ABSTRACTDuring the Second World War, attention turned to reconstructing the world economy by moving away from competitive devaluations, protectionism and economic nationalism that had marred the 1930s. The Americans had considerable economic and political power, and they wished to restore multilateral trade, fixed exchanges and convertibility of currencies. The British government was in a difficult position, for it faced a serious balance of payments deficit and large accumulations of sterling in the Commonwealth and other countries. Multilateralism and convertibility posed serious difficulties. This address considers whether the American government had economic and financial hegemony after the war, or whether it was constrained; and asks how the British government was able to manoeuvre between America, Europe and the sterling area. The result was a new trade-off between international monetary policy, free trade, capital controls and domestic economic policy that was somewhat different from the ambitions of the American government and from British commitments made during and at the end of the war.
Implications of the U.S. Current Account Deficit