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Negotiating Credibility: Britain and the International Monetary Fund, 1956–1976

  • BEN CLIFT (a1) and JIM TOMLINSON (a2)
Abstract

For twenty years before the famous crisis of 1976 Britain was a regular borrower from the International Monetary Fund (IMF). Through this lending role, the Fund in these years played a key part in determining the credibility of British policies. Borrowing from the Fund meant that British policy had to be seen as conforming to certain norms, but these norms were always negotiable, albeit within shifting limits. This article uses archival material from London and Washington to examine these processes of negotiation, showing how far British policy was shaped by the desires of the IMF, and how far it was able to maintain autonomy in national economic policy.

Durant les vingt années qui précèdent la fameuse crise de 1976, la Grande-Bretagne a régulièrement emprunté de l'argent au Fonds monétaire international. En prêtant de l'argent, le Fonds participait à l'établissement de la crédibilité de la politique britannique. L'emprunt d'argent du Fonds signifiait en effet que la politique britannique devait se conformer à certaines normes dont les limites cependant sont perpétuellement renégociées. Cet article se base sur l'étude de matériel archivistique de Londres et Washington pour examiner ces processus de négociation. Il montre jusqu'à quel point la politique britannique s'adaptait aux exigences du Fonds monétaire international ainsi que les limites de l'autonomie de la politique économique britannique.

Großbritannien lieh sich während den zwanzig Jahren vor der berüchtigten Krise von 1976 regelmäßig Geld vom Internationalen Währungsfonds. Dadurch spielte der Währungsfonds eine wichtige Rolle in der Festlegung der Glaubwürdigkeit der britischen Wirtschaftspolitik. Die britische Wirtschaftspolitik wurde passte sich somit gewissen Normen an, welche jedoch in einem gewissen Rahmen immer verhandelbar waren. Dieser Artikel stützt sich auf Archivquellen aus London und Washington, um aufzuzeigen, inwiefern die britische Politik von den Wünschen des Währungsfonds beeinflusst war und inwiefern es ihr möglich war, eine autonome Volkswirtschaftspolitik aufrechtzuerhalten.

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2 Toye, R., ‘The Attlee Government, the Imperial Preference System and the Creation of the GATT’, English Historical Review, 118 (2003), 912–39.

3 Germain, R., The International Organization of Credit (Cambridge: Cambridge University Press, 1997).

4 The best short summary is Eichengreen, B., Globalizing Capital: A History of the International Monetary System (Princeton: Princeton University Press, 1996), ch. 4. Much more detailed are Horsefield, K., The International Monetary Fund 1945–65: Twenty Years of International Monetary Co-operation (Washington, DC: IMF, 1969); de Vries, M., The International Monetary Fund 1966–1971: The System under Stress, 2 vols (Washington, DC: IMF, 1976); de Vries, M., The International Monetary Fund, 1972–78: Co-operation on Trial (Washington, DC: IMF, 1985); James, H., International Monetary Co-operation since Bretton Woods (Washington, DC: IMF, 1996).

5 Solomon, R., The International Monetary System, 1945–1976: An Insider's View (New York: Harper & Row, 1977), ch. 5.

6 Ludlam, S., ‘The Gnomes of Washington: Four Myths of the 1976 IMF Crisis’, Political Studies, Xl (1992), 713–27.

7 K. Burk and A. Cairncross, Goodbye Great Britain: The 1976 IMF Crisis (New Haven: Yale University Press), 225.

8 Balls, E., ‘Open Macroeconomics in an Open Economy’, Scottish Journal of Political Economy, 45 (1998), 113–32. Clift, B. and Tomlinson, J., ‘Credible Keynesianism? New Labour Macroeconomic Policy and the Political Economy of Coarse Tuning’, British Journal of Political Science, 37 (2007), 4769.

9 Hickson, K., The IMF Crisis of 1976 and British Politics (London: Tauris, 2005), chs. 4, 5.

10 Gold, S., The Standby Arrangements of the IMF (Washington, DC: IMF, 1970), 210; de Vries, International Monetary Fund 1966–1971, 395–6.

11 Burk and Cairncross, Goodbye; Harmon, M., The British Labour Government and the 1976 IMF Crisis (London: Palgrave, 1997); Hickson, IMF Crisis; de Vries, International Monetary Fund 1972–78; Crawford, M., ‘High-Conditionality Lending: the UK Case’, in Williamson, J., ed., IMF Conditionality (Washington, DC: Institute for International Economics, 1985).

12 De Vries, IMF 1966–1971, chs. 18, 21; Harmon, British Labour Government, 29–45; Strange, S., ed., International Economic Relations of the Western World, Volume 2 International Monetary Relations (Oxford: Oxford University Press, 1976), 135–72.

13 Strange, E.g. S., Sterling and British Policy (Oxford: Oxford University Press, 1971); Schenk, C., Britain and the Sterling Area (London: Routledge, 1994); Strange, International Economic Relations.

14 Gold, Standby.

15 Horsefield, International Monetary Fund 1945–65, 464–7.

16 IMF Archives (hereafter IMF), Staff Memoranda (hereafter SM), 68/128.

17 IMF, UK Country files, 1760, Box # 32, File # 5, David Finch to the Managing Director ‘United Kingdom Consultation under standby arrangement’, 16 July 1968.

18 ‘IMF: Statement by Managing Director on Procedures for Reviews of External policies’, The National Archives, Kew (hereafter TNA), T354/226; IMF Executive Board Minutes (hereafter EBM), 31 Oct 1973.

19 Rawlinson to Littler, TNA, T354/226, 12 Sept. 1973. See also TNA, T354/226 Mrs. Hedley-Miller to Mitchell, ‘Visit of the IMF Representatives 22 and 23 November 1973’, 27 Nov. 1973.

20 Note to D. Ricketts 8 May 1959, TNA, T236/5740.

21 C.W. Fogarty to D Mitchell, 21 Dec 1973, TNA, T233/2950.

22 ‘IMF Drawings Against Decreases in Sterling Balances’, TNA, T236/5737, 4 May 1956.

23 Kunz, ‘Importance’, 225–31; Kunz, Economic Diplomacy, chs. 5, 6, 7.

24 Kunz, Economic Diplomacy, 102, 113–14.

25 Foreign Office to Washington ‘IMF Stand-by’, TNA, T236/5737, 8 Nov. 1956.

26 IMF, EBM 56/59 10 Dec. 1956, 5.

27 Statement by Harold Macmillan, 561 H. C. Deb., 5s, cols. 1052–8, 4 Dec. 1956.

28 561 H. C. Deb., 5s, col. 327, 18 Dec. 1956.

29 562 H. C. Deb., 5s, col. 56, 16 Feb. 1957; ibid., 31 Jan. 1957.

30 Washington to Foreign Office, TNA, T236/5738, 14 Dec 1956

31 ‘Draft letter to Biggs-Davison’, TNA, T236/5379 17 Feb. 1957; ‘Conditions for Fund Drawings’, ibid., 18 Feb. 1957.

32 Comments by L. Rasminsky, IMF, EBM 57/10, 27 Feb. 1957, 13–15.

33 IMF, EBM 57/59, 16 Dec. 1957, 2–14.

34 IMF, EBM 58/11, 7 March 1958

35 IMF, EBM 58/59, 19 Dec. 1958, 3–16.

36 Burnham, P., ‘The Politicisation of Monetary Policy-Making in Post-War Britain’, British Politics, 2 (2007), 395419.

37 Note to D. Ricketts, TNA, T236/5740, 8 May 1959.

38 Letter to A.W. France, TNA, T236/5740,? June 1959.

39 Radcliffe Committee on the Working of the Monetary System, Report, Cmd 827, 1959, 247.

40 IMF, EBM, 4 Aug. 1961.

41 Ibid., 23.

42 648 H. C. Deb., 5s, cols. 787–8, 7 Nov. 1961.

43 649 H. C. Deb., 5s, cols 173–4, 14 Nov. 1961. For discussion of this episode see Booth, A., ‘Inflation, Expectations and the Political Economy of Conservative Britain, 1951–1964’, Historical Journal, 43 (2000), 844.

44 Samuel Brittan seems to have invented this term; see Brittan, S., The Treasury under the Tories (Harmondsworth: Penguin, 1964), ch. 7. For recent discussions see Pemberton, H., Policy Learning and British Governance in the 1960s (Basingstoke: Palgrave, 2004), and O'Hara, G., From Dreams to Disillusionment: Economic and Social Planning in the 1960s (Basingstoke: Palgrave, 2007).

45 Tomlinson, J., ‘Inventing “decline”: The Falling Behind of the British Economy in the Postwar Period’, Economic History Review, 49 (1996), 731–57; Ringe, A., Rollings, N. and Middleton, R., Economic Policy under the Conservative, 1951–1964 (London: HMSO, 2004), 3942.

46 Brittan, S., Steering the Economy: The Role of the Treasury (Harmondsworth: Penguin, 1971), 233; Ringe et al., Economic Policy; Tiratsoo, N. and Tomlinson, J., The Conservatives and Industrial Efficiency, 1951–64: Thirteen Wasted Years? (London: Routledge, 1998), ch. 2.

47 Middleton, R., Government versus the Market (Cheltenham: Elgar, 1996), 497509.

48 Per Jacobsson to Selwyn Lloyd, TNA, T236/6723, 9 March 1962.

49 D. Mitchell, ‘Renewal of UK Stand-by’, TNA, T236/6723 27, March 1962.

50 ‘IMF Standby’, TNA, T236/6723, n.d but ?April 1962.

51 IMF, EBM, 29 July 1963 (afternoon meeting), 7.

52 IMF, EBM, 29 July 1963 (morning meeting), 3–4.

53 ‘Report of IMF Executive's discussion of 31 July’, TNA, T277/1233, 8 Aug. 1963.

54 IMF, EBM, 29 July 2007 (morning meeting), 6.

55 ‘Mins of meeting 7 May 1964 re draft Statement of Intent’, TNA, T311/276.

56 ‘IMF Standby: notes for Sir Eric Roll’, TNA, T311/277, 7 July 1964; IMF, EBM, 27 July 1964, 6.

57 ‘IMF: UK Consultations 1964 Final Statement by Friedman 12 May 1964’, TNA, T277/1440.

58 IMF, EBM, 27 July 1964, 11, 19, 25.

59 IMF, EBM, 28 Oct 1964, 23–4.

60 Ibid., 24.

61 Telegram Foreign Office to Washington, ‘The UK drawing from the IMF’, TNA, PREM 13/3151, 20 April 1965.

62 IMF, Archive Executive Board Series (hereafter EBS), /65/74, 2–3.

63 IMF, EBM/65/25, 23–4, EBM/65/26; Telegram, Sir P. Dean from Washington to Foreign Office, ‘IMF: UK Drawing’, TNA, PREM 13/3151, 29 April 1965.

64 Letter from Schweitzer to the UK Chancellor, TNA, T230/800, 14 July 1965.

65 Mr Hubback to Mr Walker on ‘IMF Informal Consultations’, ibid., 8 July 1965. See also Telegram Sir P. Dean in Washington to the Foreign Office, TNA, T230/800, 6 Jan. 1966.

66 P. Brown to Workman, ‘The IMF Visit in December’, TNA, T230/800, 25 Nov. 1965 (emphasis added).

68 Workman memo to Hubback ‘IMF Visit: Balance of payments’, TNA, T230/800, 26 Nov. 1965

69 ‘Note for the Record on IMF consultations by D. Hubback’, TNA, T230/800, 7 Dec. 1965.

70 P. Brown to Workman ‘The IMF Visit in December’, TNA, T230/800, 25 Nov. 1965.

71 Mr. Workman ‘IMF Consultations: Balance of Payments’, TNA, T230/801, 4 May 1966.

72 Ibid.

73 ‘United Kingdom – 1966 Article VIII Consultations: Preliminary List of Questions’, TNA, T230/720.

74 ‘IMF: United Kingdom Consultations 1966’, TNA, T312/1632, 27 April 1966.

75 Mr. Workman ‘IMF Consultations: Balance of Payments’, TNA, T230/801, 4 May 1966.

76 Quotes from ‘Balance of payments’ line in Article 8 consultations, TNA, T230/720.

77 Earlier drafts of Letter of Intent – apparently by WA (William Armstrong), TNA, T326/730, no date.

78 Frank Southard Memo for files ‘Proposed UK Stand-By Arrangement: Conversation with Mr Goode,’ IMF, Country Files: United Kingdom, File 1760, box 32, 22 Nov. 1967.

79 Frank Southard Memo for files ‘Proposed UK Stand-By: Conversations with Mr Goode, November 21 and 22 1967’, ibid., 22 Nov. 1967.

80 ‘Personal message from Schweitzer to the Chancellor’, TNA, PREM 13/3151, 22 Nov. 1967.

81 ‘Personal message from Chancellor to Schweitzer’, ibid., 23 Nov. 1967.

82 ‘United Kingdom – Stand-By Arrangement’, EBS/67/277, 29 Nov. 1967, 1.

83 Ibid., 2.

84 EBM/67/97, 18–21.

85 ‘PM's personal minute to the Chancellor on the adjournment debate on the IMF loan’, TNA, PREM 13/3151, 4 Dec. 1967.

86 Brief for Ministers by P.R. Baldwin, ‘What “strings” or conditions have been attached to the credits from foreign Central Banks and the IMF standby?’, ibid.,1 Dec. 1967.

87 ‘PM's personal minute to the Chancellor on the adjournment debate on the IMF loan’, ibid., 4 Dec. 1967.

88 EBS/68/86, 26 March 1968.

89 Hubback to Goldman, ‘UK Forecasts and the Fund/OECD February Consultations’, TNA, T312/2119, 25 Jan. 1968.

90 Statement by Richard Goode ‘IMF Consultations: Final Session’, TNA, T312/2120, 27 Feb. 1968.

91 Andrew Graham to Mr Halls on ‘Commitments to the IMF’,TNA, PREM 13/3151, 26 July 1968.

92 Memorandum from Richard Goode to the Managing Director, ‘United Kingdom – Consultations under the standby arrangement’, IMF, CF, UK Country files, 1760, Box # 32, File # 5, 10 July 1968.

93 ‘United Kingdom – Review under standby arrangement’, EBS/68/342, 30 Dec. 1968, 20.

94 Ibid., 21.

95 ‘IMF UK Standby. Statement by the Chancellor of the Exchequer in the House of Commons after questions on 23 June 1969’, TNA, PREM 13/3151.

96 ‘Memorandum of Understanding’, TNA, PREM 13–3151, 22 May 1969; ‘Memorandum of Understanding’, IMF, Country Files: United Kingdom, # 1760, Box 32, 3 May 1969.

97 Victoria Brittain, ‘Toughest-Yet Rules on New IMF Stand-by’, The Times, 11 May 1969; Samuel Brittan, ‘IMF to Pose Stiff Conditions for UK Standby Credit’, Financial Times, 12 May 1969.

98 783 H.C. Deb. 5s, cols. 1403–6, 14 May 1969; ‘International Monetary Fund (Stand-By Credit)’, TNA, T326/979.

99 Tomlinson, J., The Labour Governments 1964–1970, Vol. 3 Economic Policy (Manchester: Manchester University Press, 2004) ch. 3, especially 56–7.

100 ‘United Kingdom – Staff Report for the 1972 Article VIII consultation’, IMF, SM/72/155, 27.

101 Ibid., 25.

102 James, International Monetary Co-operation, ch. 10, 251–5.

103 De Vries, International Monetary Fund 1972–78, 322; Harmon, British Labour Government, 65–9.

104 Harmon, British Labour Government, 99.

105 J. M. Bridgeman to Lavelle, Littler, ‘IMF Letter of Intent’,TNA, T233/2950, 12 May 1975.

106 Rawlinson ‘Possible IMF Drawing: Meeting with Witteveen’, TNA, T371/23 31, Aug. 1975.

107 Ibid.

108 Note of a Meeting at 10 Downing St, TNA, PREM 16/348 28, Oct. 1975.

109 Ibid.

110 Littler, ‘IMF Drawing’, ibid., 29 Oct. 1975.

111 Ibid.

112 ‘Note of a working dinner between Chancellor and Witteveen at No 11 Downing Street 3 Nov. 1975’, TNA, T371/23.

113 Ibid.

114 Henley to Mitchell ‘External use of public expenditure figures’, ibid., 4 Nov. 1975.

115 Miss J. E. Court to Mr Anson ‘Fund Drawing: public expenditure’, ibid., 12 Nov. 1975.

116 ‘Note of a Meeting in the House of Commons 5 Nov. 1975’, TNA, PREM 16/348.

117 ‘NLW(?) to Prime Minister’, TNA, PREM 16/827, 19 Dec. 1975.

118 C.W. France, ‘Mr. Witteveen's call on the Chancellor’, TNA, T371/23, 20 Nov. 1975.

119 A. Graham to Mr Stowe ‘Letter to the IMF’, TNA, PREM 16/348, 21 Nov. 1975 (emphasis in original).

120 ‘NLW (?) to Prime Minister 18 Dec. 1975’, TNA, PREM 16/827.

121 Healey to Witteveen ‘Letter of Application’, ibid., 18 Dec. 1975.

122 Ibid.

123 Telegram Littler to France & Callaghan, ‘IMF Drawing’, TNA, PREM 16/827, 16 Dec. 1975.

124 Healey to Witteveen ‘Letter of Application’, TNA, PREM 16/827, 18 Dec. 1975.

125 Healey to Wilson, ‘IMF Applications’, ibid., 2 Jan. 1976.

126 Telegram UK Director IMF Ryrie ‘IMF Drawing’, ibid., 31 Dec. 1975.

127 Burk and Cairncross, Goodbye Great Britain, 228.

The authors would like to thank the Carnegie Trust for the Universities of Scotland for financial support, and the ESRC-funded Centre for the Study of Globalisation and Regionalisation at the University of Warwick for funding Ben Clift's teaching buy-out which enabled parts of this research to be pursued. We would also like to thank the Department of Politics and International Studies at the University of Warwick for granting the study leave and providing the financial support which enabled the fieldwork in Washington to be carried out.

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