¹ Financial Agreement Between the Governments of the United States and the United Kingdom, Cmd 6708 (London, 1945).Google Scholar

² This is the dominant political interpretation exemplified by Brett, E., The World Economy Since the War (London, 1985)CrossRefGoogle Scholar; Brett, Edward, Gilliat, Steve, Pople, Andy, ‘Planned Trade, Labour Party Policy and US Intervention’, History Workshop, 13 (1982)CrossRefGoogle Scholar; Lipietz, A., Mirages and Miracles (London, 1987)Google Scholar; Domhoff, G. W., The Power Elite and the State (New York, 1990)Google Scholar; Tomlinson, J., Public Policy and the Economy Since 1900 (Oxford, 1990)Google Scholar; Pijl, K. van der, The Making of an Atlantic Ruling Class (London, 1984)Google Scholar; Glynn, Andrew, Hughes, Alan, Lipietz, Alain, and Singh, Ajit, ‘The Rise and Fall of the Golden Age’, in Marglin, S. and Schor, J. (eds.), The Golden Age of Capitalism (Oxford, 1990)Google Scholar; Gott, Richard, ‘Sentimental Island Story’, The Guardian, 30 January, 1987Google Scholar. Much of the more narrative work on the postwar Labour government also sanctions such a view, including Eatwell, R., The 1945–1951 Labour Governments (London, 1979)Google Scholar; Morgan, K., Labour in Power, 1945-1951 (Oxford, 1984)Google Scholar; Coates, D., The Labour Party and the Struggle for Socialism (Cambridge, 1975)Google Scholar. It is also implicit in the hegemonic interpretations of the rise of the postwar system, see notes 12, 14, and 15.

³ The Economist, 8 December 1945, p. 821Google Scholar.

⁴ On this initial hope see PRO, T236/439 Keynes to Bevin 15 August 1945; also reprinted in Bullen, R. and Pelly, M. E. (eds.), Documents on British Policy Overseas, Series I, Volume III, Britain and America: Negotiation of the United Slates Loan 3 August-7 December 1945 (London, 1986), pp. 44–9Google Scholar.

⁵ , Tomlinson, Public Policy, p. 186Google Scholar.

⁶ Particularly when placed beside the authorative economic histories of Dow, J., The Management of the British Economy, 1945–1960 (Cambridge, 1964)Google Scholar; Cairncross, A., Years of Recovery (London, 1985)Google Scholar; and Pressnell, L., External Economic Policy Since the War, I. The Post-War Financial Settlement (London, 1986)Google Scholar.

⁷ PRO,T267/3, Treasury Chamber Paper by Hugh Ellis-Rees, ‘The Convertibility Crisis’, 24 February 1961.

⁸ PRO, T236/1667, Telegram from Playfair to Christelow, 20 September 1947.

⁹ PRO, T232/199, Summary of Fundamentals of External Financial Policy.

¹⁰ The most impressive ‘revisionist’ study of Western European reconstruction is Milward, A., The Reconstruction of Western Europe, 1945–51 (London, 1984)CrossRefGoogle Scholar. Milward's account however begins from 1947 and does not therefore consider the Agreement in detail.

¹¹ Brett, , World Economy, pp. 141–3Google Scholar.

¹² Isaak, R., International Political Economy (New Jersey, 1991), p. 18Google Scholar. The view that 1945 marks the beginning of the Pax Americana is shared by the majority of theorists of hegemonic stability. See for instance, Kindleberger, C., The World in Depression, 1929–1939 (Middlesex, 1973), p. 28Google Scholar; Krasner, S., ‘State Power and the Structure of International Trade’, World Politics, 28, 3 (1976)CrossRefGoogle Scholar; and Gilpin, R., The Political Economy of International Relations, (Princeton, 1987), p. 343CrossRefGoogle Scholar. An excellent recent review of hegemonic stability theory and its mythology is Grunberg, Isabelle, ‘Exploring the “Myth” of Hegemonic Stability’, International Organisation, 44, 4 (1990)CrossRefGoogle Scholar. For a critique of hegemonic stability theories in this context see Burnham, P., The Political Economy of Postwar Reconstruction (London, 1990)CrossRefGoogle Scholar.

¹³ This is a conclusion reinforced by Ikenberry's brief but competent account of the period 1945-50. See Ikenberry, G. John, ‘Rethinking the Origins of American Hegemony’, Political Science Quarterly, 104, 3 (1989)CrossRefGoogle Scholar.

¹⁴ For hegemonic theorists the loan agreement would best exemplify the ‘crude basic force’ view of the exercise of power, in that the US sought to exercise power over Britain to achieve its aims. Neo-Gramscian theorists, and those neo-realists influenced by Gramsci, highlight the role of persuasion and the manipulation of consent in the exercise of power, often using an analytical framework which considers structural alongside behavioural power. The neo-Gramscian view is best summed up by Cox, R., ‘Gramsci, Hegemony and International Relations’, Millennium, 12, 2 (1983)CrossRefGoogle Scholar; Gill, S. and Law, D., The Global Political Economy (London, 1988)Google Scholar. For the sophisticated neo-realist view see, Keohane, R., After Hegemony: Cooperation and Discord in the World Political Economy (Princeton, 1984)Google Scholar; Snidal, Duncan, ‘Hegemonic Stability Theory Revisited’, International Organisation, 39 (1985)CrossRefGoogle Scholar; and Hirsch, F. and , M.Doyle, Alternatives to Monetary Disorder (New York, 1977)Google Scholar. The distinction between structural and relational power is discussed in Strange, S., States and Markets (London, 1988)Google Scholar. Although neo-Gramscia n variants broaden our understanding of power, they leave unanswered the question, where does cooperation end and hegemony begin? As I will show in the conclusion, they share the same deficiencies as their realist cousins by retaining a notion of hegemony i n their explanation of the postwar order.

¹⁵ Spero, J., The Politics of International Economic Relations (London, 1990), p. 37.Google Scholar This is the overwhelmingly dominant view sanctioned by both neo-realists such as Gilpin, Robert, Political Economy, p. 344Google Scholar; and contemporary marxists such as Chase-Dunn, C., Global Formation: Structures of the World-Economy (Oxford, 1989), p. 185Google Scholar. It is also implicit in the most well respected study of the immediate postwar period, Gardner, R., Sterling-Dollar Diplomacy (Oxford, 1969), see p. xcGoogle Scholar.

¹⁶ Gardner, Sterling-Dollar; Clarke, R., Anglo-American Economic Collaboration in War and Peace 1942-1949 (Oxford, 1982)Google Scholar; Cairncross, Recovery.

¹⁷ United Kingdom Balance of Payments 1946–1953, Cmd 8976 (London, 1953)Google Scholar.

¹⁸ For an analysis see Gardner, Sterling-Dollar, chs 3 and 4. The Atlantic Charter, signed between Roosevelt and Churchill in 1941, expressed the desire to bring about collaboration between all nations i n the economic field. Althoug h through the Charter, Roosevelt sought the abolition of imperial preference, Churchill safeguarded the Ottawa Agreements by inserting the saving clause, ‘with respect for existing obligations’. The Mutual Aid Agreement, signed on 23 February 1942, made further reference to seek collaborative solutions to postwar trade problems. The infamous Article VII made provision for agreed action by the US and Britain, ‘directed to the expansion … of production, employment and the exchange and consumption of goods … and … to the elimination of all forms of discriminatory treatment in international commerce … and to the reduction of tariffs and other trade barriers’. It is important to realize that, as with the Atlantic Charter, the terms of the agreement did not state directly that non-discriminatory policies would be adopted but only that ‘agreed action’ towards this end should be an objective. It is this point which distinguishes these earlier precedents from the Washington Loan Agreement.

¹⁹ ‘Joint Statement Regarding Settlement For Lend-Lease, Reciprocal Aid, Surplus War Property and Claims’, attached to Financial Agreement, pp. 6–8Google Scholar. Article Two of the Joint Statement made clear that this complete and final settlement of Lend-Lease was taken ‘in full cognizance of the general obligations assumed [by the two governments] in Article VII of the Mutual Aid Agreement of the 23rd February 1942, and the understandings agreed upon this day with regard to commercial policy’. In this way the Lend-Lease settlement was designed to reinforce British compliance with American foreign policy objectives.

²⁰ PRO, T267/3, Ellis-Rees, ‘The Convertibility Crisis’, 24 February 1961.

²¹ Keynes, J. M., The Collected Writings of J. M. Keynes (Cambridge, 1979), XXIV, pp. 256–93Google Scholar. The ‘Justice’ path of reconstruction would involve a contribution of the Americans of approximately $3 billion together with a dollar refund for purchases made in the US before lend-lease became fully operative, and the scaling down, funding and convertibility of the sterling balances to enable ‘de facto’ convertibility of sterling within a year after the end of the war. See Burnham, Political Economy, ch. 2.

²² Dalton, H., High Tide and After (London, 1962), p. 81Google Scholar.

²³ Wright, K., ‘Dollar Pooling in the Sterling Area, 1939–1952’, American Economic Review, September (1954), p. 575Google Scholar.

²⁴ Calculated by Ellis-Rees to amount to ¤3.5 billion, PRO, T267/3, ‘The Convertibility Crisis’. Also see The Banker, September (1946), table 1.

²⁵ The debate re-surfaces in the Robot discussions in 1952 and in almost every statement on Convertibility in the 1950s.

²⁶ For an analysis see McNair, Lord, The Law of Treaties (Oxford, 1961), ch. 15. McNair (p. 273)Google Scholar, believes that the clause first acquired its most permanent characteristic in a Treaty between Great Britain and Portugal of 29 January 1642, whereby the subjects of Britain became entitled to enjoy all the immunities accorded to the ‘subjects of any nation whatsoever in league with the Portugals’.

²⁷ Gardner, Sterling-Dollar; Brett et al., ‘Planned Trade’; Cairncross, , Recovery, pp. 505–9Google Scholar.

²⁸ On the use of Clause (b) see PRO, T236/782, R. Clarke to E. Bridges ‘Brief for US Negotiations’. On the definitional issue, PRO, T236/686, Foreign Office to Washington, 18 April 1947.

²⁹ PRO, T232/199, Overseas Finance Division, Summary of Fundamentals of External Financial Policy.

³⁰ On the Key Currency solution see Williams, John, ‘International Monetary Plans’, Foreign Affairs, October (1944)CrossRefGoogle Scholar; Mikesell, Raymond, ‘The Key Currency Proposal’, Quarterly Journal of Economics, 59 (1945)CrossRefGoogle Scholar; Block, F., The Origins of International Economic Disorder (Berkeley, 1977)Google Scholar.

³¹ Letter to Clayton from R. Wood, Chairman of Sears Roebuck and Company, 26 November 1945, in Gardner, , Sterling-Dollar, p. 197Google Scholar.

³² Spence's report in Kress, A. (ed.), The Documents of Economic Diplomacy (Washington, 1949), Document 5, p. 9Google Scholar; PRO, T236/1667, Memo to Bridges.

³³ Boothby's objections to the loan are well summarized in Boothby, Lord, My Yesterday, Your Tomorrow (London, 1962), pp. 146–54Google Scholar.

³⁴ Keynes, , Collected, p. 336Google Scholar; also see Keynes, HC Debates, 18 December 1945, vol. 138, col. 790.

³⁵ Pimlott, B., Hugh Dalton (London, 1985), p. 439Google Scholar; Jay, D., Change and Fortune (London, 1980), p. 139Google Scholar.

³⁶ Bareau, Paul, ‘The New Bilateralism’, The Banker, February 1948, p. 79Google Scholar; Monetary Agreement between the United Kingdom and Belgium, Cmd 6557 (London, 1944)Google Scholar.

³⁷ Patterson, Gardner and Polk, Judd, ‘The Emerging Pattern of Bilateralism’, Quarterly Journal of Economics, 62 (1947)CrossRefGoogle Scholar, table I and II; League of Nations, International Trade Statistics (Geneva, 1938)Google Scholar; Mikesell, Raymond, ‘Regional Multilateral Payments Arrangements’, Quarterly Journal of Economics, 62(1947/1948)Google Scholar.

³⁸ Larry Neal has argued that it is inaccurate to characterize German bilateral arrangements with southeastern European states as exploitative in the interwar period. It is, of course, exaggerated to suggest that German y bought oil and grain in exchange for harmonicas and aspirin. But, as Kindleberger points out, although bilateralism began as a movement to conserve scarce foreign exchange, it slowly developed into a device for obtaining real resources. By delaying the exchange of manufactured goods, forcing debit balances, and through discriminatory pricing, Germany exploited its monopsony position as an important market for the goods of southeastern Europe. Neal, Larry, ‘The Economics and Finance of Bilateral Clearing Agreements: Germany 1934-38’, Economic History Review, 32, 3 (1979);CrossRefGoogle ScholarKindleberger, C., The World in Depression, 1929–1939 (Middlesex, 1987), p. 238Google Scholar. Also see, Gardner Patterson and Judd Polk, ‘The Emerging Pattern of Bilateralism’.

³⁹ The reminiscence of Hugh Ellis-Rees, ‘The Convertibility Crisis’ in PRO, T267/3.

⁴⁰ See ‘Discussions on Fundamentals’, various papers in PRO, T232/199.

⁴¹ Hugh Ellis-Rees, ‘Convertibility Crisis’.

⁴² For details see Clarke, , Anglo-American, p. 185Google Scholar; Zupnick, E., Britain's Postwar Dollar Problem (New York, 1954)Google Scholar; Bareau, , ‘New Bilateralism’, p. 79Google Scholar; Shannon, H., ‘The British Payments and Exchange Control System’, Quarterly Journal of Economics, 63 (1949)CrossRefGoogle Scholar; Cairncross, Years of Recovery; and PRO T267/3.

⁴³ Bareau, , ‘New Bilateralism’, p. 81Google Scholar.

⁴⁴ Bareau, , ‘New Bilateralism’, p. 82Google Scholar; Zupnick, , Britain's Postwar Dollar, p. 169Google Scholar; Patterson and Polk, ‘Emerging Pattern’.

⁴⁵ Brett, , World Economy, p. 142Google Scholar; Tomlinson, , Public Policy, p. 186Google Scholar; and Pollard, S., The Development of the British Economy 1914–1980 (London, 1983), p. 238Google Scholar, subscribe to a version of this argument. Brett argues that ‘the enforced attempt to introduce convertibility in July … led to a major crisis’; Tomlinson rhetorically asks how significant the Agreement was, and answers ‘It was very important for convertibility. In the summer of 1947, in fulfillment of the Agreements, sterling was made convertible, but the flight from the pound was made so intense tha t the policy was reversed in six weeks’; whilst Pollard argues, ‘the run on the pound was immediate, as almost every country with sterling earnings hurried to convert them into dollars’.

⁴⁶ Quotes in this paragraph from PRO, T236/3243, ‘External Sterling’ Report to Butler, 22 March 1952; PRO, T2326/3240, ‘Inconvertible Sterling’ Appendix, 16 February 1952; PRO, CAB 129/36, ‘The Future of Multilateral International Economic Cooperation’, 12 September 1949. PRO, T267/3, ‘The Convertibility Crisis’; PRO, T232/199, ‘Summary of Fundamentals’.

⁴⁷ PRO, T236/782, ‘Brief for US Negotiations’.

⁴⁸ PRO, T267/3, ‘How the Credit was Used’, Annex of Part 2.

⁴⁹ Milward, The Reconstruction, argues an impressive case for this explanation based on recognizing the expansionist programme of the Labour government.

⁵⁰ ‘US Balance of Payments 1946–1953’, Annex, in United States Commission on Foreign Economic Policy, Staff Papers (New York, 1954), p. 15Google Scholar.

⁵¹ See PRO, T236/782, ‘Brief for US Negotiations’; PRO, T267/3.

⁵² PRO, T236/782, ‘Dollar crisis (European Reconstruction)’, Telegram Washington to Foreign Office.

⁵³ PRO, T236/1667, Memo by Playfair ‘Convertibility’.

⁵⁴ PRO, T232/199, ‘Summary of Fundamentals of External Financial Policy’.

⁵⁵ PRO, CAB 129/36, ‘The Future of Multilateral International Economic Co-operation’, Memo by the President of the Board of Trade, 12 September 1949. Fora good theoretical discussion of the relationship between convertibility and discrimination see, Patterson, G., Discrimination in International Trade, The Policy Issues (Princeton, 1966), chs 2 and 3CrossRefGoogle Scholar; Curzon, G., Multilateral Commercial Diplomacy (London, 1965), ch. 6Google Scholar.

⁵⁶ PRO, CAB 129/36, ‘The Future of Multilateral International Economic Cooperation’.

⁵⁷ PRO, T236/686, ‘Article Nine of the Loan Agreement’, Memo from Foreign Office to Washington, 18 April 1947.

⁵⁸ H. C. Debates, 6 August 1947, col. 1494.

⁵⁹ PRO, T236/686, ‘Text of US Statement on Relaxation of Loan Agreement Provisions’; PRO, T236/1667, ‘Memo to Bridges’.

⁶⁰ PRO, T230/177, ‘Dollar Drain Committee Papers’, US Treasury Meeting, 8 June 1949; PRO, CAB 129/36, ‘The Future of Multilateral International Economic Co-operation’, Memo by the Board of Trade, Appendix B ‘Non-Discrimination’, 12 September 1949.

⁶¹ Ibid. PRO, CAB 129/36; PRO, T236/1667, ‘Memo to Bridges’.

⁶² MSS, 200/F/4/61/4, C. Baillieu, Presidential Address, March 1946, Modern Records Centre, University of Warwick; PRO, T230/136, Meade's Paper, ‘The Balance of Gain and Loss’.

⁶³ Glickman, D., ‘The British Imperial Preference System’, Quarterly Journal of Economics, 61 (1946–1947). pp. 439–70CrossRefGoogle Scholar.

⁶⁴ H. C. Debates, 7 August 1947, col. 1663.

⁶⁵ PRO, T236/1667, ‘Telegram Playfair to Christelow’, 20 September 1947.

⁶⁶ Ibid.

⁶⁷ PRO, T267/3, Ellis-Rees, ‘The Convertibility Crisis’.

⁶⁸ Carr, E. H., The Twenty Years' Crisis 1919–1939 (London, 1946), ch. 11CrossRefGoogle Scholar; Shaw, M., International Law (Cambridge, 1986), ch. 15Google Scholar; Gardner, J. W., ‘The Doclrine of rebus sic stantibus and the Termination of Treaties’, American Journal of International Law, 21 (1927)Google Scholar; Vamvoukos, A., Termination of Treaties in International Law: The Doctrines of Rebus Sic Stantibus and Desuetude (Oxford, 1985)Google Scholar. Technically it could have been argued by the British state that the burst of US inflation between 1946-7 broke one of the assumptions of the Agreement, hence enabling a weak invocation of rebus sic stantibus. Gardner, however makes the important point that although the United States may have agreed to a postponement of convertibility in respect of ‘exceptional cases’ of payments difficulties with individual nations, Britain was not permitted to maintain restrictions generally on a worldwide basis even in conditions which might have been described as exceptional. See Gardner, , Sterling-Dollar (1969), pp. 222–3Google Scholar.

⁶⁹ See Plender, Richard, ‘The Role of Consent in the Termination of Treaties’, British Yearbook of International Law 19S6 (Oxford, 1987), pp. 133–67Google Scholar. For a commentary on the ‘new’ Vienna Convention adopted on the 21 March 1986 see, Gaja, Giorgio, ‘A “New” Vienna Convention on Treaties between States and International Organisations or between International Organisations: A Critical Commentary’, British Yearbook of International Law 1987 (Oxford, 1988), pp. 253–69Google Scholar.

⁷⁰ See, McNair, Law of Treaties; Kratochwil, F., Rules, norms and decisions (Cambridge, 1989)CrossRefGoogle Scholar. I also wish to thank Philip O'Keefe, of the Law Department at Warwick, for advice on this point.

⁷¹ Spero, , Politics of International, pp. 23–4Google Scholar.

⁷² Gardner, , Sterling-Dollar, p. lxivGoogle Scholar.

⁷³ Gilpin, , Political Economy, p. 343Google Scholar.

⁷⁴ Milward, , Reconstruction, p. 492Google Scholar.

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