multinationalfirms makes it very much in the interest of such bodies to co-
operate in international arbitration, so that the actual effectiveness of private
international law may be greater than the formally institutionalized public
international law. The importance of international law actually varies from
country to country according to whether their internal doctrine of law is
‘monist’ or not. If it is, a treaty signed by a country may give its own citizens
direct rights; in ‘dualist’ countries, international law has to be directly
incorporated by parliamentary action before it can be cited before domestic
courts.
International Monetary Fund (IMF)
The IMF is a specialist agency of theUnited Nations, set up after the Second
World War mainly as a result of bilateral agreement between the USA and the
UK at the Bretton Woods conference of 1944. It was intended to be a means of
producing stable international economic relations and, above all, a stable
international currency and set of exchange rates. In a sense it was a replacement
for the old gold standard which had been abandoned almost everywhere by
- The trouble with the gold standard, under which all currencies had to be
directly backed by equivalent amounts of gold held by central banks, was that
although it produced stability of currencies, its effect was automatic and often
very harsh. Thus a country with a balance of payments difficulty would find its
unemployment rate increasing in an uncontrollable fashion. In addition, as the
supply of gold was not variable by direct political decision, an essentially
arbitrary physical restriction was placed on the amount of money available in
the world, reducing the possibility of economic growth. Yet when the gold
standard was abandoned, anarchy reigned in the international money markets,
with instant devaluations or revaluations, and great instability, which itself
acted as a restraint on international trade and economic development.
What was needed, it was felt, was a form of international currency which
could support national currencies, reduce uncertainty and bring stability, but
which would not be automatic in the way gold was. Thus it was vital that the
IMF should allow a country undergoing a balance of payments problem to be
much more moderate in its internal economic regulatory moves than had been
possible in the past. Essentially the IMF worked like a supranational central
bank, with member countries paying in an initial deposit (part of this still had
to be in gold), and then being allowed to draw out more than they had put in,
as a debt to the Fund, when in balance of payments or currency crises. These
debts had to be repaid, usually within five years, and rates of interest, varying
with the amount borrowed, had to be paid. The arrangement allowed a
country to pay its international debts without having to impose internal
deflationary controls to reduce demand, and thus possibly increase unemploy-
International Monetary Fund (IMF)