London Economic Conference
Encyclopedia
The London Economic Conference was a meeting of representatives of 66 nations from June 12 to July 27, 1933, at the Geological Museum
in London
. Its purpose was to win agreement on measures to fight global depression
, revive international trade, and stabilize currency
exchange rates.
The Conference was "torpedoed" by U.S.
President Roosevelt
in early July, when Roosevelt denounced currency stabilization.
devastated the world economy in the years 1929-1932, it was generally assumed that the United States would serve as a hegemon, providing leadership for a program to bring about recovery. President Herbert Hoover
in 1931 called for a conference to decide how to reduce tariff
s and also revive prices (i.e. reverse the deflation associated with the Depression). The agenda for the Conference was drafted by representatives of six major nations who met in Geneva in 1932. The agenda asserted that intergovernmental debts should be settled as they represented a major obstacle in the road to recovery.
The Europeans believed that “the settlement should relieve the world” of the crushing debt burdens. But most of these debts were owed to the U.S., and Americans were reluctant to write them off. Senator
Borah
held that “the troubles of the world were really due to the War, and to the persistence of Europe in keeping great armaments, and to the mismanagement of money”; therefore, he was not willing to postpone, reduce, or cancel the payment of debts “and have Europe go ahead with a programme which has practically sunk the world into its present economic condition.”
Other events indicated that the U.S. would not support the Conference agenda as outlined. Roosevelt declared during his inaugural speech that “I shall spare no effort to restore world trade by international economic readjustment, but the emergency at home cannot wait on that accomplishment.” This was a clear signal to those in the Conference that Roosevelt would carry out his program to revive the American economy regardless of or even in opposition to international plans to revive the world economy.
The next day, Roosevelt took the U.S. off the gold standard
. In May, the Thomas Amendment to the Agricultural Adjustment Act “required the President to pursue a policy of inflation through the issue of paper money.”
U.S. Secretary of State Cordell Hull
led the American delegation to the Conference. The President ordered Hull not to enter into any discussions regarding currency stabilization. However by time the Conference gathered, President Roosevelt had changed his mind, supporting currency manipulation to raise prices, and had American banking experts Oliver Sprague and James Paul Warburg
conduct currency stabilization talks with their British and French counterparts. By June 15, Sprague, Warburg, Montagu Norman of the Bank of England
, and Clement Moret of the Bank of France had drafted a plan for temporary stabilization.
Word of this plan leaked out. The reaction in the U.S. was negative: the dollar rose against foreign currencies, threatening U.S. exports, and stock and commodity markets were depressed.
Although Roosevelt was considering shifting his policy to a new median dollar-pound rate, he eventually decided not to enter into any commitment, even a tentative one.
On June 17, fearing the British and the French would seek to control their own exchange rates, Roosevelt rejected the agreement, in spite of his negotiators’ pleas that the plan was only a temporary device full of escape clauses.
On June 30, Roosevelt went further: in an interview with four reporters, he openly criticized stabilization. Then on July 3, he issued a message to the Conference condemning its efforts at stabilization when "broader problems" existed, and asserting that the exchange rate of a nation's currency was less important than other economic values.
Roosevelt’s rejection of the agreement gathered an overwhelmingly negative response from the British, the French, and internationalists in the United States. British Prime Minister Ramsay Macdonald
feared “Roosevelt’s actions would destroy the Conference” and Georges Bonnet
, rapporteur of the French Monetary Commission, is said to have “exploded.”
Critics see nationalism
as a key factor in Roosevelt’s decision.
, who put forth a programme of German colonial expansion in both Africa
and Eastern Europe
as the best way of ending the Great Depression
, which created a major storm at the conference. For being indiscreet enough to advance the claim to Germany's Lebensraum
(living space) at a time when Germany was still more or less disarmed, Hugenberg was sacked from the German cabinet by Adolf Hitler
.
Geological Museum
The Geological Museum is one of the oldest single science museums in the world and now part of the Natural History Museum in London...
in London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
. Its purpose was to win agreement on measures to fight global depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
, revive international trade, and stabilize currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
exchange rates.
The Conference was "torpedoed" by U.S.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
President Roosevelt
Franklin D. Roosevelt
Franklin Delano Roosevelt , also known by his initials, FDR, was the 32nd President of the United States and a central figure in world events during the mid-20th century, leading the United States during a time of worldwide economic crisis and world war...
in early July, when Roosevelt denounced currency stabilization.
Background
When the Great DepressionGreat Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
devastated the world economy in the years 1929-1932, it was generally assumed that the United States would serve as a hegemon, providing leadership for a program to bring about recovery. President Herbert Hoover
Herbert Hoover
Herbert Clark Hoover was the 31st President of the United States . Hoover was originally a professional mining engineer and author. As the United States Secretary of Commerce in the 1920s under Presidents Warren Harding and Calvin Coolidge, he promoted partnerships between government and business...
in 1931 called for a conference to decide how to reduce tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
s and also revive prices (i.e. reverse the deflation associated with the Depression). The agenda for the Conference was drafted by representatives of six major nations who met in Geneva in 1932. The agenda asserted that intergovernmental debts should be settled as they represented a major obstacle in the road to recovery.
The Europeans believed that “the settlement should relieve the world” of the crushing debt burdens. But most of these debts were owed to the U.S., and Americans were reluctant to write them off. Senator
United States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...
Borah
William Edgar Borah
William Edgar Borah was a prominent Republican attorney and longtime United States Senator from Idaho noted for his oratorical skills and isolationist views. One of his nicknames later in life was "The Lion of Idaho."...
held that “the troubles of the world were really due to the War, and to the persistence of Europe in keeping great armaments, and to the mismanagement of money”; therefore, he was not willing to postpone, reduce, or cancel the payment of debts “and have Europe go ahead with a programme which has practically sunk the world into its present economic condition.”
Other events indicated that the U.S. would not support the Conference agenda as outlined. Roosevelt declared during his inaugural speech that “I shall spare no effort to restore world trade by international economic readjustment, but the emergency at home cannot wait on that accomplishment.” This was a clear signal to those in the Conference that Roosevelt would carry out his program to revive the American economy regardless of or even in opposition to international plans to revive the world economy.
The next day, Roosevelt took the U.S. off the gold standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...
. In May, the Thomas Amendment to the Agricultural Adjustment Act “required the President to pursue a policy of inflation through the issue of paper money.”
Roosevelt's Rejection
When the Conference opened on June 12, 1933, all attention rested on the tripartite currency discussions happening outside the Conference. The big issue was the exchange rate of the dollar against foreign currencies such as the British pound and French franc. Many in the U.S. favored devaluation of the dollar to improve the U.S. trade position; France and Britain wanted to stabilize the dollar rate; i.e. fix it at a relatively high value.U.S. Secretary of State Cordell Hull
Cordell Hull
Cordell Hull was an American politician from the U.S. state of Tennessee. He is best known as the longest-serving Secretary of State, holding the position for 11 years in the administration of President Franklin Delano Roosevelt during much of World War II...
led the American delegation to the Conference. The President ordered Hull not to enter into any discussions regarding currency stabilization. However by time the Conference gathered, President Roosevelt had changed his mind, supporting currency manipulation to raise prices, and had American banking experts Oliver Sprague and James Paul Warburg
James Warburg
James Paul Warburg was an American banker and financial adviser to Franklin D. Roosevelt. His father was Paul Warburg.- Biography :...
conduct currency stabilization talks with their British and French counterparts. By June 15, Sprague, Warburg, Montagu Norman of the Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...
, and Clement Moret of the Bank of France had drafted a plan for temporary stabilization.
Word of this plan leaked out. The reaction in the U.S. was negative: the dollar rose against foreign currencies, threatening U.S. exports, and stock and commodity markets were depressed.
Although Roosevelt was considering shifting his policy to a new median dollar-pound rate, he eventually decided not to enter into any commitment, even a tentative one.
On June 17, fearing the British and the French would seek to control their own exchange rates, Roosevelt rejected the agreement, in spite of his negotiators’ pleas that the plan was only a temporary device full of escape clauses.
On June 30, Roosevelt went further: in an interview with four reporters, he openly criticized stabilization. Then on July 3, he issued a message to the Conference condemning its efforts at stabilization when "broader problems" existed, and asserting that the exchange rate of a nation's currency was less important than other economic values.
Roosevelt’s rejection of the agreement gathered an overwhelmingly negative response from the British, the French, and internationalists in the United States. British Prime Minister Ramsay Macdonald
Ramsay MacDonald
James Ramsay MacDonald, PC, FRS was a British politician who was the first ever Labour Prime Minister, leading a minority government for two terms....
feared “Roosevelt’s actions would destroy the Conference” and Georges Bonnet
Georges Bonnet
Not to be confused with the French Socialist Georges MonnetGeorges-Étienne Bonnet was a French politician and leading figure in the Radical-Socialist Party.- Early career :...
, rapporteur of the French Monetary Commission, is said to have “exploded.”
Critics see nationalism
Nationalism
Nationalism is a political ideology that involves a strong identification of a group of individuals with a political entity defined in national terms, i.e. a nation. In the 'modernist' image of the nation, it is nationalism that creates national identity. There are various definitions for what...
as a key factor in Roosevelt’s decision.
The Hugenberg Controversy
Another area of dispute was created by the head of the German delegration, the Economics Minister Dr. Alfred HugenbergAlfred Hugenberg
Alfred Ernst Christian Alexander Hugenberg was an influential German businessman and politician. Hugenberg, a leading figure within nationalist politics in Germany for the first few decades of the twentieth century, became the country's leading media proprietor within the inter-war period...
, who put forth a programme of German colonial expansion in both Africa
Africa
Africa is the world's second largest and second most populous continent, after Asia. At about 30.2 million km² including adjacent islands, it covers 6% of the Earth's total surface area and 20.4% of the total land area...
and Eastern Europe
Eastern Europe
Eastern Europe is the eastern part of Europe. The term has widely disparate geopolitical, geographical, cultural and socioeconomic readings, which makes it highly context-dependent and even volatile, and there are "almost as many definitions of Eastern Europe as there are scholars of the region"...
as the best way of ending the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
, which created a major storm at the conference. For being indiscreet enough to advance the claim to Germany's Lebensraum
Lebensraum
was one of the major political ideas of Adolf Hitler, and an important component of Nazi ideology. It served as the motivation for the expansionist policies of Nazi Germany, aiming to provide extra space for the growth of the German population, for a Greater Germany...
(living space) at a time when Germany was still more or less disarmed, Hugenberg was sacked from the German cabinet by Adolf Hitler
Adolf Hitler
Adolf Hitler was an Austrian-born German politician and the leader of the National Socialist German Workers Party , commonly referred to as the Nazi Party). He was Chancellor of Germany from 1933 to 1945, and head of state from 1934 to 1945...
.
External links
- H. G. WellsH. G. WellsHerbert George Wells was an English author, now best known for his work in the science fiction genre. He was also a prolific writer in many other genres, including contemporary novels, history, politics and social commentary, even writing text books and rules for war games...
in his 1933 book The Shape of Things to Come gives a detailed description of the conference, making fun of the various participants' ineptness and incompetence but also expressing the writer's poignant disappointment with their failure and its likely dire consequences. This is expressed in the title given by Wells to the relevant chapter: "The London Conference: the Crowning Failure of the Old Governments; The Spread of Dictatorships and Fascisms".