London Economic Conference
The London Economic Conference, held in 1933, aimed to address the economic challenges faced by European nations in the wake of World War I, particularly focusing on relieving the burden of war debts. Initiated by a meeting of six nations in Geneva, the conference sought to foster international cooperation to revive global trade, eliminate tariff barriers, and negotiate debt forgiveness. However, the United States, grappling with the Great Depression, was hesitant to forgive these debts, prioritizing domestic economic recovery over international commitments.
U.S. President Franklin D. Roosevelt, while initially open to discussions on currency stabilization, ultimately adopted a nationalistic stance, fearing that stabilizing the dollar might hinder American exports. This shift led to a rejection of proposed stabilization measures at the conference, which resulted in limited progress on any of the agenda items. The failure of the conference emphasized a growing trend toward isolationism and nationalism among nations, particularly as several countries began defaulting on their war debts.
Despite the conference's shortcomings, it eventually paved the way for the Reciprocal Trade Agreements Act of 1934, which enabled the U.S. to engage in free trade agreements that helped stimulate the economy and reduce tariffs. Ultimately, while the London Economic Conference did not fulfill its objectives, it highlighted the complexities of international economic cooperation during a time of global crisis.
London Economic Conference
The Event International economic conference focusing on monetary stabilization, reduction of tariffs, and Allied war debts from World War I
Dates June 12 to July 27, 1933
Place Geological Museum, London, England
International agreement on monetary solutions to combat the Depression could not be reached at the London conference, giving rise to nationalistic policies. Each nation wanted to protect its own economy, as evidenced by President Franklin D. Roosevelt’s denunciation of currency stabilization and his refusal to cancel war debts.
The London Economic Conference was called to relieve European nations and their former Allies of the burden of debts stemming from World War I. The agenda had been established by a preliminary meeting of six nations in Geneva in 1932. The goal was for the international community to work together to revive the world economy through reviving trade, eliminating tariff barriers, and forgiving debts. However, the United States, suffering from the Great Depression, was reluctant to forgive, reduce, or postpone payment of the war debts owed by Europeans. American unemployment, hunger, and despair had dictated this resolve.
While desiring to restore world trade by international adjustment of tariff barriers, Roosevelt had to respond to the emergency within the United States first, taking the country off the gold standard. He pursued monetary inflation by issuing additional paper currency and making money cheaper through devaluation. On the other hand, European countries wanted to stabilize the dollar against their currencies and fix it at a high value to stimulate foreign trade and regularize the balance of payments in their favor.
Secretary of State Cordell Hull led the American delegation to the London conference and initially entered into currency stabilization discussions with Clement Moret of the Bank of France, Montagu Norman of the Bank of England, and other gold-bloc nations. However this initial internationalism was replaced by a nationalistic stance when Roosevelt, fearing that the dollar’s rise against foreign currencies would further depress U.S. exports, issued a statement to the conference in the form of a radio message sent from a cruiser in the North Atlantic. He criticized the conference’s attempts at currency stabilization when broader economic problems existed. He instructed Hull to reject all currency stabilization proposals, however tentative, that were made at the conference. Roosevelt believed economic recovery should begin in the United States, and he did not wish to jeopardize the slight economic gains already made through devaluation. He had little confidence in European central bankers and believed the United States had nothing to gain by linking itself to a potentially hazardous international agreement. European countries noted this assertion of economic independence. The United States was lambasted for its policies, and the London Economic Conference failed to achieve significant agreement on any of the targeted issues.
Impact
The London Economic Conference was futile and dealt a temporary blow to international camaraderie and cooperation between countries against the Depression. This result was a drifting toward isolationism and extreme nationalism, as exhibited by Germany’s withdrawal from the League of Nations and the Geneva Disarmament Conference. France had defaulted on its war debts in 1932, and Italy and Great Britain made only token payments in 1933. The Johnson Act of 1934 made it illegal for U.S. citizens and corporations to loan money to governments in default to the United States, and former war debts had to be paid in full so as not to be considered in default. Only Finland fully repaid its Allied war debts, with all other Allies formally defaulting on June 15, 1934. The plight of the Depression had taken its toll worldwide and sabotaged international economic cooperation.
However, by 1934, Roosevelt supported Hull’s enthusiasm for reciprocal trade agreements as a means of alleviating internal economic problems, and the Reciprocal Trade Agreements Act of 1934 became law. Negotiated by Roosevelt without the consent of Congress, free trade agreements and relatively low tariffs “primed the pump” and stimulated the economy. Hull negotiated eighteen reciprocity treaties within the next four years, effectively halting further decline in the world economy. Several target issues of the London Economic Conference were finally resolved, such as the reduction of tariffs to stimulate international trade.
Bibliography
Hinton, Harold B. Cordell Hull, A Biography. New York: Hinton Press, 2008.
Hull, Cordell. The Memoirs of Cordell Hull. 2 vols. New York: Macmillan, 1948.
Pratt, Julius W. Cordell Hull, 1933-1944. New York: Cooper Square, 1964.