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and the individual components was the lowest in the 1930s included in technical issues. The 1920s however, had a higher index of cooperation, even higher than in the pre-World War I period. But cooperation was found to be the highest in the period 1959–1973.

      The GC recommended that a meeting among central bank heads be convened soon. But such a meeting did not take place. The 1920s witnessed a sharp struggle for supremacy between the US and Britain.²¹ To strengthen its position, Britain needed the adoption of the GES to bolster demand for sterling and thus retain the importance of London.²² It sought an expanding world economy fuelled by expansionary US policies as inflation in the US improved Britain’s competitiveness without having to undergo a debilitating deflation and also US government loans. Specifically, the British sought a favoured status in Russian development, a financial bloc centred in London, reduced war debts, regulated world capital flows and stabilised world prices.

      The US on the contrary wanted private lending so that New York would replace London.²³ It also wanted a pure GS so that the pound sterling would be at a disadvantage.²⁴ It wanted repayment of its loans while raising tariffs that made it difficult for other countries to export to the US. The US was willing to lend to help other countries import from the US and thereby increasing their indebtedness to the US and providing the US with leverage. This US system stacked benefits, such as trade surpluses, stable prices and debt receipts, heavily in favour of the United States and assigned adjustment burdens such as trade deficits, deflation and debt payments primarily to Europe and the rest of the world.

      Ultimately, Britain was forced by US policies and the actions by the important colonies to return to the GS at an overvalued ER which hindered the growth of its economy and circumscribed its role in the world economy.²⁵ Return to the GS was necessary to pre-empt the colonies from adopting the GS before Britain which had fatally weakened the control of the London money market and the links between Britain and her colonies were replaced by links between the US and the colonies. This struggle continued in the fashioning of the post-Second World War international economic system culminating in the negotiations for the US loan to British after the conclusion of the World War II.

      Norman and Strong had been meeting regularly to exchange information and views regarding the state of the international economy and measures to solve the problems. In 1924, Schacht, the head of the German central bank, also joined the meetings and from 1927 the Bank of France was also represented.²⁶

      Governor Strong of the NY Federal Bank supported the return of the UK to the GS.²⁷ He tried to maintain a low interest rate in the US so that capital would not flow from the UK to the US. He did so sometimes even after opposition from other Federal Reserve Banks and sometimes even the central board located in Washington (Ahamed, 2009). But ultimately when inflationary pressures became too strong and also when pressure to curb the speculation on the New York stock exchange mounted, he was forced to raise interest rates.

      After the stabilisation of the franc at an undervalued rate, the French ran surpluses and accumulated considerable amounts of gold. It soon became clear that the interests of the French central bank were aligned with those of the US central bank as both were running surpluses and accumulating gold.²⁸ The German economy was also doing well after the acceptance of the Dawes Plan. In the two following years, US$1.5 billion flowed into Germany more than the US$500 million required for reparations payments (Ahamed, 2009) and this inflow fuelled rapid growth. However, Schacht remained concerned at the running up of German debt, and his interests seemed to align more with those of Norman.

      In brief, by the mid-1920s all the major currencies were on gold. France and the US ran BOP surpluses, whereas Britain ran considerable deficits. While Germany ran surpluses, these were based on borrowings from the US and there were doubts about their sustainability. As far as growth was concerned, the US, France and Germany were all growing rapidly and only Britain was limping along.

       Cooperation after the Onset of the Great Depression: The London Conference

      When England went off the GS in September 1931, the ERs among major currencies became very unstable. Furthermore, at that time all the economies were suffering from severe reduction in economic activity and increase in unemployment. It was believed that governments needed to act cooperatively to stabilise ERs which would raise investor confidence and thus lead to a revival of the world economy. Also, cooperation was required to turn back the increased protectionism which was aggravating the problems faced by the trade sector.

      The 33% depreciation in the sterling/dollar rate during the 16 months ended in December 1932 and the preferential imperial trading arrangements negotiated at Ottawa in July–August 1932 had allowed the BE to follow a more expansionary monetary policy and the domestic economy was beginning to recover. The only drawback was the continued burden of war-debt annual payments to the United States, equivalent to 12% of Britain’s 1932 exports.

      When economic activity declined in France, the exigencies of remaining on the GS led the authorities to cut expenditures and maintain monetary discipline, which further weakened the domestic economy. Raised tariffs and quotas sought to bolster domestic industries from imports cheapened by currency depreciations and deflation abroad. A devaluation of the French franc became imperative and the French sought to persuade Britain and the US to accept the devaluation and not seek to negate it. Therefore, an understanding needed to be reached among the three major countries. A conference was organised in London in 1933 to stabilise ERs and to take steps to revive the world economy.

      The British, French and American experts while agreeing on the necessity of doing this disagreed on the sequencing of the measures. The Americans and French held that the return of sterling to gold at an as yet unspecified parity was a prerequisite for cooperative measures in other areas. Without exchange stabilisation, no country could undertake monetary expansion or the reduction of trade and exchange restrictions without risking an unfavourable external position. The British experts, while believing in the virtues of a reformed GS, thought that sterling could be stabilised only after (1) the adoption of expansionary measures in the major countries that would increase commodity prices to cover production costs; (2) the reduction of barriers to trade and payments; (3) the acceptance of gold economy measures; and (4) cooperative central bank measures to provide special credits to debtor countries, leading to revival of international capital flows.

      The new President, Roosevelt, agreed to honour the previous president’s commitment to attend though the US dollar had gone off gold and even though he was very sceptical about the conference. He thought that the others would merely try to inveigle him to go back to the GS which Roosevelt did not want to do (Clarke, 1973). The Roosevelt administration was very suspicious about UK motives about their desired value for the dollar–sterling ER. He also wanted the meeting to be held after initiating his domestic programme. The main aim of President Roosevelt seems to have been to avoid anything that limited his ability to adopt any policies that he thought necessary for recovery. Not only commercial policy, tariffs and import quotas but also exchange rate policy was frequently directed to the attainment of what was perceived to be national advantage, while the cost to other countries and possible feedbacks were accorded little importance or ignored. The London Conference sought to reach agreement on ERs as well on measures to revitalise the world economy.

      Agreement was soon reached among the technical experts about how to stabilise the three currencies. But negotiations on the other main issue, the measures necessary for recovery of the economies, did not make adequate headway. Every time there was news that agreement was about to be reached on ERs, the dollar appreciated and the US stock market declined. When hopes for an agreement receded, the stock market recovered and the dollar depreciated. These helped US recovery. Thus, President Roosevelt torpedoed the ER agreement also. No agreement was reached at London in order not to impede the recovery of the US economy.^29,30 Later in 1935 a weak tripartite agreement was reached between England, France and the US under which the countries agreed to stabilise ERs at prevailing rates and not to engage in competitive depreciations. However, there was no specific plan on actions to stabilise the ERs.

       Prospects for Cooperation at the

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