Letter to the Daily Telegraph
The Prime Minister wants a new Bretton Woods deal for the global financial system. As a continuation of their war loan, the Americans forced on the British Parliament their understanding of what should be the terms of the Bretton Woods agreement, rather than that of Keynes.
What were the consequences for international trade following American rejection of Keynes’ advice? The Model was that a nation wishing to develop should
a) borrow funds from the World Bank and IMF to invest in agricultural and industrial projects,
b) export products resulting from investment of these funds,
c) repay the capital loan from export revenues gained and
d) end up in an improved position with a more highly developed economy.
But the paradigm is flawed. No Third World country has ever succeeded in restoring solvency once funds have been borrowed from the World Bank and the IMF. Third World countries have made huge efforts only to service their debt; they cannot repay the capital. Payments of interest charges far exceed the amount of the principal loaned in the first place. So the Third World has been sustained by continual bailouts of additional credit. When this happens, Third World countries are invariably required to devalue their currencies and thus reduce the price of their exports, not least their export of raw materials. For decades, therefore, the Third World has been transferring vast quantities of primary commodities, manufactured goods, raw materials and minerals to the wealthy nations, when the acknowledged need for Third World countries is to direct less effort towards exports and develop their agricultural and industrial infrastructure for their own domestic purposes. At the moment their agriculture and industry are driven into decline and decay.
From: LORD SUDELEY FSA
25 MELCOMBE COURT
LONDON N.W.1 6EP.
Telephone 020 7258 0351
e-mail: sudeley at btinternet.com