Don John, rektor of St. John's.

Treasurer with St. John's Treasury, just to the south of
P.P. I know the day with St. John's in it for the rest of the
year.

Henry V. Knaufert

Sincerely yours,

Best regards,

to make sure this reaches you.

I am sending a cold card for this letter so far.

Thanks for your help. Do let me know when I can come on your
appointment, which we arranged in our office, would be
with a more efficient introduction. I want to know what
Institute, and if someone can let me know something like that,
together with some of the rest. I have seen some, easily for the
rest of the rest. I hope we have it in Vassar Library.

I am writing this letter only to let you know

the address.

first I go with you, would offer a card or, so far as I know, no office here. You have so much experience with me, especially in
business and you can get in some way with me, especially in
the future. And I hope to see you again some time. I will be
very happy to talk to you, will be in school with you. We will
be very happy to see you again some time. I will see you
next time.

Dear Mr. de Tournai:

Veuve-Franee NAVINCE
bar. Borrier, Orie
M. Bertrand, de Tournai

with 18, 1922

S.E.D.E.I.S.

SOCIÉTÉ D'ÉTUDES ET DE
DOCUMENTATION ÉCONOMIQUES
INDUSTRIELLES ET SOCIALES

SOCIÉTÉ ANONYME - CAPITAL : 1.000.000 DE FR.

205, Bd. Saint-Germain
PARIS (7°)

Tél. : LIITré 50-53 (lignes groupées)

C.C.P. Paris 666-549

8, C. 930.022-B

R.C. Seine 55 B 4122

Paris, le

Dear Kissinger,

being responsible for an organisation,
however small, proves extraordinarily absorbing. So much that
I now feel almost certain that I shall not go through with my
project of a visit to the States this year. This little thing
is growing vigorously and making quite unexpected demands on
my time. I now realize , oneex more, my wife's wisdom in pul-
-ling the manuscript of Soverreignty out of my hands as I could
not materially write another line into it.

The SEDEIS infant's almost ceaseless
clamours for attention have also set back any further medita-
tion upon the under-developped issue. I am however going to
attend the Milan Conference called on this subject by the Con-
gress for Cultural Freedom, as you know. The three dozen re-
ports which have already come to hand promise a good discuss-
ion, rather slanted to psychological aspects than to economic.
I feel that on my return from this, I shall be invigorated and
then will set out to give you a better paper. Till then I cannot
satisfy you. I feel less scruples in failing to deliver at sta-
ted date since I have found myself at the receiving end and
found that people thought nothing of merely forgetting their
promises ! At least I have not forgotten mine, I am duly rep-
entant, and that is something already.

I am sending you by slow mail a funny little thing, which has aroused some interest. It is an attempt to set up some- -thing I call Political Ecology.

We are leaving to morrow for the South where I pro- -pose to sleep in the sun, forgetful of broken covenants !

Did I give for your under-developped scheme the name of this indian economist who did so remarkable an article in the review of economic studies : DAYA, 1935 Gali Leshwa, Bazaar Sita Ram, Delhi, India.

I imagine that you have arranged with Nabokov, Congrès pour la Liberté de la Culture, IO4 bld Haussmann to get the whole series of the reports which may give you ideas.

all the best

(LJ)

October 11, 1955

Monsieur Bertrand de Jouvenel
par Bornel, Oise
Ansville, FRANCE

My dear Monsieur de Jouvenel:

This is a most painful and difficult letter to write
and I only hope it will not affect a relationship which I have come
to value very much indeed. Indeed, I have to send you the news which
will justly outrage you, that when I did not hear from you for several
weeks, I assumed that you were in agreement with my proposal and sent
your article to the printer. I was all the more confirmed in this
by two things: a) Strausz-Hupe told me that I could do with the piece you
had written for him what I wished, and b) more importantly, I circu-
lated the revised version to several people here as well as to partici-
pants in the Seminar, and the universal consensus was that it was one of
the best statements of the colonial problem that they had seen. As a
matter of fact, it was used as a basis for some discussions that were
held here.

Since you were willing to have your original draft published,
I did not imagine that you would object to an expanded version. I can
assure you that no one even remotely accused you of French self-
centeredness.

To make matters worse, when your letter arrived, I was on
an extended absence from Cambridge. Nevertheless, I tried desperately
by long distance phone to stop the printing run, but it was just forty-
eight hours too late.

I hope you will forgive me, and I can assure you that this
cannot happen again. If you feel that the present version misrepresents
your intention, I shall make such space available for you in our next
issue, and I shall pay you at the established rate. I know that this
is not really making amends, and I do hope you will forgive me.

Are you planning to come to the United States in the near
future?

Best regards.

P.S. Whatever became of Aron's appointment at the Sorbonne?

P.S. Whatever becomes of Aron's abodement at the Borpoume?

Henry V. Kneutinger.

Sincerely yours,

Best regards.

Lynn?

It is not very likely, I suppose, and I go jobo how will continue me.
I am sure I will be able to get a job at the airport, I know that I will
not be able to get a job in the United States, but I am sure that I will
continue to do so for a while.

How about you?

I want to go to school to get the beautiful man, but it was just too
expensive from Campido. We are going to try to get a better place
To make matters worse, when your letter arrived, I was on
vacation.

Please come soon.

I did not imagine that you would object to an extended vacation. I can
see you very well, but I would not like to stay with my brother and
since you are so remote, see you at French school.

How are you?

My father, Monsieur de l'Onaneuf:

Vraiment, BRUNO

Baron Borisy, Ores

Montem, Bertrand de l'Onaneuf

October 11, 1922

My dear Monsieur de l'Onaneuf:

Vraiment, BRUNO

Baron Borisy, Ores

Montem, Bertrand de l'Onaneuf

October 11, 1922

S.E.D.E.I.S.

OCT 21 RECD

Tél. : LITtré 50-53 (lignes groupées)
C.C.P. Paris 666-549
B. C. 339.922-B.
R.C. Seine 55 B 4122

Paris, le

18oct

Dear Killinger

I feel very sorry to
have given you such a poor
of conscience. Harviny best
an editor myself, I should
have foreseen that my
letter might reach you

April 13, 1956

M. Bertrand de Jouvenel
S.E.D.E.I.S.
205 Bd. Saint-Germain
Paris, FRANCE

Dear M. de Jouvenel:

You may remember that I wrote to you a few months
ago telling you about the topic we are considering at the
present time for Confluence. I am most anxious to receive an
article from you on this topic, and I am therefore writing again
to ask if you would be willing to write something for us.

It has seemed to me extremely important to have a
reappraisal of the ideals for which Woodrow Wilson stood. For
our topic we shall use as a point of departure the centenary of
his birth, and it will deal with the problem of what has happened
to the liberal values which seemed so self-evident in 1914. Indeed,
one could go further and pose the question as to whether the very
cocksureness with which these values were held has not contributed
to our difficulty. Other aspects of the topic might concern
principle versus pragmatism in diplomacy, and the impact of the
doctrine of national self-determination.

I feel that the issues raised by this topic are very
much in line with your thought, and your views would be particularly
interesting.

I would appreciate hearing from you as soon as possible
as to whether you would be willing to undertake such an article
for us. We would need a piece of between three and four thousand
words in length and could offer you $100 for your effort.

I look forward to hearing from you.

Kind regards.

[Y]

May 16, 1956

Mr. Bertrand de Jouvenel
S.E.D.E.I.S.
205 Bd. Saint-Germain
Paris, FRANCE

Dear Mr. de Jouvenel:

You may remember that I wrote to you in April telling you
about the topic we are considering, which concerns a reappraisal of
the ideals for which Woodrow Wilson stood. I hope very much you
will be interested in writing for us on this topic.

I am writing again today to tell you about another topic
which I hope will interest you. It concerns the function of education
at the present time. Specifically, it has seemed to us that one very
important clue to various systems of value, of tradition, and of social
purpose can be found in the concepts of the role of education held by
different peoples. How do they conceive of the problem of education?
What importance is given to the family, the church, and the university
and other like institutions in this respect? How do non-Europeans
conceive the role of the Western type university established in their
midst? What changes are occurring in European universities? Are they
in some significant way adjusting to the new position of Europe in the
world? What influence do universities and other schools have on
modifying the habits of a people and throwing into question certain
traditional cultural beliefs? In short, what is the impact of education
on religious belief, political behavior and cultural values generally?

If you do not feel you can write for us on the Woodrow Wilson
topic, perhaps you would be able to do a piece on the topic on education.
If not, I would appreciate it if you could suggest some other
contributors who would be interested in either of these topics. However,
I need hardly tell you how eager I am to have an article from you, as
I consider your previous articles to be among the best we have ever
published.

June 1, 1956

Dear M. de Jouvenel:

I am delighted you will be doing the article for us on Woodrow Wilson. I am not sure I understand fully what documents with regard to Wilson you wanted me to send you, but I have sent you by airmail, under separate cover, a book which appeared recently which may serve your purpose.

As for the other books, I have made enquiries at the Harvard University Press and I understand from them that books in question were published in 1932 and have been out of print for some time. They do not have any extra copies and they think it is very doubtful that copies are obtainable anywhere other than in libraries. I am sorry I cannot be of more help.

I am in the same position as you with respect to the National Review. I too have refused to write for them, and I even went to one of their editorial lunches once to tell them why.

I look forward to your suggestions about our education issue, and to receiving your article by August 1.

Best regards.

C]

Ansville par Bornel Oise

Dear Kissinger

here, at long last, and possibly too late,
is the piece you asked for. It is centered on Wilson's European
work, the only part of his activity of which I have knowledge.
Nor have I really discussed his ideas, as I did not find in his
utterances properly so-called ideas but rather a spirit.

We shall be in New-Tork in a few days, it
remains for Panamerican to tell us exactly when. In any case I
am scheduled to find myself at Chapel Hill ( care of Prof Phill-
-brook ) for a conference at the University of North Carolina,
starting sept. 5 in the evening and going on until the 14 th.

I hope to spend a few days after that
in Washington and perhaps two days in New-York. I would like to
meet you on this trip but doubt whether I can come up to Harvard
for reasons of monetary stringency. Yet it seems a scandal that
knowing many out of the way places in the States, I have never
seen its most famous University.

Pe haps you could drop me a line to aw-
-ait arrival at Panamerican terminal ? I would thus know how to
get into touch with you. I would have loved to make a jump to
Washington for your merting but I am in the hands of the organ-
-izers of the conference I am to attend. Also I would very much
liked to have slipped\* in at Friedrich's meeting of political
philosophers : same objection. Things in the States have a way
of thrashing themselves out so possibly there is a faint hope.
If possible, in your note, please remind me of when and where
the two aforenamed intellectual events are due.

all the best

journe!.

November 14th

Dear Henry Kissinger,

We have been so sorry to have not the occasion to
meet you again in Washington or in New York.

Bertrand tried to reach you during your stay in
Washington, but I think it was not the right adress,
so we do not receive any answer.

We are now looking forward to see you here. Have
you not any project to come?

Bertrand told me you have perhaps some money for him
for a little article he had done for you. In this case,
is it possible to send it to me. We are trying to do some-
thing for the Hungarian arriving here, and you know,
each little thing of that sort is very useful.

I shall not speak to you about the events of the
month, what can I say without tears? And now fight being
over, the silence will get down on this poor people. It is
really horrible to be not able to help them in any way.
It is necessary to give to them food, clothes, medicament,
but it was not what they want so much, their liberty.

Kind regards for Mrs Kissinger ans yourself also from
my husband

December 4, 1956

Mme. Bertrand de Jouvenel
Ansville par Bornel
Oise, France

Dear Mme. de Jouvenel:

Thank you very much for your letter of
November 14th. In the meantime you have undoubtedly
received a check for M. de Jouvenel's article.

The Hungarian situation is depressing enough,
and the Middle Eastern fiasco compounds it. I am
tired of all the little individuals who have been
preaching absolute moral values for so long and who
never have anything concrete to offer, when really
ultimate experiences are at stake. If Christ had
had a Policy Planning Staff he would never have
died on the Cross. Even more than the foolishness
of our policies, I deplore the pettiness and the
lack of style. I am glad you are doing something
for the Hungarians and if there is any assistance I
can give from over here do let me know.

It was a particular pleasure to meet you again
in New York. I have a vague recollection that you
promised to analyze my handwriting. Have you
forgotten or was it too terrible to tell?

With kind regards.

22 WEST 55TH STREET

April 8 195

TO: Dr. Kissinger

FROM: Marjorie Martus

You might wish to refer, in the meanwhile, Vick to the French equivalent of the American Management Association:

Col. L. Segonne
Comité Nationale de L'Organisation
Française
57 rue de Babylon
Paris 7, France

They would know the more progressive industry people (and U.S. oriented) including management consultants.

April 8, 1957

My dear Jouvenel:

It was a great pleasure to see you here again and the ride to
Philadelphia gave us the opportunity to talk in a somewhat more
leisurely fashion than seems to be my lot here usually.

I do hope to have a chance to get to France this year and if
I do, I would hope very much to have a chance to meet you and
Madame de Jouvenel again.

This letter concerns a question which has been put to me by an
American corporation to which I really do not know the answer. The
Vick Chemical Company which is one of the largest pharmaceutical
concerns would like to hire some French executives for their European
operations. I do not know whether the term "executive" makes any
sense in French and I have not the vaguest notion how they might
go about doing it. Since this is a subject which I think is close to
your heart, I thought you might not mind advising them on how to go
about it, and I have therefore taken the liberty of giving them your
name.

By now you and Madame de Jouvenel are probably making
ready to go to Japan -- a prospect which fills me with considerable
envy. For some extraordinary reason Japan is one of my very favorite
countries.

Warm regards,

Mr. Bertrand de Jouvenel
Chateau D'Ansville
Par Bornel
Oise, France

S. E. D. E. I. S.

205, Bd Saint-Germain
PARIS (7°)

Tel. : LITtré 50-53 (lignes groupées)
C. C.P. Paris 666-549
R C. Seine 55 B 4122

Paris, le

my dear Henry

it has occurred to me that, as you are a man of goodly wit and counsel, I should seek your opinion in a matter of considerable interest to me. The matter is as follows, both my British publisher ( the Cambridge University Press ) & my American publisher ( the Chicago University Press : Alexander Morin ) have shown considerable eagerness towards a project I broached to me some time ago, i.e. writing an elementary course in Politics - not Government - for 18 year olds. The Cambri-dge people are now pressing me to carry out this project. My difficulty is, as difficulties so often are, of a financial nature.

I must briefly explain to you how my life is run. Unlike Gaul, it falls into two parts. On the one hand I edit SEDEIS, which is becoming very influential, being the only source existing in France where basic information on economic problems of the country is marshalled and where discussion of economic policies is carried out at a level of seriousness. This however is run on a small budget which there is no short-run prospect of extending, since our rapid intake of subscriptions goes to diminish the subsidies we receive from our sponsors. When equilibrium shall be reached, my first concern will be to enlist expert personally personnel & this means that for the time being and the foreseeable future I must take out of this business only half or less of our family expenditure. Which implies by consequence that another part of my life must be devoted to pot-boiling writing. And therefore there is no room for serious endeavor

in the field of political science.

With this exposition of the problem, you immedia-
tely grasp what I am in search of : a grant which would free me
from the pot-boiling part of my activities for the time necessary
to write the aforementioned book.

I realize that this is not easily gotten. You ex-
plained to me that Foundations liked vast projects ( if so I wish
they would like my SEDEIS thing which is a vast project if under-
taken with scant means ). A grant of say 6.000 ¢ towards the
writing of a book is not something which falls within their habits.
But I felt that you might possibly have an idea and that in any
case you would not mind my consulting you about it.

Of course I would have no problem at all if I
were not tied down by my SEDEIS venture since I have received
both from the States and from England attractive offers of a
chair of Political Science, but, though I say it who ~~may~~ should not, SEDEIS is performing over here an urgently needed
service, and I do not see any one of my generation available
to take it over, only very junior people who will be fit to
continue and improve it only in a few years' time.

By the way do you see this publication and
if not do you want to get it ? I am chary of sending it to xxx
friends who I presume will not have time to read it as even its
marginal cost is extremely high.

Please give my respects to Mrs Kissinger,
tell her how much I enjoyed our brief meeting at the Beekman,
and try to come over. Arent you going to the Strausz-Hupé Bru-
-ges meeting ?

all the best

Bertrand de Jouvenel

September 6, 1957

M. Bertrand de Jouvenel
S.E.D.E.I.S.
205 Bd. Saint-Germain
Paris, France

Dear M. de Jouvenel:

Enclosed is a copy of a letter which I wrote to you this past
July 8 and which I am wondering if you ever received or somehow mislaid.

I would also like to get your advice on two topics which we are currently planning for Confluence. The first topic concerns the general problem of the city. I think it is becoming quite evident that in all industrialized countries, and probably in the underdeveloped countries as well, the mushrooming of the cities without a clear plan is raising a whole host of problems - from aesthetics to juvenile delinquency, from housing to communal living. I would like to get a series of articles dealing with one or more of these topics and trying to set the problem of the city into our general social context.

The second topic concerns the problem of organized labor, or
abroad, of the socialist parties. It seems to me that labor movements
all over the world may soon face a major crisis because of their very
successes. In the more industrialized countries there now exists, or
will soon exist, a social climate in which labor will achieve automati-
cally many of the things which seemed utopian a century ago. What then
becomes of the labor movements or socialist parties? What goals can
they set themselves to challenge young people to devote a life-time to
their service? Is it possible, as some of their critics maintain, that
in order to keep up the momentum of their achievement they may be tempted
into measures which must unleash an inflationary spiral? I would not
expect the author to deal with all these sub-topics, but to pick one or
two of these questions and focus on them. Whom would you suggest?

Kindest regards.

Paris oct. II 1957

We have lived through a golden decade. Production and welfare have been almost ceaselessly on the increase in Western countries, international trade among the non-Communist countries has grown ever freer, and, in real terms, it has almost doubled. This is a pleasing picture but there are ominous signs, such as the slipping of primary prices, the collapse of freights, the drain of exchange reserves suffered by many countries. In my opinion, subject to correction, the current policies of the main Western countries threaten to tear up the delicate and precious network of the international economy.

This opinion involves no judgment of value; it is not implied that those policies are " wrong " in themselves but only that they are incompatible with the state of affairs in the rest of the world, and thereby imperil the existing relations. People who are strongly convinced that these policies are " right " may interpret the writer's statements in the sense that the other countries of the world are " weaker vessels " which can not stand the strain placed upon them by the American and German policies. There is no purpose here to apportion praise or blame, mutually nor is the writer at all concerned to measure up present institutionalized practices of the several countries against ideal behaviours. The sole inspiration of these remarks is to show the earnest desire that the free world should pursue its progress towards ampler and freer foreign trade, and towards market practices in the several countries.

There is a fashion in ideas. During the years following the last war, full employment, continuous expansion of capacities and of production, were the prevailing preoccupations, regardless of the influence upon prices. Now the wheel has tilted right around: sooner or later in the different countries, the preservation of the national monetary unit's buying power has become the main concern. This attitude has culminated in the recent meeting of the International Monetary Fund, the rise in consumer prices ( somewhat improperly called inflation) being taken as the one enemy against which all guns should be turned. At the same time, it was affirmed that exchange rates should be preserved at their present parities and rigidities.

2

Nowhere is the " fight against inflation " so much talked
of and conducted with more energy than in the United States and We-
tern Germany, the two countries where prices have least risen since
the devaluations of 1949, and which both register considerable surp-
luses in their balances of trade and services. From the declarations
and comments made in the U.S., one might think that the country was
imper running the risk of a gallopping inflation. The fight against
inflation, while including a considerable cutting down of military
military orders, mainly consists in a tightening of credit and a raising
of the cost of money. American industrial activity runs at less
than which are not only inferior to previous levels, but even more
inferior to capacities which have recently undergone a notable ex-
pansion.

economy

Thereby the American buys from abroad less primary goods
than it did and especially less than it was expected to buy this
year, affecting the exports of primary producers somewhat in volu-
me and to a greater degree in prices. Unfortunately this is not
the sole or even the main influence of current American policy.

I want to turn to the countries which have been suffe-
rin a heavy drain upon their foreign exchange resources. The
approved method of dealing with such a situation is a "squeeze".
The drain may proceed from one of two causes or more
generally from both. The first cause is an excess of domestic De-
mand over domestic production which brings about a net intake of
foreign production. The deficit in the balance of trade and servi-
ces is such that a net intake and therefore can be done away with
only by shrinking the domestic demand, so that the national economy
lets out more goods or services and sucks in a lesser amount. The
second cause, which was operative recently in the case of Britain,

is a flight of liquids: it is not necessary that these should
" run away " from the country flexibly through loss of confidence, they
may simply be attracted to another country by advantages offered
to them: anyhow they leave and in order to recall them, it is nece-
nary to allure them with a higher price for short-term money. Thus
whatever the cause of the drain, the " squeeze " is in essence the
came. Either you create unsatisfactory monetary stringency to shrink de-
mand for goods and services, and dear money follow as a consequent
... or you aim at dear money to lure balances and you need monetary
stringency for that purpose.

Now it stands to reason that the " squeezing " of a de-
ficit economy will prove more easily effective if at the same time
there occurs a " swelling " of the surplus economy. Taking things at
their simplest in the case of two countries with nothing but metall-
lo currency, as the deficit of one drains it of money, which tends
to constriction, the money pours into the surplus country, which
tends to expansion. Thus in any properly organized international
economic system, at the same time as the deficit country takes a
step backward a surplus country takes a step forward and thus the
coincidence of two moves in different directions facilitates the
restoration of equilibrium.

Our present international system is faulty in two
ways. Firstly, in the case of a continuing drain upon the reser-
vies of a country, there is no automatic squeeze operating immedi-
ately as a progressive brake to redress the situation. Instead
The squeeze must be deliberate, an act of policy which may intervene
too late. But secondly there is no automatic swelling in the surplus
country working towards the restoration of equilibrium. Indeed gov-

4

the deficit authorities of surplus countries are at pains to preclude the influx of gold (or other international means of payment) from affecting their domestic economy. It was done in the United States during the warties that "sterilisation" of accruing gold was first practiced, and it has been practiced in Germany on a grand scale during the fifties. Such policies of sterilisation throw the ones of restoring the equilibrium upon the deficit country alone instead of its being shared by the surplus country. It is natural that the flight of balances from pounds into marks should put up the price of money in Britain: but it is unnatural that it should not bring down the price of money in Germany.

A deficit country has to squeeze more roughly if the squeeze has not automatically begun with the drain. But its task is made harder if there is not attendant swell on the other side; and it may become intolerably hard if a squeeze is in pro-gross on the other side.

This is the arresting and alarming feature of the present situation: while many countries, suffering a drain of exchange resources, must squeeze to get back into balance, the surplus countries are themselves squeezing for their quite another reason. The squeeze within deficit countries must then be quite a superlative one, which may be harmful to their economy, to social relations, and bring about important political consequences.

Let us now turn our eyes towards deficit countries which are primary exporters. The American lack affects them but the British squeeze must affect them far more. In addition, the British deficit, which, in view of Britain remains the world's chief buyer of primary goods entering

5

international trade, and a "squeeze" such as that which is being operated must result in some reduction of inventories of primary goods. Many countries which are primary exporters are pursuing development programs, which are sometimes over-ambitious. These programs involve increasing acquisition of equipment goods from abroad, the prices of which will have risen recently and in some cases are still rising. Similarly, to pay these goods the primary exporters rely mainly upon the receipts from their exports: if these fall both in volume and in price, trade will decline, and the reserves of primary countries must be increasingly drained away, and the development projects will have to be cut down, entailing an economic crisis, with possible consequences in the political realm. But also this will react upon the exports from the industrial countries most, a good third of which are addressed to primary countries.

It is unnecessary to trace every step of a chain reaction: we know the outcome. Individual countries try to inculcate themselves from spreading deflation, and hastily put up physical controls and negotiate bilateral trade agreements. If such policies are to be effective, they must be backed by a strong commitment from the industrial countries. The true authors of such policies are not those who put them in to operation but those who have caused the situation to which such policies are a direct result. As a rough and ready reaction, as natural as it is deplorable. I regard the hard money men in Washington and Bonn as a danger to everything they hold dear, such as a market economy and a freely developing multilateral trade.

India is a case in point.

6

Let us stress two features of the golden decade. Firstly, thanks to the wisdom of President Trueman and other generous generosity of the American people, measures were taken to ensure a ceaseless outflow of gold and dollars to the rest of the world. Government loans, grants and expenditures abroad were set, year after year at such levels as to reverse the natural effect of a continuous surplus in the American balance of trade and services. There is no doubt in my mind that the world is indebted to this far-seeing policy for the superb growth of multilateral trade; much let it be noted that there was nothing like this expansion of world trade after World War One: in-ternational trade did not then keep pace with production increases as has been the case this time, thanks, I repeat it, to American fo-recast. The rest of the world has, through this golden decade, added continuously to its holdings of gold and dollars, which grew from 14,6 thousand million dollars at the end of 1947 to 27,9 at the end of 1956, thus keeping pace with the increase in imports, the relation being 32 % in 1947 and 33 % in 1956.

Two unfortunate developments have occurred in this respect: one is that the outflow of gold and dollars has ceased, indeed during the first quarter of the current year, the current was reversed, possibly a temporary phenomenon. The other is that gold and dollars have piled up in Germany to such an extent that all other O.E.O.E. countries now totalize no more exchange reserves than they had at the end of 1950, when their total import trade measured in dollars was hardly more than half of what it is now. Therefore there is now a dearth of reserves which causes countries to be much more vulnerable to deficits and tends towards the compression of imports.

7

A second important feature of the golden decade was the extreme cheapness of money in the U.S., which continued up to the end of 1955. When Chancellor Butler, then prime minister after the elections of October 1951, began yielding the weapon of the interest rate, this proved remarkably effective, even though the hardening of money rates was mild, because at that time, the price paid for short-term investments was extremely low in the U.S. During the short-term use of balances was extremely low in the U.S., but it did not then matter that a high price was paid for balances in Germany, since confidence in the stability of the mark was not yet fully restored. (Rates of interest are of course Nevertheless, the attraction of high interest rates in Germany, the U.S., and Switzerland, sharply reduced the demand for money, then, as now, was less well placed, in order to retain or attract balances, must go to extreme danger. There is no doubt that such high rates as have been adopted in Britain must attract balances but the question arises whether the incoming balances next shall be wholly recalled from the aforementioned countries, or whether they will not be in great part drained out of less favoured countries such as the primary producers of the sterling area and some badly placed European countries. It would then seem that such countries would have to make money even more costly than it is in Britain.)

9

ed the same lesson to the German authorities. There is no doubt that flexible exchange rates are a considerable inconvenience, but surely a lesser one than a move back towards exchange controls and the inconvertibility of currencies. The Bretton Woods idea was to firstly establish fixed parities, and then to move towards convertibility: and convertibility of currency means that any bearer of a currency may change it at will against another, convertibility for foreign bearers only is not convertible. How the prospects of a general return to convertibility are extremely poor, and the question arises whether we should not reverse the Bretton Woods procedure, start with free convertibility and look towards the progressive establishment of stable rates of exchanges through a process of fluctuations possibly ample at first, and gradually damping itself down.

Speaking as a Frenchman, I can testify that the franc lost much less internal and external value under the regime of free convertibility at market rates, after World War I, than it has done after World War II, under the regime of inconvertibility and supposedly fixed exchange rates. A falling price means of course the domestic currency on exchange markets exercises an additional restraining effect partly automatic and partly psychological, on the causes which bring it about. And surely we want corrections to come as far as possible from voluntary actions of individuals rather than from governmental measures.

I must however make it clear that if free convertibility at market rates of exchange seems to me preferable to the present state of affairs, I do not regard it as a panacea. Neither it nor any other means at our disposal can cancel out the nefarious influence

II

It is quite true, as Mr. William Ro Cheesey Martin argues, that cessation of Demand inflation must prevent producer from handing on cost increases. But this puts producers in presence of a very unwelcome choice. Either they still adjust their prices upwards to rising costs, and their volume of sales falls

Cost-push inflation in general tends to continue after Demand inflation has ceased, and this lag is prolonged in the case of the U.S. to day by some built-in, institutionalized, cost increases. If the continuation of this cost-push inflation is taken as a sign of continuing Demand inflation, the measures taken to constrict Demand may be dangerously exaggerated.

I2

affecting the volume of their profits and sooner or later the vo-
lume of employment (XXIX institutional causes may intervene to
induce employers rather to spread the work : one of these causes
being the great difference between normal rates and rates for sur-
plus hours ; another the incidence of which I can not rightly ap-
preciate the costs involved in diametrically by the Annual Guaranteed
Wage ). Or the employers may absorb rising costs and accept a XXIX
shrinking of their profit margins. In either case their internal
financial resources will suffer a decline, causing them to post-
one development programs, which must cause attrition of the
plant and equipment industries.

But development programs which are already under way can not be stopped from one day to another. The decline in internal financial resources must cause firms to seek more external financing, and so they must come to the capital market, bidding competitively for available funds, and thereby driving down the market value of existing securities.

This view of the American situation is of course based
only upon such data as are available to us in Europe, and it is
subject to correction. But, as I see it, the American situation
is not inflationary, it is deflationary. It does not call for
continuing constriction but for stimulation.

Bertrand de Jouve nel

oct. 13

my dear Henry

I have rewritten the piece which I formerly sent
you and I feel that as it is now you may distribute it among your
friends if you see fit.

I should perhaps clarify its nature. As you know
I edit a fortnightly journal SEDEIS, which carries regularly surveys of
the world situation. As things seem to be going the way we have said,
the B.B.C. has asked me to sum up our views in a Third Program broad-
cast. I have seized this opportunity to extend my remarks, and for
instance the final sub-title about the situation in the U.S. is not
for broadcasting purposes.

It is clear that, since this is ( in its greater
part ) a script for the B.B.C. it is not for publication. But there
is surely no objection to its circulation among your friends. Perhaps
it would be well to put in a small note, stating that this is a bald
summing up of views which have been advanced since the last winter in
the SEDEIS bulletin.

In order to save your time, may I suggest the fo-
llowing note " about the author ".

This paper is by Bertrand de Jouvenel, whose book
" Sovereignty " has recently been published by the Chicago University
Press. It summarizes in the roughest form, views which have been ad-
vanced and documented in the reviews of the world situation regular-
ly published in the fortnightly Bulletin of SEDEIS, a private orga-
economic research organization, which Bertrand de Jouvenel heads in
Paris. This paper is not to be published.

Three times the word " published " ! I had better
leave it to you.

As the following people may not be on your mailing list, may
I suggest that you send them copies :

Mrs Joan Raushenbush France Actuelle 2I Southern Building
Washington 5 D.C

Alexander Sachs

Dexter Keezer, Mc Graw Hill

Robert Strausz-Hupé, Foreign Policy Research Institute
room 203 I33 South 36 th Street
Philadelphia pen.

all the best from your friend

Bertrand de Jouvenel

Bertrand de Jomanel
off the beat from your friend

Philadelphia ben.
room 503 133 South 3d Street
Robert Strasas-Hube, Foreign Policy Research Institute
Dexter Keeser, McGraw Hill

Alexander Sachs

Mrs Joan Ranshaw Prance Actuelle, SI Southern Building
Washington 2 D.C.

Ya the following people may not be on your mailing list, may

leave it to your

Barna. This paper is not to be published.
economic research organization, which Bertrand de Jomanel heads in
-ly published in the fortnightly Bulletin of SEDEIS, a private XXXXX
-anced and documented in the reviews of the world ation regular-
-press. It summarizes in the roughest form, views which have been ag-
-s Governance " has recently been published by the Chicago University

This paper is by Bertrand de Jomanel, whose book
-llowing note " spout the author " .

In order to save your time, may I suggest the to-
the SEDEIS bulletin.
ansing up of views which have been advanced since the last winter in
it would be well to put in a small note, stating that this is a paid
is surely no objection to its circulation among your friends. Perhaps
It is clear that, since this is ( in its greater
for proscating burpoles.

instance the final and-title spout the situation in the U.S. is not
csat. I have seized this opportunity to extend my remarks, and for
the B.B.C. has asked me to amm up our views in a Third Program prosc-
the world atation. As things seem to be going the way we have said,
I edit a fortnightly Jomanel SEDEIS, which has been regularly arrivea of
I should perhaps clarify its nature. Ya you know
friends if you see fit.

You and I feel that as it is now you may distribute it among your

I have rewritten the piece which I formerly sent
my dear Henry

oct. 13

2

The squeeze : its proper place

Within an international economic system, countries which suffer a continuous draining of their foreign exchange resources have to take corrective action. The approved method of dealing with such a situation is a "squeeze". The drain may proceed from one of two causes or both. The first cause is an excess of domestic Demand over domestic production which brings about a net intake of foreign goods and services. Such a situation is exemplified by France and perhaps it would be better to say by the franc area. The deficit in the balance of trade and servi-ces represents a net intake from abroad, and therefore it can be done away with, in conditions of full employment, only by shrinking domestic Demand, so that the national economy lets out more goods and services and sucks in a lesser volume. The second cause, which was recently ope-rative in the case of Britain, is a flight of liquidities. It does not matter whether this is a flight from, caused by lack of confidence in the country, or a flight towards, caused by the attraction exerted by another country, in this case Germany. In any case the liquidities have to be lured back by the offer of favourable terms. If it is proposed to shrink demand for goods and services, monetary stringency will be used and the clearness of money will be a consequence. If it is proposed to lure back balances, dear money will be used, and monetary stringency a condition. Therefore the squeeze is in any case a matter of monetary stringency and clearness of money.

Now it stands to reason that the "squeezing" of an economy will prove more easily effective if, at the same time, there occurs a "swelling" of the surplus economy. Taking things at their simplest in the cases of countries using nothing but metallic currency, as the deficit of one country drains it of money, causing its dearth, the currency lost pours into the surplus country, causing monetary abundance. Thus in any properly working economic system, at the same time as the deficit country takes a step backwards, the surplus country takes a step forward, and the simultaneity of two moves in opposite directions facilitates the restoration of equilibrium.

Our present international system is faulty in two ways. First -ly in the case of a continuing drain upon the reserves of a country, there is no automatic squeeze operating immediately as a progressive brake to correct the situation ; the squeeze must be a deliberate act of policy, implying delay and consequent brutality. But secundly there is no automatic swelling in the surplus country working towards the restoration of equilibrium.

Indeed the authorities of surplus countries are at pains to preclude the influx of gold ( or other international means of payment ) from affecting their domestic economy. It was in the United States during the twenties that "sterlization" of accruing gold was first practiced, and it has been practiced by Western Germany on a grand scale in the fifties. Such policies of sterilization throw the omus of restoration equilibrium upon the deficit country alone, instead of its being shared by the surplus country. It is natural that the flight of balances from pounds into marks should put up the price of money in Britain ; but it is unnatural that it should not bring this price down in Germany.

A deficit country has to squeeze more roughly if the squeeze has not begun with the drain. But its task is made harder if there is no attendant swell on the other side ; and it may become intolerably hard if a squeeze is in progress on the other side.

3

This is the arresting and alarming feature of the present situation: while many countries, suffering a drain of exchange reserves, must squeeze to get back into balance, the surplus countries are themselves sqeezing for quite another reason. The squez within deficit countries must therefore be a superlative one, which may be harmful to their economy, to social relations, and might bring about important political consequences.

## The plight of primary exporters

Let us turn our eyes towards countries which are primarily exporters. Many of them pursue development programs, sometimes in themselves over-ambitious. These programmes involve increasing acquisition of equipment goods from abroad, the prices of which have been rising recently. To pays these goods, the primary exporters must rely primarily upon the proceeds of their sales of primary commodities abroad. They have reckoned upon a demand increasing in volume. The American slack is a first cause which diminishes the volume called for as against that assumed. But the British squeeze is a second cause, and an even more important one, since Britain remains the world's chief buyer of primary goods entering world trade, and a "squeeze" such as that which is being operated must result in some working off of inventories. Therefore the proceeds of primary sales are affected by a fall in volume and a more pronounced fall in prices. The reserves of primary countries must therefore be drained away, and the development projects have to be cut down, entailing an economic crisis with possible consequences in the political field. Incidentally this must react upon the exports of industrial countries, a good third of which are addressed to primary countries.

The chain reaction is well known and also what it leads to, i.e. a return to bilateral methods of trade. Some people may remember that when Hitlerian Germany offered bilateral trade to primary producers, who had ceased to obtain satisfactory terms for their exports, this offer was welcomed and led to new links with Hitlerian Germany. Now Soviet Russia is ready at hand to organize such bilateral trading. And primary producers must be inclined to turn to her in proportion to the deficiency shortfall of their export proceeds. One might venture the statement that the political influence of the Anglo-American group over the rest of the world is a function of the prosperity of multilateral trading and falls off sharply when this trading falls off. Also one might say that the success of multilateral trade is a function of the volume of international means of payment and of the facility of restoration of an impaired external balance. These two features obtained during the golden decade.

## Two features of primary exports

The primary features of primary exports are first of all the thanks for the aid of the President and the thanks of the Congress.

## Exchange reserves

Thanks to the wisdom of President Truman and generosity of the American people, measures were taken to ensure a ceaseless outflow of gold and dollars to the rest of the world. Government grants, loans, and expenditures abroad were set year after year at such levels at to reverse the natural effect of a continuous surplus in the American balance of goods and services. There is no doubt in my mind that the world is indebted to this far-seeing policy for the magnificent growth of multilateral trading; let it be noted that there occurred nothing like this ex-

4

pansion of world trade after World War One: international trade did not then keep pace with production increases as has been the case this time, thanks, I repeat it, to American foresight. The rest of the world has, through this golden decade, added continuously to its holdings of gold and dollars, which grew from 14.6 thousand million dollars at the end of 1947 to 27.9 at the end of 1956, thus keeping pace with its increase in imports, the relation being 32% in 1947 and 33% in 1956.

Two unfortunate developments have occurred in this respect: one is that the outflow of gold and dollars has ceased, indeed during the first semester of 1957 the current was reversed, possibly a temporary phenomenon. The other is that gold and dollars have piled up in Germany to such an extent that all other O.E.C.E. countries now totalise no more exchange reserves than they had at the end of 1950, when the dollar value of their imports was hardly more than half of what it is now. Therefore there now exists a dearth of reserves which causes countries to be more vulnerable to deficits and tends towards the compression of imports.

## The effectiveness of discount rates

A second feature of the golden decade was the extreme cheapness of money in the U.S., which endured until the end of 1955. When Chancellor Butler, after the elections of October 1951, began wielding the weapon of the interest rate, this proved remarkably effective, even though the hardening of money rates was mild, because at that time the price paid for the use of short-term balances in the U.S. was extremely low. It did not then matter that a high prices was paid for balances in Germany, since confidence in the future of the mark was not yet fully restored. The attraction of high prices offered for the use of balances is of course impaired if there are doubts about the preservation of a currency's value and doubts about the facility of removing balances at will. It is then natural and normal that countries about which such doubts are entertained should offer a high price for balances to attract them from abroad or even to retain those which arise in the country.

But when countries which present the most reassuring traits, such as the U.S., Germany and Switzerland sharply put up the price of money, then countries somewhat less well placed, in order to attract or retain balances, must go to extreme depth. For example, such high rates as have been adopted in Britain must attract balances; but the question may be asked whether the inflating balances flowing in after the 7% rate was established are all returns from the American, German or Swiss markets, and whether they do not to some degree originate from the less favoured countries such as the primary producers of the United States and some badly placed European countries. It would then seem that such countries would have to make money even more costly than it is in Britain.

In other words, the high price of money in the most favoured countries must run all along the line of the less and less favoured countries, gaining in strength as it goes along: the less favoured countries squeeze, if conducted in the best-placed countries, must

grow more and more vigorous as it proceeds to the ill-placed countries. There is a considerable danger that the braking of the leaders may con-vey a cumulative jolt, capsizing the last waggons. We do not find that countries in contrasting situations fix as to their international accounts, but they all move in the same direction which implies that the ill-placed have to move to an excessive and probably intolerable degree.

## Two questions

I regard this as an alarming situation, which raises two questions, one relating to organization, the other to facts. The first question is whether the Bretton Woods doctrine and arrangements are adequate to the preservation of a satisfactory international system. The second question is whether the American policy of monetary stringency is really called for by the American situation. My answer is no to both questions. The reasons can be given very shortly. As to the Bretton Woods arrangement, they provide no feed-back mechanisms whereby a drain of reserves tends to choke off the causes producing it or whereby an influx of reserves tends to choke off the causes producing it. A country may still swell its internal Demand while its reserves run out, and it may squeeze its Demand notwithstanding the influx of foreign exchange. Turning to the American policy, I deem it irrelevant to the present situation of the American economy since it is aimed at Demand inflation which is clearly inexistant at the present time. As I see it, present American policies are creating a pressing danger for the world economy, in order to fight an imaginary danger at home. The hard money men of the U.S. are taking a very great responsibility.

## Inadequacy of Bretton Woods

France and Germany offer opposite and equally striking examples of the lack of influence of reserve efflux or influx upon the national economy: such an influence was the essence of the gold standard system. Whenever one states the necessity of letting incoming surplus-es exert their effect upon the domestic conditions of a surplus economy, one gets the answer coined by those masters of colourful expression, our American friends: we do not wish to import inflation. This is a legitimate concern, but then perhaps it is also legitimate in the deficit countries to want to keep the "squeeze" necessary in order to restore balance, within limits which shall be exceeded if one must adapt to a "squeeze" already conducted in the surplus country. In other words, deficit countries must disinhale but they may be chary of importing deflation.

Now can such national preoccupations be reconciled with an international economic system? An answer was offered already in the fall of 1950 by Professor Milton Friedman who argued the case for flexible exchange rates (I). Now the great authority of Professor James

(I) Milton Friedman: *Essays in Positive Economics*. Chicago University Press 1954. The chapter called "The Case for Flexible Exchange Rates" was written for B.C.A. in the fall of 1950

November 11, 1957

My dear ~~de~~ Jouvenel:

It is unforgiveable that I have not written you since your latest manuscript arrived. I thought extremely well of it as always and am having it duplicated to send to some people here. It strikes me as a highly original and novel approach to the problem.

I was delighted to see the splendid review of your book in the Times Literary Supplement although for one of your admirers it was not surprising that you had produced a masterpiece.

A copy of my book is on the way to you.

All good wishes and kind regards to Madame de Jouvenel.

M. Bertrand de Jouvenel
S.E.D.E.I.S.
205 Bd. Saint Germain
Paris, France

BULLETIN
S. E. D. E. I. S.

SOCIÉTÉ ANONYME - CAPITAL : 1.000.000 DE FRS

Tél. : LITré 50-53 (lignes groupées)
C. C. P. Paris 666.549
R. C. Seine 55 B 4122

Paris, le

Dear Henry,

it was good to see you. I have not forgot-
-ten your suggestion that I should send you my views about the
condition of the world economy for circulation to your important associates. This is not it : I mean that the present piece, which is in effect a rough draft of a talk for the B.B.C.;
Third Program should be thought of as a first exposition to be refined after some reactions have been obtained. For that purpose I am sending it also to Dexter Keezer of whom I think highly ( as you do I know, and as he does of you ).

So I would like you to discuss it with a
few people who are specially interested in world economy, and
to let me have the benefit of their remarks. I am sorry that
the carbon is so bad, after the first page. As you know I have
no English-speaking secretary, and the cleaner copies must go
to the B.B.C. for to let them know what I propose to talk about.

Perhaps you can have it retyped by one of
those graceful and efficient girls with whom you are happily
surrounded.

It was very nice of you to let me have
the use of one of your brief hours in Paris. Please return
soon and be sure to come with Mrs Kissinger. My wife and I
are eager to have her at Ansville. Please convey my respects
to her and tell her I am grateful for the appointment she gave
me in New-York. We have a talk quite delightful to me.

very sincerely yours
B.J.
Houten

July 18, 1958

M. Bertrand de Jouvenel
205 Boulevard St. Germain
Paris, France

My dear Jouvenel:

It has been a long time since we have been in touch.
My life has been incredibly hectic with working on the Rockefeller
Special Studies Project and my Harvard activities. Also, I did
not quite know how to deal with the last matter you wrote about.
I now have, however, a pretty good idea on how to proceed, and I
will write you more fully about it in another few weeks.

The main purpose of this letter is to introduce a very
dear friend of mine, Miss Nancy Hanks, who worked with me on the
Rockefeller Project. She assisted on almost every phase of the
Project. She is visiting France for a few weeks for a well-
earned rest and I think it would be very nice if she had a chance
to meet you and perhaps Madame de Jouvenel also. You will find
her intelligent and charming, and I would consider anything you can
do for her a personal favor.

When will we have the pleasure of welcoming you again to the
United States?

With kind regards.