Money: The Financial Olympics

Tokyo’s imaginative headline writers called it Okane no Saiten—the Festival of Money. Some Japanese authorities considered it more important than the Olympics in adding luster to Japan’s image, and Prime Minister Ikeda came to speak to the opening session. When the International Monetary Fund met last week in Tokyo, the gathering in the elegant Hotel Okura was the greatest in the city’s history, a financial Olympiad for 2,000 mental gymnasts from 102 nations.

Eager to impress, the Japanese plied the bankers with No plays, Koto recitals, Bunraku puppet shows, trips to the countryside, geisha parties and tea with Emperor Hirohito. They even introduced a new cigarette called IMF. Between the crowded plenums and the warm sake sessions, the international moneymen performed some important business—and witnessed a struggle for control of the world’s monetary leadership.

After several days of debate, the delegates voted unanimously to ante up an increase in the IMF’s $15.6 billion fund, which is used to bail out countries in financial distress. Most countries will probably get a 25% rise in their assessments, but certain ones that have been doing particularly well of late—such as Japan and West Germany—are expected to be asked to contribute even more. While the IMF met, delegates to the World Bank, the IMF’s sister institution, also gathered in Tokyo; over strong objections from the Latin Americans, Filipinos and Iraquis, they approved a plan by which the bank will try to arbitrate expropriations of foreign-owned properties. Despite such accomplishments, the most dramatic development in Tokyo was a dispute—a barefaced attempt by France to grab the lead in world monetary markets from the U.S. and Britain.

“Little De Gaulle.” At issue were long-simmering proposals to reform and modernize the IMF, which France (and some other countries) believes to be dominated by the U.S., although its chairman is Frenchman Pierre-Paul Schweitzer. The IMF has been uniquely successful in spurring orderly growth in world commerce, but it has not been basically changed since its founding at Bretton Woods, N.H., 20 years ago. By posing as the helpful repairman anxious to correct this oversight, Charles de Gaulle hopes to gain more power for France in world monetary circles. Many U.S. financial leaders believe that France wants to transfer some of the IMF’s money and credit powers to the Bank for International Settlements, a clubby little band of French and other Continental moneymen.

As a first step at Tokyo, France’s aristocratic, intellectual Finance Minister Valery Giscard d’Estaing plumped for a basic change in the system of monetary reserves that helps to bankroll world trade. He proposed that the leading industrial countries create a vague new international currency, based on gold, that would gradually replace the current reserve mix of dollars, sterling and gold. The hooker in this return to a universal gold standard is that it would greatly enhance the power of France, which has plenty of gold reserves, but weaken the U.S. and Britain, which are currently embarrassed by a shortage of enough gold to fill all their needs. Tokyo’s financial press sniffed at the proposals of “Little De Gaulle.”

Delaying Action. In formal rebuttal, Britain’s Chancellor of the Exchequer Reginald Maudling, normally a champion of reform, labeled Giscard d’Estaing’s plan “a danger” and cautioned the delegates to go slow in tampering with the IMF. U.S. Treasury Secretary Douglas Dillon got in his licks, too, playing upon the bankers’ conservative instincts to make his point. Dillon conceded that international cash and credit should eventually be enlarged to keep up with the rapid expansion of world trade, which has outstripped the rise in the world’s money supply, but he argued that the IMF’s newly voted increases would be sufficient to cover any reserve problems for the next two to four years. Rejecting France’s opportunistic urgency, he advised the delegates to approach reform “in an atmosphere of calm.”

Though France had lined up some weighty allies, notably the Germans and the Dutch, Dillon and Maudling appeared to win the majority of the delegates—at least for now. Many echoed the sentiment of Japan’s mightiest financier, Fuji Bank President Iwasa: “The gold standard is outdated.” But the cold, hard fact of monetary policy is that the long-term trend is toward less dependence on the dollar and sterling. As he tries to do with everything else, General de Gaulle is certain to press his attempt to use this economic shift to gain political dividends.