There seems to be wide agreement that encouragement and aid is necessary if an adequate volume of
international investment is to be maintained after the war. There has been some question whether an
international agency is best suited for this purpose.
The provision of long-term international credit affects every aspect of international economic relations.
Unless an adequate supply of capital for international investment is available, it will be difficult to
maintain the balanced growth of international trade. International investment facilitates the maintenance
of equilibrium in the balance of payments and thus helps to stabilize exchange rates. Furthermore,
worldwide fluctuations in business conditions are to a considerable extent the result of large fluctuations
in international investment. An international problem, so broad in scope and with such wide
ramifications, can best be handled through an international agency such as the proposed Bank.
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International investment is not confined to any one country. The large industrial countries of Europe as
well as the United States have played an important role in the provision of capital for international
investment. No doubt, as the result of the [p. 49] war other countries, such as Canada, will for the first
time become important sources of capital for international investment. The resources available for
encouraging international investment can be most effectively used through an international agency
embracing all countries.
The risks of holders of securities guaranteed or issued by an international agency are shared by all of the
participating countries. The creditors on securities issued through or by the Bank would in a real sense
include all of the participating countries or guarantors of securities through their subscription to the Bank.
The default on such securities becomes default on a general international obligation to many countries
and the measures that may be applied to the defaulters would be applied by all member countries.
If national agencies should be established generally for the purpose of encouraging international
investment it is doubtful whether countries could altogether escape use of their lending agencies for the
purpose of furthering national political interests. The extension of credit to a particular country becomes
a political matter to be settled by negotiation between the borrowing country and the lending country.
Even if such political considerations could be kept to a minimum, it is doubtful whether national agencies
would [p. 50] be as helpful as an international agency in developing international trade and removing the
restrictive bilateralism that grew up in the decade before the war.
The provisions of the Bank proposal are designed to safeguard the national interests of member
countries. No loan can be made nor can any securities be sold by the Bank in a member country without
its approval. No exchange transactions can be undertaken in the currency of a member country without
its approval. These provisions are intended to make sure, as explained in the answers to Questions 16 and
17, that the operations of the Bank do not adversely affect the capital, money and exchange markets, or
business conditions in member countries. The determination of policy on these matters is completely
reserved to each member country.
An international agency working in cooperation with the national authorities can be most effective in
encouraging private investors to resume international investment and provide adequate capital for
productive purposes. The operations of such an agency can do much to contribute to a higher level of
world trade, a greater degree of stability in exchange rates, and fuller employment in all member
countries.