The Reform of the Global Financial Architecture

Roy Harrod actively participated in the design and reform of the international financial architecture in the aftermath of World War II. On the basis of the ideas presented in the first edition of International Economics (Harcourt, Brace and Company, New York, 1933), Harrod developed a plan for reform which contributed, in no small manner, to shape Keynes views on his Clearing Union Plan (CU). Harrod’s plan was more comprehensive than that of Keynes focusing on a range of issues from price stabilization and investment to taxation, trade, labor, and nutritional standards. Harrod defended the Keynes Plan against that of Harry Dexter White and was ultimately disillusioned with the final agreement and the limited scope of the International Monetary Fund (IMF). In the 1950s, Harrod became convinced that the low level of world reserves was the main stumbling block facing developed economies and pushed to increase to price of gold to increase world liquidity in order to meet the growth in global transactions. Harrod also addressed the external sector predicament of developing countries and argued that the insufficiency of technical and entrepreneurial cadres, rather than an insufficiency of capital, was the major constraint on their economic development.