The Dollar

The Harry White affair cast a pall over the early days of the IMF, and the new institution was hardly involved in the major issues of the time. Dealing with the aftermath of World War II in Europe was initially largely left to the World Bank, which timidly provided modest loans for reconstruction. This support turned out to be insufficient for a devastated continent full of uncertainty following a short period of euphoria. For many, “[s]urviving the war was one thing, surviving the peace another.”73 The war effort had depleted the gold and foreign exchange reserves of the European Allies, who urgently needed to be able to purchase goods from the United States and formerly neutral countries such as Sweden. Dollars were the only means with which countries that desperately needed American foodstuffs, raw materials, and machinery could pay. And the only way to obtain dollars was to run a trade surplus and take up large dollar loans. This turned out be an enormous challenge, as most European countries, with Great Britain the first to face economic collapse, were running large trade deficits and were also not creditworthy. In a visionary act, the United States announced the European Recovery Program in 1947, popularly known as the Marshall Plan, having been conceived by the American secretary of state George Marshall.