meeting with Dr. Ibrahim F.I. Shihata, Director General of the OPEC Special Fund, October 29, 1979. 92 In 1979, the OPEC deposits at the eight largest New York banks amounted to over 11 percent of their total deposits in domestic and foreign offices: just over half of total OPEC deposits were liabilities of Citibank. More importantly, OPEC deposits at domestic offices of those eight largest banks amounted to over 21 percent of these banks' net Federal Funds position, while at foreign branches and subsidiaries of the banks these deposits were still over 54 percent of the banks' Eurocurrency placements with foreign banks. From December 1975 to December 1978 the deposits of Middle East oil producing countries in foreign branches of the six largest US banks peaked from $197.5 billion to $274 billion. Cf. FRBNYA, Central Files, b. 114512, fold. OPEC, P. Coldwell (Member, Board of Governors of the Federal Reserve System), Statement before the Commerce, Consumer, and Monetary Affairs Subcommittee, Committee on Government Operations, House of Representatives, Table 3, July 18, 1979. Bolstering the U.S. Dollar and Stabilizing World Trade and Payments 309 Bretton Woods in propping up the strength of the u.S. currency by reducing or containing the share of dollar assets in world liquidity. Later on, in the time period when both of them were deeply involved in reaching that target in the second half of the 1960s through to late 1979, the United States modified the balance of payments deficit financing policies to center them on monetary policies. This was in the aim to stabilize the world trade and payments system under a revamped hegemony of the dollar. However, neither of the borrowing programs or multilateral financial arrangements established under the two institutions in order both to resurrect the dollar and to prevent the non oil LDCs from slipping away from the world trade and payments system, did work efficiently. This was due to the ascendancy on the world financial stage of both the oil producers and the largest western commercial banks which undertook the recycling of the oil revenues in world financial markets. ROSER CuSSÓ EPILOGUE INTERNATIONAL COOPERATION AND EXPERTISE ON STATISTICS A CHALLENGE FOR GLOBAL HISTORY The analysis of international technical coordination and expertise, as phenomena that transcend state borders, is particularly relevant to global history. As already mentioned in the Introduction to this volume, intergovernmental organizations (IOs) play an important role in transnational processes; their missions, functioning and power are intrinsically multilateral and multi-scalar. Founded by governments and reliant on their consent, IOs are also connected to states at the regional and local scales. In regard to their means, IOs do not directly implement laws or other constraining tools; they function by coordinating Member States and their governmental activities. To produce such coordination, a new arena of continuous and accumulative interaction between international secretariats, government representatives, civil society and experts was constructed by the first major IO, the League of Nations (1919-1946), and the system has been continued by IOs since then. Technical cooperation was an essential factor in this new form of transnational interaction. The league shaped it and reinforced it through the practices it introduced. Despite the potential benefits to historiography of analysis of this mechanism, it has not been examined often, or in detail. The analysis of cooperation processes can contribute to identifying and understanding better the specific levers and actors of globalization. It also helps allay recourse to conventional “narratives” of inordinate influences and dominance in the international context. The term “technical” is often meant to be opposed to “political” activities. For example, the promotion of vaccination against certain diseases by the Hygiene Section of the league of Nations could be seen as belonging to the technical domain. The same applied to the production of guidelines for the measurement of cause-specific mortality. We would not dare today to consider health policies and nomenclatures simply as (non-political) 312 Roser Cussό technical measures. Yet, if the political nature of IO technical activity has been more readily acknowledged of late, this is nevertheless often limited to its auxiliary role in a more explicit decision-making process. Such a perception may overlook the relative autonomy present in technical processes and micro-decisions as well as the more profound and subtle political and social “discipline” effects that they involve. This volume contributes to revisiting and detailing from new perspectives the analysis of international technical cooperation and expertise, in particular in relation to quantification. Statistical programs and activities can enact and develop their own purposes and mechanisms. The discussion, and adoption by different countries, of common quantifiable definitions of international trade, for example, could impact national economic programs through several channels. First, the statistics standardization process tended to reduce the diversity of available data and, accordingly, of economic knowledge and related alternative views. Second, League cooperation could indirectly promote “good practices” through comparing both figures (ex. volume of foreign trade by country, national financial conditions…) and underlying national capacities and choices (reduction of customs duties, monetary reforms…). In a context where cross-country economic interdependency was linked to peaceful relations, harmonized knowledge and state emulation were supporting advances in trade and financial globalization. Nevertheless, international cooperation was and still is a work in progress, and subject to unpredictable evolution: reinterpretation of, and resistance to commitments and goals, and formation or consolidation of new geopolitical alliances have always been common features of international activity. The international arena makes for the emergence of new political balances not only between countries but also between countries and IOs. From a methodological point of view, the analysis of statistical cooperation as a social and political process is a major challenge. First, the complexity and manifold character of such international mechanisms must be acknowledged. The league of Nations developed a very complete statistical cooperation program: preparation of conventions and methodologies, discussion and adoption of these documents by the Member States, expert missions, collection and processing of national data, publication and analysis of the latter. Less visibly, data production presupposed prior, and continuing, harmonization work by national statistical institutes. Second, these cooperation stages and results are best analyzed together, seen over time, and considered in both their macro and micro dimensions, i.e., the aspects which structure the cooperation (conventions, guidelines, data, etc.) and those which are contingent (actors and their practices and micro-decisions, Epilogue - International Cooperation and Expertise on Statistics 313 their profiles, their relationships). Some actors had also a multi-scalar role. As mentioned above, the national statistical institutes implemented the international accords. Their representatives often participated both in the coordination thereof and in its practical adoption; they were “passeurs” of global ways of conceiving and representing trade; they could contribute to changing the “sociology” of the State’s statistical production from within. Yet, it is necessary to go beyond the stereotyped roles sometimes granted to actors and positions in order to analyze practitioners, experts and officials in a dynamic framework, open to new and flexible interpretations of the economic transformations of the interwar period. Global cooperation has always involved a country’s capacity (and need) for re-interpretation and dissent. The analysis of the links between the global and national levels (agendas, correspondence, minutes of meetings, decisions, etc.), along with the regional and local dimensions, also requires national case studies (role of transnational experts, laws which reformed statistics, new data, their internal use). The analysis of the role of experts in Turkey illustrates these aspects and opens up important avenues to understanding the mechanism for the transfer, adaptation or circumvention of both IO and bilateral technical instruments in a specific country. In brief, the analysis of transnational technical cooperation, and statistical production and comparison, contributes to a better understanding of globalization dynamics and geopolitical reconfigurations. It puts center-stage the detailed study of the connections of different actors at different political levels through their exchanges and discussions, agreements and conflicts. Similarly, the reforms of national technical and statistical activities will need to be examined more deeply, and in parallel with these international studies. Biographies of the Authors (by alphabetic order) Antonis A. Antoniou PhD in Economic History, University Paris I Panthéon-Sorbonne (2004). He holds also a D.E.A. in sociology of labor, University Paris VII - Jussieu and a D.E.A. in Economic History, University Paris I Panthéon-Sorbonne. He has teaching experience, teaching Greek and European Economic History, Modern Greek History and History of Modern Greek Education in the University of Thessaly, the University of Macedonia and the Hellenic Open University throughout a period lasting more than ten years. His major publications are related to economic history of Greece and especially to the historical analysis of the Greek public sector and he participated in international congresses with relative thematic. He also published articles in the Greek press regarding issues of financial policies and economic history. He is Postdoctoral Researcher in the Research Program “Transnational Monetary and Economic Alternatives in the Interwar Politics: The 1930s Greek Crisis in European Context”, Academy of Athens - HFRI. Dimitrios K. Apostolopoulos Senior Researcher at the Modern Greek History Research Centre of the Academy of Athens. He was born in Athens in 1978 and graduated in International and European Studies from the Political Sciences and Public Administration Department of the Athens Law School, as well as in German Studies from the Department of German Language and Literature of the University of Athens. He holds a Ph.D. from the History Department of the Technische Universität Berlin in the field of Modern and Contemporary History (2004) and completed Post-Doctoral research at the University of Athens (2008). He has worked as a lecturer at the Hellenic Open University, the Department of History and Archaeology of the University of Athens, the National Center of Public Administration, the Hellenic Army Academy and as a scientific assistant at the National Defense Politics and International Relations General Directorate of the Greek Ministry of Defense. He has participated in various scientific conferences and has published a book on Greek-German Postwar Relations (original title: Die griechisch-deutschen 316 Curriculum Vitae Nachkriegsbeziehungen. Historische Hypothek und moralischer “Kredit”, Peter Lang 2004), as well as a number of articles on modern and contemporary history in specific journals and collective volumes. For more information and publications see: http://www.academyofathens.gr/en/researchers/apostolopoulos Catherine P. Brégianni Doctor in Modern History, Paris I Panthéon-Sorbonne (2001). Research Director of the Modern Greek History Research Centre, Academy of Athens. Scientific Director of the Research Project Transnational Monetary and Economic Alternatives in the Interwar Politics. The 1930s Greek Crisis in the European Context, Academy of Athens Hellenic Foundation for Research and Innovation. Correspondant of the group laboratoire de Démographie et d’Histoire Sociale, CRH-EHESS, Paris [individual project Crises économiques, politiques transnationales et exemples nationaux à l’Europe de l’entre-deuxguerres]. She was Invited Professor at the University Paris I (2017) and the Financial University of Moscow (2016). She was Invited Researcher at the MSH/ Paris during her financed research leave (2012). Her previous functions are: Scientific associate at the Bank of Greece, Centre of Research, Documentation and Collections (2008-2015, external); Tutor at the Hellenic Open University, teaching European Economic History (2001-2011); Scientific Collaborator at the Hellenic Banks Association (1999-2004, external). She has published on market mechanisms in-between the international monetary system in a transnational perspective, by means of institutional analysis. Her research includes topics of the European Rural History, focusing on the interwar rural modernization in Greece and on the emergence of institutions of social economy. She was organizer or co-organizer of various thematic Sessions at International Conferences of Economic History from 2012 to the present, focusing on the institutional interaction between the global and the local. last monograph: From the Greek Revolution to the Greek-Turkish War (ceremonies-symbols- representations), Athens, Alfeios, 1922, in Greek. She has published articles in: Historia Agraria, Cahiers de la Méditerranée, Histoire & Société, Histoire et Sociétés Rurales, Review of Business and Economic Studies. For more information and publications see: http://www.academyofathens.gr/en/researchers/bregianni Roser Cussó Roser Cussó is a historian and demographer. She is a professor at University Paris I Panthéon-Sorbonne. Her recent work is on the history and sociology Curriculum Vitae 317 of the quantification produced by intergovernmental and supranational organizations (on education, population, economics) as well as on technical cooperation processes - viewed as levers for political change and globalization. She also analyses minorities and nationalities in the international arena, especially as regards the League of Nations, and the measurement of national identity. She has edited 4 books and contributed over 20 chapters and 40 scientific articles – appearing in journals such as: International History Review; International Journal on Minority and Group Rights; Ethnopolitics; Popolazione & Storia; International Journal of Educational Development; Comparative Education; Pôle Sud; Histoire & Mesure; Études Internationales; Mots - Les langages du politique; Éducation et Sociétés; Revue française de socio-économie. For more information and publications see: https://www.researchgate.net/profile/Roser_Cusso4/research Aykiz Dogan Aykiz Dogan is PhD in sociology and associate researcher at the Sorbonne Institute of Development Studies (IEDES), University of Paris I PanthéonSorbonne. She obtained her bachelor’s degree in economics and followed master’s courses in media and cultural studies in Ankara, Turkey (Universities of Ankara, Bilkent and Hacettepe). She acquired eight years of work experience in management, financial markets and market research as an economist before investing in an academic career. She holds a master’s degree in political science from the university of Paris VIII. Her research interests include international political sociology, economic sociology, sociology of expertise, and historical sociology. Her PhD was supervised by Roser Cussó (University of Paris I, Professor of sociology), and studied the role of international actors and expertise in the Turkish state-making during the interwar period. She also collaborates with Frédéric lebaron (ENSCachan, Professor of sociology) on a long-term project on central banking and bankers which produced various publications. She is a member of the working group organizing International Political Sociology (IPS) seminars in France. She has teaching experience in sociology and political sciences at the universities of Paris I, Paris VIII, Paris XIII and Paris-Est as well as the Sciences Po Saint-Germain-en-Laye. She has published journal articles in: European Journal of Turkish Studies, European Review of History: Revue européenne d’histoire, Sociologica, Ekonomik Yaklaşım, Finans Politik & Ekonomik Yorumlar Dergisi. For more information and publications see: https://www.researchgate.net/ 318 Curriculum Vitae Jürgen Nautz After evening college study of history, philosophy and economics, he obtained: PhD scholarship of the Hans-Böckler-Foudation (Federation of German Trade Unions), Doctoral degree (1984, Heinrich-Heine-University, Düsseldorf), habilitation in economic history (University of Vienna, 1996). From 1984 to 1990 he was assistant professor (University of Kassel, 19902013). He held various projects, acquired teaching assignments, standin professorships, and fellowships (University of Innsbruck/ University of Vienna/ Bauhaus-Universität, Weimar/ Institute for German Studies, Amsterdam/ Berlin Social Science Center). Since 1996 he was associate university professor at the Dep. of Economics, University of Vienna (ao. Universitäts-Professor), and 2014 professor for business science, Internationale Berufsakademie, Nürnberg. During the years 2014 to 2020 he was professor for economics in the Technische Hochschule OstwestfalenLippe, and during the years 2018 to 2020 he was speaker of the department Business and markets, Promotionskolleg Nordrhein-Westfalen (graduate institute). Since his retirement in 2020 he holds teaching assignments (TH OWL, University of Vienna, and Hochschule Fulda University of Applied Sciences). He is member of the scientific advisory board Leipzig Resilience Hub, University of Leipzig. Selected publications: “Österreichische und deutsche Sozialpartnerschaft im Vergleich”, in Rolf Walter (ed.), Geschichte der Arbeitsmärkte. Erträge der 22. Arbeitstagung der Gesellschaft für Sozial- und Wirtschaftsgeschichte, 11. bis 14. April 2007 in Wien. Stuttgart: Franz Steiner Verlag 2009, pp. 397-418; editor with Nathalie Champroux, Georges Depeyrot, Aykiz Dogan, Construction and Deconstruction of Monetary Unions. Lessons from the Past (Collection Moneta 201). Wetteren: Moneta 2018; “Ethnic, Religious, Cultural Plurality and Economic Institutions”, in Georges Depeyrot (ed.), Currency, Money, and Economic History (Collection Moneta 206). Wetteren: Moneta 2019, pp. 113122. Sotiris Rizas Research Director of the Greek Modern History Research Centre of the Academy of Athens and acting Director of the same research center. He has written in English the books: The Rise of the Left in Southern Europe, London: Routledge (2016) The End of Middle Class Politics? Cambridge Scholars Publishing (2018) Realism and Human Rights in US. Policy toward Greece, Turkey, and Cyprus, Lexington Books/Rowman and Littlefield (2018) Curriculum Vitae 319 He also wrote articles in: Contemporary European History, Journal of Transatlantic Studies, Cold War History, Fletcher Forum of World Affairs, Mediterranean Quarterly. For more information and publications see: http://www.academyofathens.gr/en/researchers/rizas Michalis Sarras Michalis Sarras has studied Political Science and Public Administration (Bachelor of Arts, 2005), “European and International Studies” (MPhil, 2007) in the National and Kapodistrian University of Athens. His PhD thesis, entitled Agrarianism in the Balkans during the Interwar Period. Structure Formation and Social Evolution in Greece and Bulgaria, University of Ioannina, 2015, focuses on the economic and social agrarian background of the Balkan Peninsula for the interwar period. He is conducting research on the subject of agrarian economy for the Balkan Peninsula and South-East Europe. He has participated in conferences on the agrarian and economic history of Greece and the Balkans and has published articles in collective volumes and conferences proceedings. His scientific interests revolve around the Greek agrarian economy of the 19th century and the 1914-1941 period of the 20th century, as compared to the Balkans and Eastern European paradigm. He is working at the General State Archives and he is Postdoctoral Researcher in the Research Project “Transnational Monetary and Economic Alternatives in the Interwar Politics: The 1930s Greek Crisis in European Context”, Academy of Athens - HFRI. Simone Selva Dr. Simone Selva is currently tenure-track assistant professor in international economic history at the University of Naples L’Orientale, where he instructs graduate courses in Global Economic History and History and Politics of Transatlantic Relations. He is presently also a visiting scholar at universidad de Buenos Aires. A former visiting scholar at the Universities of Columbia, Harvard, New York University, University College London, the European University Institute, he has been researcher at the German Historical Institute in Washington DC and Visiting professor for the Mexican Government at El Colegio del Mexico. He currently sits on the board of professors of a PhD program in History and Philosophy (University of Bari), and a PhD program in International Studies (University of Naples L’Orientale). In 2022 he has been nominated Fellow of the Royal Historical Society in london. He specialises in the history of U.S. foreign economic and financial relations in the twentieth century, as well as in the intertwining between energy and 320 Curriculum Vitae finance in the twentieth century. His research has revolved around the U.S. federal institutions and policymaking in shaping the role of the united States in the twentieth century international economic system. More recently he has shifted attention to the rampant ascendancy of U.S. financial institutions and elites in the making of American global economic leadership in the age of financial capitalism. He is presently working on a new book project on the internationalization of u.S. banks in the Twentieth Century. His monographs are: Supra-National Integration and Domestic Economic Growth. The United States and Italy in the Western Bloc Rearmament Programs, 1945-1955 (Bruxelles-New York-Oxford-Frankfurt: Peter lang 2012); S.Selva, Before the Neoliberal Turn. The Rise of Energy Finance and the Limits to US Foreign Economic Policy. London: Palgrave, 2017. He also wrote journal articles for Passato e Presente and the Rivista Storica Italiana, forthcoming. Lefteris Tsoulfidis He holds a Ph.D. and an M.A. in economics from the New School of Social Research, New York and a B.A. in Economics from the University of Macedonia, Thessaloniki. He worked for many years in universities in New York including Hofstra university and College of New Rochelle before joining the Department of Economics of the University of Macedonia in Thessaloniki, where he teaches courses in the History of Economic Thought, Economic History, Political Economy, Mathematical Economics and Macroeconomics. He is the author of Competing Schools of Economic Thought (2010) and co-author of Political Economics and Modern Capitalism: Theory of value, Competition, Trade and Long Cycles (2019); the Modern Classical Economics and Reality, all published by Springer-Verlag. He has also published books on the Economic History of Greece (2016) and the History of Economic Thought and Policy (2018) both published in Greek. He is the co-editor of the international journal Bulletin of Political Economy and the Director of the laboratory of the Economic and Social Research of the Department of Economics in the University of Macedonia. His research has been published in many scientific journals on theoretical and empirical issues related to actual competition, theory of value and distribution, international economics, energy economics, long economic cycles and economic growth. He has also written a number of articles published in international encyclopedias and chapters in books published by major international publishers. He has been invited lecturer and keynote speaker in many universities. He also has written short articles on current economic and financial issues of general interest that appeared in major newspapers and sites. Index of Persons Abs, H.J. 247, 247 f., 253, 257, 261 Ackley, G. 282 Adenauer, K. 248, 250, 253, 254 Anzilotti, D. 145 f. Aron, R. 17 f. Attolico, B. 145 f. Aybar, Mehmet Celal 84 Baines, A. 76 Beer 145 f. Bemmann, M. 73, 84 f., 143 Black, E. 285 Blanchard, Ol. 238, 240 Bluestein, P. 238 Bodio, L. 79, 149 Boorbach, G. B. 151 f. Boratav, K. 84 Borchardt, K. 165, 165 f., 170 f., 185 f. Born, K.-E. 173, 176 Brüning, H. 163, 171, 178, 179, 180, 187 Burhop, C. 173, 174, 186 Carter, J. (administration of), 304, 306, 308 Cecil, R. 76 Clausen, Alden Winship (called Tom), 304 Clavin, P. 74, 81 f., 82, 87 f., 140, 141 f. Coats, R. H. 149 Colban, E. 145 f. Comert, P. 145 f. Crowdy, R. E, 145 f. D’Alessandro, M. 141 Davost, M. H. 251 f. Dawes, C. G. (Plan) 163, 165, 172, 192, 193, 249 De Vries, R. 303 Decorzant, Y. 140 Delatour, A. 79, 149 Delombre, P. 149 Dillon, Douglass (U.S. Secretary of the Treasury) 276, 279, 280 Drosopoulos, I. 56 Drummond, E. 148 Endres, A M. 139 Etlinger, D. 151 f. Ferguson, Th. 176, 185, 186, 186f. Fior, M. 139 Fisher, I. 208 Flemming, G. A. 139 Flux, A. W. 77, 149 Ford, H. 197 Fosdick, R. 77, 145 f. Fowler, H. 283 Frumkin, G. 151 f. Ghébali, V.-Y. 134 Gontikas, Konstadinos 48, 61, 61 f., 62 f. Gregh, F.-D. 251 f. Gunter, J. W. 251 f. Hamel, van 145 f. Heilbroner, R. 209 Hill, M. 142 Hindenburg, P. von 178 Hitler, A. 181, 254 Hodža, M. 111 Holtfrerich, C.-L. 186, 187 Hoover, H. 77, 177, 179 322 Inazo, N. 76 Inönü, Is. 92 f., 94 Jacquart, C. 73, 74, 80, 85, 85 f., 86, 86 f., 87, 88, 89, 89 f., 90, 91, 91 f., 92, 93, 93 f.,95, 95 f., 96, 96 f., 97, 98, 99, 100, 102, 103, 104, 105, 106, 107, 108, 149 James, H. 164 Johnson L. (administration of) 278, 279, 280, 281 Johnson, Lyndon B. 280 Kemal, Mustafa [Atatürk] 92, 92 f. Kennedy J. F. (administration of) 274, 279, 279 f., 286 Keynes, J. M. 191, 192, 192 f., 195, 208 Knortz, H. 161 f., 176 Kondratiev, N. 189, 189 f., 190 Kopper, Ch. 186 Index of Persons Nelson, St. 240 Nichols, C. K. 142 Nitobe, I. 76, 145 f. Nixon, F. 146 f. Nixon, R. (administration of) 264, 294 Obama, B. (administration of) 235, 239, 244 Obstfeld, M. 242 Papaconstantinou, G. 234 f., 235 Papanastasiou, Al. 37 Papandreou, G. A. 234, 235 Papandreou, G. 259 f. Papen, F. von 179, 180 Pauly, L. W. 134, 139, 140, 146 f. Pedersen, S. 139 Pierson, W. L. 251 f. Porter, Th. 96 Quetelet, A. 95, 95 f., 137, 147, 151 Layton, W. 80, 146 f. Lew, J. 244 Liebisch-Gümüş, C. 74 f. Lipton, D. 239 Loveday, A. 75, 80, 86, 86 f., 87, 88, 90, 91, 91 f., 92, 97, 98, 99, 100, 103, 104, 105, 107, 108, 137, 151 f., 154 Regling, Kl. 244, 245 Reinhardt, H. 259 f. Rendel, G. 251 f. Ritschl, A. 165, 171, 260 f. Rodocanachi, A. 251 f. Rosenborg, Johan Ansgar Esaias, 98, 98 f., 99, 105, 106 Mantoux, P. J 145 f. March, L. 78, 149 Marshall, G. C. (Plan) 248, 250, 258 Marx, K. 195 Maurette, F. 87, 103 McNamara, R. 267, 272, 284, 287, 288, 291, 302 Meeker, R. 149 Menzies, A. A. 142, 153 Merkel, An. 233 Metaxas, I. 51 Mitchell, G. W. 280 Monnet, J. 145 f. Müller, H. 178 Salter, A. J., 76, 76 f., 145, 145 f., 146 f., 147, 148 Sarkozy, N. 234 f. Schäffer, F. 254 Schauble, W. 233, 245 Schleicher, K. von 180, 181 Schnabel, I. 186, 186 f., 187 Schumpeter, A. 171 Sergent, R. 251 f. Shah of Iran, the 302 Smuts, J. C. 143 Spoerer, M. 165 Stamboliiski, A. 110, 111, 113 Strauss Kahn, D. 235, 236, 238 Index of Persons Švehla, A. 111, 112 f. Temin, P. 176, 185, 186, 186 f. Thomsen, Poul M. 238, 239 Tito, J. B. 253 Trakakis, G. 58, 58 f., 59, 59 f. Trump, D. (administration of) 245 Venizelos, E. 35, 200, 201 Venizelos, E. (government of) 40, 49, 50, 61 f. Volcker, P. A. 263 Waley, D. 251 f. Wessels J.-W. 74, 82, 87 f., 140, 141 f. Wilson, W. 77, 143, 144 Witos, W. 111 Witteveen, J. 301, 302 Würzburger, E. 84 Young, O. D. (Plan) 172, 175, 186, 249 323 The research work is supported by the Hellenic Foundation for Research and Innovation (H.F.R.I.) under the “First Call for H.F.R.I. Research Projects to support Faculty members and Researchers and the procurement of high-costνresearch equipment grant” (Project Number: 1310 ). This volume explores the progressive establishment of a global monetary order within the development of market mechanisms during the interwar period. Reference is made to the emergence of disintegrating policies under the impact of the Great Depression. Furthermore, it discusses how the global monetary mechanisms developed after World War II. The volume focuses on the interaction between local actors –as policymakers at national or peripheral level– and the global economic institutions -as producers of a financial “engineering” process. Open Access Digital Volume (HFRI. Guide for Management and Implementation of Research Projects, 1310/2017) Print edition ISBN: 978-960-6679-72-8

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