A Child of the Interwar Period

Robert Triffin was born in 1911 in Flobecq, Belgium. It was a turbulent period. At the age of 24, the young Triffin had already lived through World War I, monetary and financial turmoil after the war, the Great Depression, the 1935 Belgian franc devaluation, and the rise of fascism. In this chapter, the early period of Triffin’s life is discussed. It focuses on his undergraduate studies at Louvain University, his doctoral studies at Harvard, and his early academic career. During these years, like many people of his generation, Triffin became a profound pacifist. Moreover, as an economist, he became convinced that the market economy was fundamentally unstable. Special attention is paid to his two major publications during these years: an article on the 1935 devaluation of the Belgian franc (Triffin made the calculations) and his PhD on monopolistic competition and general equilibrium theory.

Monetary Expert on Monnet’s Action Committee for the United States of Europe

Robert Triffin played a key role in the debates on European monetary integration, especially as the monetary expert of Monnet’s Action Committee for the United States of Europe. He developed proposals for European monetary cooperation, especially a European Reserve Fund and a European currency unit, inspired by his experience of the European Payments Union. In his view, a European Reserve Fund could be constituted by pooling 10% to 20% of the international reserves of the member states’ central banks. A key moment was the 1969 Hague summit when Triffin, via Jean Monnet, provided the German chancellor Willy Brandt with a plan for European monetary integration. Moreover, through his activities and connections in the world of commercial banking and finance, Triffin also actively promoted the European currency unit as a parallel currency in financial transactions and markets.

Money Doctor in Latin America

Robert Triffin started working at the Board of Governors of the Federal Reserve System in 1942. He worked mainly on Latin America and participated in several missions on monetary and banking reforms. They were part of the Roosevelt administration’s Good Neighbor Policy and imbued by New Deal values. Triffin was an open and multicultural person, with both his Belgian and American background. Moreover, as a progressive Catholic with a strong grounding in economics, he was the ideal person for this new type of monetary reform mission. Triffin emphasized that the aim was to put monetary and banking policy at the service of development objectives previously ignored in central bank legislations. This also reflected a change in economic paradigms, from classical economics to Keynesian economics. During this period Triffin wrote a first important essay on the international monetary system, putting global liquidity at the core of the international monetary system.

Bretton Woods Cassandra

In 1951, Robert Triffin became a professor at Yale. By the end of the 1950s, Triffin became more and more worried about the international reserve position of the United States due to the country’s gold losses and the increase in dollar liabilities. In his view, the continued deterioration in the US net reserve position would undermine foreigners’ confidence in the dollar as a safe medium for reserve accumulation. So, the gold exchange standard was not sustainable, as argued in his famous dilemma. Triffin thus established his reputation as the Cassandra who predicted the end of Bretton Woods. However, he was an optimistic Cassandra. He sought a more international solution for the world liquidity problem, a true internationalization of the foreign exchange component of the world’s international reserves. This chapter also pays attention to life in Yale and Triffin’s reaction to the Vietnam War.

Epilogue

In his later life, Robert Triffin received wide recognition for his work. Especially his intellectual analyses with a focus on contemporary economic policy issues and his tireless fight for a true international monetary order were praised. In 1989, King Baudoin made him a baron. Triffin chose as his motto a paraphrase of Belgium’s national motto, transposing “Unity makes strength” into “Unity makes peace.” It is remarkable that throughout his life Triffin remained faithful to the ideals of his youth, a rare quality. The young Triffin was indignant about the Versailles Treaty, while the old Triffin fulminated against the Vietnam War. For him, economics was a way to contribute to a better world. He was never interested in high-level prestigious positions or financial gain. He was strongly attached to his independence and the pursuit of a better and more peaceful world. He was indeed a true monk in economist’s clothing.

Return to Belgium

In 1977, Robert Triffin decided to return to Belgium. He put forward two reasons: the invitation for a visiting professorship at the University of Louvain and, “most of all,” the opportunity to be involved, as an adviser at the European Commission, in the process of European monetary union. Triffin’s return to Belgium coincided closely with the advent of Roy Jenkins as European Commission president, who consulted Triffin regarding his monetary integration plans. Triffin was enthusiastic about the European Monetary System (EMS), which was established in 1979. With the support of the European Commission, especially Tommaso Padoa-Schioppa, he organized four international conferences on different aspects of its functioning. During the 1980s, Triffin promoted the development of the private European Currency Unit (ECU) market, especially the establishment of an ECU clearing system.

Architect of the European Payments Union

In 1946, Robert Triffin went on to the International Monetary Fund, where he became head of the Exchange Control Division, before moving to Paris to lead the International Monetary Fund’s Representative Office in Europe. Thereafter, he was a special adviser to the (US) Economic Cooperation Administration in Paris. During these years, his focal point of interest was the European Payments Union (EPU). In his analysis of postwar Europe, Triffin emphasized that several structural factors, especially the low level of gold and dollar reserves and weak industrial capacity, impeded the successful operation of market forces. He favored a pragmatic regional approach with the EPU, giving priority to the abolition of bilateral trade and payment restrictions. Triffin played a key role in the EPU negotiations, especially with his proposal for the EPU unit of account.