Economic and Financial Organization of the League of Nations

The Economic and Financial Organization was the biggest technical group of the League of Nations, and it was the first international group in the world to focus on helping countries work together on money and trade. It started in the early 1920s and worked until the United Nations was created in 1945. This group helped shape how countries help each other with money after big wars, and it had a big effect on groups like the International Monetary Fund (IMF). It was made up of many experts who shared ideas and tried to make the world economy stronger and fairer.

Background

After World War I, countries worked together in new ways to manage their economies. Groups like the Wheat Executive and the Allied Maritime Transport Council brought leaders from different nations together. People like Jean Monnet from France and Arthur Salter from Britain were important in these efforts.

Later, leaders from places like the Netherlands held meetings in Amsterdam to discuss how to fix economic problems after the war. They believed countries needed to work together. This idea gained support, and in February 1920, the League of Nations agreed to organize an international meeting in Brussels later that year to discuss these issues.

Establishment and setup

In 1919, a team working for the League of Nations in London began collecting and sharing economic information. This team became part of the League’s Secretariat and spent much of 1920 getting ready for a big meeting. Walter Layton led this early group when they moved to Geneva in 1920. Per Jacobsson joined the team in April of that year. By 1922, Salter took over and led the group until 1931, growing the team from seventeen to sixty people. By that time, it was the largest part of the League’s Secretariat.

The League’s first meeting in November 1920 agreed to expand this group into an organization that could give advice to countries. They created a special group of experts to help with this. In 1923, this group became permanent, splitting into two parts: one for trade and industry, and another for money and taxes. Even countries not in the League, like the United States, could send representatives to these groups. The setup was kept simple so that experts from around the world could join, even if their countries left the League later.

International financial and economic conferences

The Economic and Financial Organization was key in organizing four big meetings about money and trade between countries. These meetings were in Brussels in 1920, Genoa in 1922, Geneva in 1927, and London in 1933. The group helped countries agree on important ideas like good money management and independent central banks. However, they had trouble stopping unfair business groups called cartels and protecting trade from limits called trade protection.

One problem was that they did not push enough for better watching of banks. This was partly because the United States, which had the best bank watching at the time, was not part of the group. Because of this, a big bank problem in Europe in 1931 broke many of the rules they had made. After that, the meeting in London in 1933 did not succeed, and the group stopped trying similar meetings.

The group also helped organize a meeting in Geneva from October 15 to November 3, 1923, to make customs easier for countries to follow.

Stabilization loans in the 1920s

The Economic and Financial Organization (EFO) helped countries by bringing together private investors and governments to support financial stability. Unlike the later International Monetary Fund, the EFO did not have its own money but could help solve problems where countries and investors disagreed.

One of its first actions was in early 1922 when it helped Czechoslovakia with a loan.

Later in 1922, the EFO helped Austria during a serious financial crisis. Austria faced difficulties, and the EFO worked with different countries to create a plan to support it. This plan included changes to Austria's finances and the creation of an independent central bank. The EFO also provided a loan guaranteed by European governments, which was successfully raised in 1923.

Similar loans were later provided to Hungary, Danzig, Bulgaria, Estonia, and Greece. These loans helped these countries stabilize their finances and often included the creation of new independent central banks. The EFO's approach was successful and influenced other financial plans in Europe.

European integration advocacy

In the late 1920s and early 1930s, the Economic and Financial Organization began talking about the idea of European integration. This was partly because the United States started putting up trade barriers, and countries like the United Kingdom and its neighbors were also raising tariffs on each other. Two people, Salter from the United Kingdom and Pietro Stoppani from Italy, thought Europe could benefit from working together more closely, like the United States does. They even used the phrase "United States of Europe."

One big moment came in 1929 when a leader from France, Aristide Briand, suggested forming a "European Union." The League of Nations agreed to study this idea, but the plan didn’t move forward very well. Still, these ideas helped encourage some other plans, like a customs union between Austria and Germany and an agreement between Belgium, Luxembourg, and the Netherlands, even though those plans didn’t succeed either.

Policy developments in the 1930s

After one leader left in 1931, the group split into two parts—one for economy and one for finance—before joining back in 1939. During the 1930s, this group changed its ideas and supported policies to help people find jobs, similar to ideas by John Maynard Keynes.

After a big problem with banks in 1931, the group helped countries like Austria, Hungary, and Bulgaria by talking to lenders to give them more time to pay back loans and helping them manage their debts. They also worked on stopping double taxation, reducing trade limits, and making rules about selling raw materials and preventing cheating in securities. They believed trade should happen between countries that wanted to do business together, not all at once. Though a big meeting in London failed, their ideas helped shape a later agreement in 1936 that encouraged more open trade.

Economic research and statistics

The EFO employed many talented economists, such as Gottfried Haberler, Jan Tinbergen, John B. Condliffe, and Ragnar Nurkse. Canada's Louis Rasminsky joined the EFO in 1930 and stayed until 1939. James Meade served as a specialist adviser for the British government. Jacques J. Polak was on the staff from 1938 to 1943. In the late 1930s, the EFO hired Oskar Morgenstern, Bertil Ohlin, and Jacques Rueff as outside experts for important work on economic depressions. Other economists who later became famous, often at the IMF, included Marcus Fleming, Alvin Hansen, Folke Hilgerdt, and Tjalling Koopmans.

During the 1930s and early 1940s, the EFO produced major statistical and analytical works. It pioneered the new field of open-economy macroeconomics. From 1933, its research on business cycles was supported by annual grants from the Rockefeller Foundation. Regular publications included the Statistical Yearbook of the League of Nations, the Monthly Bulletin of Statistics, Money and Banking, the Review of World Trade, and an annual report on the general economic situation. The EFO's World Economic Survey has been called the ancestor of the IMF's World Economic Outlook.

Wartime relocation and postwar legacy

In May 1940, Switzerland was at risk of being surrounded by powerful enemies. The leader of the Economic and Financial Organization, Loveday, decided to move most of the staff to the Institute for Advanced Study in Princeton, New Jersey. The director there helped arrange the move and get funding.

From Princeton, the organization helped shape the work of the United Nations Relief and Rehabilitation Administration and influenced important meetings like the Bretton Woods Conference. Many former staff members took part in these discussions for their countries. The work of the organization helped create new ideas about economic policies that were used after World War II.