London Economic Conference of 1933
LONDON ECONOMIC CONFERENCE OF 1933
The London Economic Conference of 1933 had its origins in President Herbert Hoover's 1931 call for an international conference to discuss how to raise prices and to reduce tariffs. The internationalists in Hoover's cabinet hoped that once these issues were addressed economic recovery would set in. Interest overseas in the proposal grew in Europe in the summer of 1931 amid speculation that Hoover's administration had finally recognized that reparations and war debts were interconnected. The British government took the lead in securing a final reparations settlement at the Lausanne Conference of July 1932, with the expectation that a settlement on war debts with the United States would soon follow. To bring the Americans on board, the call for an economic conference was enshrined in Article Five of the Lausanne Conference.
Preparations for the meeting began in October 1932. Britain's departure from the gold standard in the summer of 1931 ensured that much of the preparatory discussions for the monetary portion of the agenda focused on the question of how to persuade Britain back onto gold. But the monetary landscape changed significantly after the U.S. dollar left gold in April 1933. As a consequence, European countries still committed to gold found their currencies under renewed pressure and begged Britain and the United States to do something about it.
In May 1933, the United States offered to negotiate a temporary stabilization agreement between the world's leading currencies so that deliberations at the London Conference would not be disrupted by speculation against particular currencies on the world's exchanges. However, France rejected the U.S. offer, demanding instead a permanent stabilization agreement. The issue remained unresolved as representatives from sixty-five different countries, plus assorted international agencies, trooped into London's Geological Museum on June 15, 1933 to begin their deliberations.
Within a matter of days, the world's attention switched from the conference hall to the Bank of England where negotiations for a new temporary stabilization agreement were underway. The bankers thought a deal was within their grasp when Franklin Roosevelt's infamous "bombshell message," made public on July 3, 1933, arrived. In it the president condemned the "old fetishes of so-called international bankers" for the gold standard and underlined his commitment to currency depreciation as a means of invigorating the international economy. The message also demonstrated Roosevelt's growing frustrations with European nationalism. France had persisted with its stubborn advocacy of gold standard orthodoxy, while Britain continued to call for the abolition of war debts. Britain also rejected Secretary of State Cordell Hull's ground-breaking proposal for a Reciprocal Tariff Act Agreement (RTAA) between Britain and the United States based on a flat rate reduction of 10 percent of existing barriers. The RTAA formally became law in 1934, but it took until 1938 for the United States to overcome Britain's political and economic objections to an Anglo-American RTAA. The RTAA became a major plank of U.S. economic foreign policy. By 1945, twenty-nine RTAA treaties had been secured, reducing U.S. tariffs by around 45 percent.
U.S. planning for a new economic order to be established after World War II was shaped by the experience of the London Conference. The U.S. administration was now determined to take the lead and "force" countries to cooperate together for the good of the international economy. In sharp contrast to 1933 it also demonstrated leadership and attempted to break away from the ad hoc character of interwar economic cooperation by creating international institutions, such as the International Monetary Fund and the World Bank, to help the world to work together in times of crisis.
Clavin, Patricia. "The World Economic Conference 1933: The Failure of British Internationalism." The Journal of European Economic History 20 (1991): 489–527.
Clavin, Patricia. The Failure of Economic Diplomacy: Britain, Germany, France and the United States, 1931–36. 1996.
Simmons, Beth. Who Adjusts? Domestic Sources of Foreign Economic Policy in the Interwar Years. 1994.