AND ITS CONTROL
Thomas D. Willett
The Bretton Woods system was based on the premise that exchange rates were a matter of international as well as national concern.1 The international economic disasters of the interwar period had clearly demonstrated the dangers of treating trade and balance-of-payments measures as purely unilateral national concerns. On the other hand, the major countries were anxious also to preserve freedom to pursue their newly found interest in active domestic macroeconomic policies. They were mindful of the costly economic consequences of Churchill's decision to subject the domestic British economy to the dictates of a particular exchange-rate goal.2 Thus they were unsympathetic to the idea of giving international authorities exclusive control over the de-____________________
Of course, in academic writings the concept that exchange rates are a matter of international concern goes back much further. An interesting example is found in Palgrave Dictionary of Political Economy: "It will thus be seen that every country, by altering its mint regulations, has power to alter the metallic standard of value pro tanto in every other country using a metallic standard; and from this point of view the contention of those who desire to make currency arrangements a matter of international agreement may be accepted."
I am indebted to Edward M. Bernstein for calling both these quotations to my attention.