1
The League of Nations and Alternative Economic Perspectives
C.N. Biltoft
The Unconventional Child of an Orthodox Marriage
The League of Nations may seem a peculiar entry in a volume dedicated to heterodoxy. The
organization emerged from the Paris Peace Conference as a manifestation of, or an international
advertisement for the braided faiths of classical economics and liberalism. The League’s paper
trail certainly contains claims that the rule of law and free trade based on comparative advantage
could together secure peace by assuring the greatest good and wealth for the greatest number.
Yet, even though the League was born within a lineage of orthodoxy, it also provided an arena
for discussing alternatives to classical liberalism. As the world’s first permanent intergovernmental forum of its kind, the League gathered and brought into conversation a host of
different nations and interest groups.1 Whatever its initial intentions, it gradually became a zone
where the claims of convergence continually and publically ran up against the persistent realties
of political and economic divergences.2 Thus, the League piloted the working through of a
question that continues to afflict multilateral institutions; should these bodies reflect or actively
alter or redress the distribution of power and resources on the global stage? It was in grappling
My thanks to the Max Planck Institute for the Study of Societies, Cologne and the Center for History and
Economics, Cambridge for the opportunity to receive valuable feedback on this work; to the Center for
International Business Education and Research, Georgia State University for their financial support; and to
the following people for their help/insights: Betsy Carter, Patricia Clavin, Marc Flandreau, Sigrid Quack, Erick
Reinert, Sophus Reinert. The usual disclaimers apply.
1 In her recent study of the League’s Economic and Financial Committee Patricia Clavin cleverly refers to the
League in this way as a “multiverse.” Please see Patricia Clavin, Securing the World Economy: The Reinvention of
the League of Nations, 1920-1946 (Oxford: Oxford University Press, 2013).
2 For broad discussions of the role of trade in preventing rather than encouraging wealth convergences please see
Erik S Reinert, How Rich Countries Got Rich and Why Poor Countries Stay Poor (New York: Public Affairs, 2008).
2
with, though not resolving, this question that the League both reasserted and then slowly came to
revaluate some of its founding precepts, especially in the economic domain.3
This essay claims that beyond the narratives of success and failure, international
organizations provide a historical laboratory for studying the ligaments connecting the
international division of labor to the international balance of power. Furthermore, they provide a
glimpse into the ways in which struggles to either preserve or restructure those ligaments often
played out equally in the realm of ideology as in the realm of policy.4 To those ends, the
following pages will first address how the League’s efforts to promote the values of classical
liberalism shed light on some of the fault lines of those doctrines. Secondly, the essay will
explore how the League weighed promises of laissez-faire’s long run prosperity against counterclaims that social and political dissatisfaction with gaps in wealth and power could undermine
international stability in the short run. Finally, it will focus on how the League’s open
discussions of wealth distribution helped to incubate the seeds of alternative trade and
development theory after 1929.
Troubled Inheritances: Legacies of Liberal Capitalism
In 1918, when post-bellum leaders sought blueprints for securing and maintaining peace,
they drew from a ready-made canon. A long tradition including Immanuel Kant, Frederic Bastiat,
Norman Angel and then Woodrow Wilson claimed that free trade and political liberties were like
water to the oil of war. Within this context, WWI came to signify an aberration set against the
3
The definitive accounts of this subject include Michel Fior, “Institution globale et marchés financiers: la Société
des Nations face à la reconstruction de l’Europe, 1918-1931” (P. Lang, 2008).Clavin, Securing the World Economy;
Yann Decorzant, La Société Des Nations et La Naissance d’une Conception de La Régulation Économique
Internationale (Bruxelles: P.I.E. Peter Lang, 2011).
4 For a trenchant discussion of the power of financial ideology in informing (or mis-informing) policy please see
Mark Blyth, “The Political Power of Financial Ideas: Transparency, Risk, and Distribution in Global Finance,” in
Monetary Orders: Ambiguous Economics, Ubiquitous Politics (Ithica, NY: Cornell University Press, 2003), 239–
259.
3
century of pacific liberalization that had supposedly preceded it.5 While this storyline offered a
soothing formula for reconstruction after 1919, it was riddled with hyperbole, as economic and
political freedoms had never been fully or universally secured at any time or place before 1914.
The long nineteenth century had been everywhere one of state and empire building with violence
enacted against the marginalized at home and the colonized abroad.6 As states pursued the
priorities of power consolidation, protectionism often attended the limited growth of
representative government. In other cases, political discriminations and injustices walked right
through economic open doors. Similarly, the War had escalated to such an extent precisely
because it grew from political rivalries deeply rooted in global economic competition, territorial
expansion, and the armed extraction of resources.7
So, the distinction between freedom and despotism, laissez-faire and intervention, and
pacifism and jingoism, was never so neat and tidy in practice as in rhetoric. From its growth in
the 18th century, new state-proponents of liberalism immediately had to reconcile the professed
values of freedom and equality with practices of wealth (and poverty) creation, such as slavery
and colonialism that ran counter to those ideals.8 Even where liberal philosophies fomented
political revolution aimed at toppling hierarchies, they did not restructure wholesale the
economic order of things. Rather, what came were acts of reframing. For example, Adam Smith
and David Ricardo together provided a new temporal horizon for economic equality. The gains
of specialization within and between societies would eventually elevate the wealth of both men
5
Jennifer Pitts, A Turn to Empire: The Rise of Imperial Liberalism in Britain and France (Princeton University
Press, 2009); Uday Singh Mehta, Liberalism and Empire: A Study in Nineteenth-Century British Liberal Thought
(Chicago: University of Chicago Press, 1999).
6
Giovanni Arrighi, The Long Twentieth Century: Money, Power, and the Origins of Our Times (London; New
York: Verso, 2010).
7
E. J Hobsbawm, The Age of Empire, 1875-1914; Glenda Sluga, Internationalism in the Age of Nationalism
(Pennsylvania Studies in Human Rights) (University of Pennsylvania Press, 2013).
8
Pierre Manent, An Intellectual History of Liberalism (Princeton, N.J.: Princeton University Press, 1994).
4
and nations. As for imperialism, new theories devised by the likes of J.S Mill simply added
paternalism to the gradualism of convergence.9
After the War, these same rhetorical devices permeated discussions of how to construct
peace, with heavy emphasis on rights and freedoms both political and economic. However, the
Treaty itself included punitive terms for the defeated powers, the continuance of empire, and the
construction of a geo-political order in favor of Great Power interests.10 It was in this mixed
context that Wilson called for the creation a permanent international organization to provide
cartilage to lessen friction at the joints between states.11 Though where liberalism served the
creation of the League, it too created a host of classical contradictions. In this way, the question
of the scope and meaning of equality became a constant point of contention. The League’s
organizational structure consisting of a Council of mostly Great Powers (with limited rotating
seats for lesser powers) and the General Assembly, weighted some states more heavily then
others. Often challenges to the global political status quo first came in the form of resistance to
the League’s bureaucratic structure and procedure. Yet, because wealth was a premier
determinant of political weight, delegates also used the public forum to air objections to what
they considered unfair economic advantages. As the League responded to each challenge raised,
at times it reasserted the classical line and at other times it explored experimental policy
suggestions and theories. Of greatest interest here is the League’s attempted resolution of
9
Eileen P. Sullivan, "Liberalism and the Imperialism: J. S. Mill's Defense of the British Empire," Journal of the
History of Ideas, 44, 4 (Oct.-Dec. 1983)
10 Charles S. Maier, Recasting Bourgeois Europe: Stabilization in France, Germany, and Italy in the Decade after
World War I (Princeton, N.J: Princeton University Press, 1975); David A. Andelman, A Shattered Peace: Versailles
1919 and the Price We Pay Today, 1 edition (Wiley, 2009); Ruth B Henig, Versailles and After, 1919-1933
(London; New York: Routledge, 1995); Zara Steiner, The Lights That Failed: European International History,
1919-1933 (Oxford: Oxford University Press, 2007).
11 As Mark Mazower has demonstrated, the origins of the League were entwined with a longer history of
imperialism and racism Mark Mazower, No Enchanted Palace: The End of Empire and the Ideological Origins of
the United Nations (Princeton: Princeton University Press, 2009).
5
conflicts surrounding the question of raw materials and international trade. This thread provides
direct insight into the League’s hybrid legacy of orthodoxy and heterodoxy.
Unequal Endowments: Comparative vs. Absolute Equality
The 23rd article of the League’s Covenant called vaguely for “the equitable treatment for the
commerce of all Members of the League.” Patricia Clavin has recently argued that this light
treading marked an attempt to avoid stepping on Great Power interests.12 Yet whatever the
article obfuscated, it also opened the door on efforts to translate equitable treatment into lines of
policy. Economic matters eventually came to occupy one of the organization’s central focal
points. For example, a multi-year discussion around the linked issues of raw materials and free
trade first appeared in the League in 1920. During one Assembly session, the Italian
representative, T. Titoni, made a controversial statement: “If the war has fulfilled the
expectations of those who desired the triumph of liberty and justice in the political sphere, it has
completely failed to satisfy those who desired justice and equality in the sphere of economics.” 13
For Titoni, justice and equality in the economic sphere was linked directly to the question of
access to those raw and primary materials necessary for fueling industrializing and feeding
industrial societies. 14 Yet, as one set of experts later put it, coal bins simply were not located in
every room of the extensive mansion that nature built for mankind.15 The question was how
nations’ could meet their growing natural resource needs, if they were not naturally auspiciously
endowed. The debate in the Assembly became heated quickly, with resource poor states aligned
against resource rich ones, which demonstrated how quickly claims of economic inequality could
lead to conflict.
12
Clavin, Securing the World Economy.
Records of the First Assembly of the League of Nations, League of Nations Archives, Geneva, p. 178.
14 Ibid., p.72.
15
John B. Whitton, Wallace McClure, and Brooks Emeny, “Problems of Markets and Raw Materials,” Proceedings
of the American Society of International Law at Its Annual Meeting (1921-1969) 30 (April 23, 1936): 104–128.
13
6
Given the gravity of the question, the League set up a committee to investigate the nature of
the problem and possible solutions. In 1921, the published report on raw materials identified
protectionism as the primary obstacle. As the influential Norman Angel stated: “Once we
recognize that the essence of the difficulties in the matter of raw materials… is markets… certain
clear lines of policy are indicated.”16 While Angel was not a member of the League, he gave
voice to the consensus that open doors and the multilateral application of most-favored nation
status would allow everyone to get what they needed in the marketplace. Still, however, there
were problems that the “free trade solution” could not solve simply or easily. For example, in
order for the League to combat protectionism, it had to address the related dilemma of imperial
preference.17 As Titoni had pointed out, the wealth of imperial powers had permitted them to
“acquire a monopoly of these materials outside of their own borders.”18 Yet, to raise the
question of imperial preference—or to ask if metropole states had a right to control via
monopoly colonial products—could add fuel to the fires of anti-imperialism. Beyond this already
sensitive point, however, the more dangerous issue was the bitterness that some powers such as
Italy and Japan (and Germany after 1926) had due to their relative lack of colonies as compared
to others. The Italian delegate had raised the question for precisely those reasons. Italy’s own
territorial ambitions had suffered when Wilson refused to honor the secret 1915 London
Agreement that had promised Italy South Tyrol, Istria, Dalmatia, Libya, Eritrea and Parts of Asia
minor. In defiance of its lot, the Italian government had already demonstrated annexationist
16
Ibid, p.109.
Kerry A. Chase, “Imperial Protection and Strategic Trade Policy in the Interwar Period,” Review of International
Political Economy 11, no. 1 (February 1, 2004): 177–203.
18
Records of the First Assembly of the League of Nations, p.178.
17
7
ambitions during its 1919/1920 occupation of Fiume. For Italy, this question of raw materials
became a way of advertising its frustrated aspirations on the global stage.19
The League certainly saw the potential dangers attached to raw materials and sought to
address them, upholding where possible their commitment to economic liberalism on the one
hand and the legitimacy of empire on the other. In pursuit of better infrastructure for encouraging
those policies, the League created the Permanent Economic and Financial Committee (EFC). 20
The committee tackled potentially peace-disturbing problems through gathering statistics,
seeking advice from prominent economists, and organizing conferences. Throughout its life the
EFC attracted such notable names as Gustav Cassel, Bertil Ohlin, Gottfried Haberler, Ragnar
Nurske, and James Meade among others.21
Between 1920 and 1937 the League addressed the question of vital resources and their
distribution among nations both through the work of the EFC and in the Council and the
Assembly. These discussions provide a way of tracking the League’s responses to the changing
contexts of the global political economy leading up to and after the Great Depression. In 1920,
there was still confidence that markets would naturally work things out, so long as states did not
stand in the way. When the League held an economic conference in 1927, the final resolutions
assertively urged a reduction in protectionism, citing it as the primary obstacle to the cooperation
19Collision
of Empires: Italy’s Invasion of Ethiopia and Its International Impact (Farnham, Surrey, UK ; Burlington,
VT: Ashgate, 2013); Cristiano Andrea Ristuccia, 1935 Sanctions against Italy: Would Coal and Crude Oil Have
Made a Difference?, Discussion Papers in Economic and Social History no. 14 (Oxford: University of Oxford,
1997); George W. Baer, Test Case: Italy, Ethiopia, and the League of Nations, Hoover Institution Publication ; 159
(Stanford, Calif: Hoover Institution Press, 1976).
20 See Clavin, Securing the World Economy, Chapter 1.
21
League of Nations and Sloutzki, Nokhim M, Report on Certain Aspects of the Raw Materials
Problem (with the Relevant Documents Submitted to the Committee by Professor Gini.
(Geneva, 1921).
8
and thus collective wealth of nations.22 After 1929, things were no longer quite as clear. Mass
unemployment on the one hand and the “Russian miracle” of central planning on the other
together undermined faith in self-correcting markets. What is more, protracted economic crisis
seemed to foment radical political regimes. As Fascism appeared on the scene, many became
increasingly willing to consider that the timeframe market’s needed to “self correct” might
simply be too long and too little too late.
Increasingly, experts in the League began considering the suggestions of those like J.M
Keynes, who advocated strategic state intervention in fiscal and monetary policy to provide
heating and cooling mechanisms for domestic economies. The League gathered statistics,
including on business cycles and the international monetary system, in an effort to achieve more
clarity on the world crisis. One result of this work was that League economists began questioning
gold standard orthodoxy. Certain experts pointed out how the same mechanisms that disciplined
and constrained the international balance of payments could also prevent states from using
monetary policy as a recovery tool.23 Yet, the League asserted that monetary compromises
should allow economies to better engage in, not opt out of, free-multilateral trade.24 The League
launched research programs attempting to find ways to square the necessity of domestic
intervention for recovery, with the continence and expansion of international trade.25 Supporting
free trade became part of the strategy for resisting the political side effects of economic
nationalism. Calls for “self-sufficiency” often came with demands for territories large and
22
Patricia Clavin, The Failure of Economic Diplomacy: Britain, Germany, France and the United States, 1931-36
(Houndmills, Basingstoke, Hampshire; New York: Macmillan Press ; St. Martin’s Press, 1996). See also League of
Nations, The World Economic Conference, Geneva, May 1927: Final Report (Imp. Atar, J. de G., Kundig, 1927).
23 Patricia Clavin and Jens-Wilhelm Wessels, “Another Golden Idol? The League of Nations’ Gold Delegation and
the Great Depression, 1929-1932,” The International History Review 26, no. 4 (n.d.): 765–795.Marc Flandreau,
Money Doctors: The Experience of International Financial Advising 1850-2000 (Routledge, 2005).
24 Louis W Pauly, Who Elected the Bankers?: Surveillance and Control in the World Economy (Ithaca: Cornell
University Press, 1997).
25 Fior, “Institution globale et marchés financiers.”
9
resource-rich enough to support domestic populations without too much dependence on the
outside world.26 Japan invaded Manchuria in 1932 precisely on the grounds that it needed
territory and raw materials.27 This made the dangers of perceived inequalities painfully clear.
Furthermore, as these claims sounded, another issue vexed the question of resources. The Great
Depression put downward pressure on commodity prices, which exacerbated the overall world
economic picture. When the economists Bertil Ohlin set out to investigate this problem under
the League’s banner, he discovered yet another potential mine filed. Ohlin noticed severe
imbalances in the prices of primary vs. finished products on the world markets. In this way,
manufacturing nations gained a seemingly permanent advantage over producers of primary
goods. Statistics supporting this trend posed a challenge to traditional Ricardian doctrines of
comparative advantage and the mutual gains of specialization. Knowing that such a discovery
could awaken the ire of agriculture states and add their discontent to that of Japan, Italy and
increasingly Germany, was a great cause for concern.28
The League dealt with the multi-front battle around the question of goods and resources in a
number of different ways. First, the League supported a number of commodity control schemes
as a way of providing non-tariff based price supports.29 In this context, the League used selected
intervention with the hope of moving against further protectionism, relying also on data that
26
Barry Eichengreen, “Keynes and Protection,” The Journal of Economic History 44, no. 2 (June 1, 1984): 363–
373.John Maynard Keynes, “National Self Sufficiency,” The Yale Review 22, no. 4 (1933): 755–769.
27 See Thomas W. Burkman, Japan and the League of Nations: Empire and World Order, 1914-1938 (Honolulu:
University of Hawaiʼi Press, 2008); Tumultuous Decade: Empire, Society, and Diplomacy in 1930s Japan, Japan
and Global Society (Toronto ; Buffalo ; London: University of Toronto Press, 2013).
28 A. M Endres and Grant A Fleming, International Organizations and the Analysis of Economic Policy, 1919-1950
(Cambridge; New York: Cambridge University Press, 2005).
29 Chandler P. Anderson, “International Control and Distribution of Raw Materials,” The American Journal of
International Law 19, no. 4 (October 1, 1925): 739–742. Lynn Ramsay Edminster, “Control of Exports of Raw
Materials: An International Problem,” Annals of the American Academy of Political and Social Science 150 (July 1,
1930): 89–97. J. Hurstfield, “The Control of British Raw Material Supplies, 1919–1939,” The Economic History
Review a14, no. 1 (1944): 1–31.
10
suggested tariffs did not in any case stabilize the prices of raw materials.30 As the Depression and
so protectionism kept rising regardless of efforts to the contrary, the League began to prepare for
a second World Economic Conference to be held in London in 1933. The goal once again was to
stimulate cooperation amidst the rising tides of economic nationalism. The conference was
unable to secure the results it sought; protectionism not only ruled the day, but Hitler also
withdrew from the League with his eyes set on reconquering lost territories in Europe and
abroad.31
After the World Economic Conference, Italy continued to talk about the disparities in
resources between itself and larger and/or imperial states. Thus, British delegate Samuel Hoare,
suggested yet another inquiry into the matter of “raw materials position” around the world. In
1935 the League published a report saying that the resource situation was not so inequitable that
free trade and a little international cooperation could not fix it. For example, it assured the world
that only 3% of all-important raw materials came from colonial territories (palm oil, copper, and
rubber).32 Even there, very few vital resources were truly produced or distributed under
monopoly conditions. Thus, if all imperial states would practice the widest open door policies
and the rest of the world would lower protective barriers, all parties could get what they need.
However, this piece of assurance did not prevent the Italians from invading Ethiopia in 1935.
Nor did it silence the concerns of primary producers over their poor terms of trade compared to
industrial nations.
30
Endres and Fleming, International Organizations and the Analysis of Economic Policy, 1919-1950.
Clavin, The Failure of Economic Diplomacy.
32 B. S. K., “The Report of the League Committee on Raw Materials,” Bulletin of International News 14, no. 6
(September 18, 1937): 3–11;.B. S. K., “The Demand for Raw Materials and Foodstuffs,” Bulletin of International
News 13, no. 20 (April 3, 1937): 3–10.
31
11
Decades ago, Douglass Rimmer argued that it was in the 1930s that disparities between the
“haves” and the “have-nots” came to be seen as a central concern of international security.33 The
League records not only reflect this growing concern, but also reveal how much of the League’s
energy and resources went towards addressing them. During the remainder of its existence, the
League kept fighting to secure multilateral cooperation while experts inside of the League
tackled the issues via the medium of economic theory. Where wealth disparities could spawn
violent conflict, the science of wealth and development was a topic of great importance and one
too that seemed in need of some revision. It is to those theoretical revisions that we now turn.
Theorizing the Gaps: Ohlin, Manoilescu and Nurske
Some of the most significant contributions to trade and develop theory after 1929 came from
figures affiliated with the League and so too privy to the contentious debates surrounding
resource and wealth gaps. Bertil Ohlin, Mikhail Manoilescu and Ragnar Nurske drew from their
experiences in Geneva as they engaged in efforts to either modify or seek solutions beyond the
classical canon. In each case, their work demonstrates how rather than a generator of consensus,
the League acted both as a spot light that illuminated the complexity of economic problems and
also as an incubator of diverse responses and proposed solutions. The first of these figures,
Ohlin, highly valued member of the EFC and a figurehead of the Stockholm School of
Economics, set out to rescue rather than question free trade. In 1931, Ohlin spearheaded the
League’s investigation into the nature of the slump entitled, Courses and Phases of the World
Economic Depression.34 In this work, he helped further refine the League’s official policy stance
33
Douglas Rimmer, “Have-Not Nations: The Prototype,” Economic Development and Cultural Change 27, no. 2
(January 1, 1979): 307–325.
34 League of Nations, International Labour Office, and International Institute of Agriculture. [from old catalog], The
Course and Phases of the World Economic Depression, Rev. ed (Geneva: Secretariat of the League of Nations,
1931).
12
in the 1930s, which supported rationalization and selective domestic interventions but reasserted
advocacy of freer trade.35 While Ohlin supported Keynesian macroeconomic intervention, he
also hoped to reinforce a view that the international gains of specialization could address global
imbalances. In his 1933 book, Interregional and International Trade, Ohlin reworked trade
theory not in a way that soothed Germany or Italy, but one that provided theoretical assurances
that free trade could still work if practiced fully. Combining the work of his mentor Eli Hecksher
with his own research, Ohlin extended David Ricardo’s theory of comparative advantage to
identify factors beyond labor efficiency as key determinants of international trade patterns.
Interestingly, Ohlin incorporated questions of scarcity and abundance into his model by
demonstrating that a state’s natural endowments would determine its efficient activities. He
claimed that the primary factors of production—land, labor, and capital—together governed how
nations specialized and engaged in trade. In other words, states should import those products or
services that required its scarce factors and should export those products that made use of natural
bounties. Ohlin thus transformed the meaning of inequality, as a state’s factors of endowment
were not a disadvantage per say, but rather a formula for determining what to offer the world and
what take in return. Absolute advantage and so absolute equality were inefficient goals; what
mattered was comparative advantage and juridical rather than absolute equality. In a certain
sense, the theory can be read as an attempt to quiet demands for active intervention –either
through protectionism or conquest—to close gaps between societies. In making capital a natural
factor of endowment and raw materials secondary or input factors, the modification to Ricardo
still reinforced extant patterns of specialization and finance without offering immediate routes
for diversification, capital formation or industrialization. It also placed territorial acquisition and
capital and labor mobility outside of the model, which masked the political realities of
35
Clavin, Securing the World Economy.
13
colonialism, migration, and foreign investment. Furthermore, the timeframe that it would take for
free trade to bring about greater collective wealth and wellbeing remained unspecified, located
somewhere off in the future. While all models rely on simplifying postulations, Ohlin’s
particular assumptions lined up in interesting ways with the complex political contexts that were
threatening the status quo both in the League and on the world stage.
Even modified classical trade theory did not open routes for stimulating development or
bridging gaps in the short-run, thus, other theoretical models for here-and-now wealth creation
emerged in the 1930s. Mikhail Manoliscu had also been privy to the debates over trade and
development in the Assembly where he served as the Romanian Representative to the League.
Like many in those years, Manoilescu became interested in the non-communist modes of
intervention offered in theories of corporatism.36 Manoilescu’s work and influence on
development economics has thus until recently disappeared behind his known sympathy to those
(increasingly Fascist) governments such as Germany, who cried inequality in the League. Yet,
regardless of his political persuasions, Manoilescu made theoretical contributions well beyond
corporatism, and is widely considered a pioneer of the theory of Unequal Exchange.37
Manoilescu observed that Depression-era protectionisms seemed to stimulate industrialization in
agricultural societies. In seeking an explanation for this trend, he also engaged with Ricardian
trade theory but in a way altogether different and for different reasons than Ohlin. Manoilescu
claimed that when put to the test, Ricardo’s all-important variable of labor efficiency tended to
diverge along with prices between industrial and agricultural societies. Thus, calculating
comparative advantage as based on efficiency/labor value did not automatically insure that the
36
Maier, Recasting Bourgeois Europe.
Joseph L. Love, “The Roots of Unequal Exchange: Mihail Manoilescu and the Debate in the 1930s,” in Ragnar
Nurkse:Classical Development Economics and Its Relevance for Today (London ; New York: Anthem Press, 2009),
103–118.
37
14
gains of train would be mutually beneficial. Further still, the opposite could be true; given the
lower productivity of agricultural or primary industries, agricultural or proto-industrial nations
could fail to escape vicious cycles of poverty and in modern terms “underdevelopment.” While
Manoilescu believed that the productivity of agricultural and industrial labor would perhaps
eventually converge, once again that timeframe even if inevitable was too far off into the future
and societies such as Romania could not afford to wait. Thus, arguing for a form of importsubstitution, Manoilescu described how and why less developed societies should build barriers
around key industries. Manoilescu further asserted that often places with raw materials and/or
that produced primary commodities did not have the capital to benefit form their own resource
position. This left them vulnerable not only to the violent vicissitudes of the market in primary
products, but also to the extractive and exploitive activities of capital-rich powers.38 Thus, by
selecting and protecting certain industries, poorer states could find a path not only to
industrialization, but also to a better and securer relative position on the world stage. To those
ends, comparative labor efficiency would help determine not international trade patterns but
rather help identify which industries had the best chance of generating rapid development if
sufficiently protected.39 Despite ample critiques, including from Ohlin, Manoilescu had made a
serious contribution to the growing body of theory more attuned to active mechanisms of welfare
and development than to wealth from the gains of trade.
One final figure, Estonian economist Ragnar Nurkse, served as an influential member of the
Economic Intelligence Service from 1934 until the League’s closure. By the time Nurkse joined
the League, the EFC had turned its attention seriously not only to gaps in wealth and resources,
38
39
Mihail Manoilescu, The Theory of Protection and International Trade (London: P. S. King & son, ltd, 1931).
Ibid.; Love, “The Roots of Unequal Exchange: Mihail Manoilescu and the Debate in the 1930s.”
15
but also to the question of living standards worldwide.40 Nurske was, along with figures such as
Paul Rosenstein-Rodan, Arthur Lewis and Gunnar Myrdal, a pioneer in an early development
economics and sought to tackle the problems of persistent poverty especially after the Second
World War.41 While at the League, Nurske contributed to the World Economic Survey, the
Review of World Trade, and other important publications, including the yearly Monetary
Review.42 During his Geneva years, Nurske also began working through some of the ideas that
he would later develop into a robust theory of development. While Nurske certainly thought that
international trade had a part to play in welfare, he saw domestic employment and the
development of national economies and markets as indispensible prerequisites.43 Nurske’s
theories went beyond his contemporaries at the League especially on the question of capital
formation. Where Ohlin left capital as a naturally present or absent factor of endowment and
Manoilescu left it as a vague necessity of development, Nurkse tackled the question of how poor
societies could raise domestic capital through wise and balanced savings and investment in
industrial and agricultural sectors.44 In this way, the question of equality pivoted neither on raw
materials, nor necessarily on labor efficiency, but on a more complex understanding how poverty
had been created via the structures of the international system. For Nurkse, a theoretician who
accepted some of the tenets of classical economics such as Say’s Law, the challenge was how to
infuse economic theory with measures for achieving equality and not just equilibrium. To those
ends, he prescribed strategically expanding domestic markets and decoupling them from foreign
capital and tight and inequitable global market structures.
40
Clavin, Securing the World Economy.
Rainer Kattel, J. A. Kregel, and Erik S Reinert, “The Life and Work of Ragnar Nurkse,” in Ragnar Nurkse: Trade
and Development (London; New York, 2009), ix–xx.
42 Ibid.
43
Kattel, Kregel, and Reinert, “The Life and Work of Ragnar Nurske.”
44
Ibid. Ragnar Nurkse, Patterns of Trade and Development (B. Blackwell, 1961); Ragnar Nurkse, Equilibrium and
Growth in the World Economy: Economic Essays (Harvard University Press, 1961).
41
16
Nurkse did most of this work on development after his time at the League. While at the
League, however, it is clear that he struggled tried to balance the organization’s agendas of
international cooperation and stability and his own concerns with how to kick-start progress in
underdeveloped economies. One of the publications to which Nurkse contributed, The
International Currency Experience: Lessons of the Inter-war period, focused on the role that the
international monetary system played in the stability of the World Economic system. On the one
hand, the text addressed the necessity of currency stability for healthy international trade. On the
other hand, Nurkse emphasized the need for domestic monetary autonomy and sufficient credit
to address concerns of poverty alleviation and development.45 Another League publication where
Nurkse left his fingerprints was that of The Transition from War to Peace Economy: Report of
the Delegation on Economic Depressions. While Nurkse was not the only author of the
publication, it bears signs of his influence, as it focused on the ways in which post-War
economic reconstruction would need to address questions of living standards, employment and
economic development. Interestingly once again, a considerable portion of the text focused on
the equitable distribution of food and raw materials on the one hand and the poor terms of trade
between the rich and the poor nations on the other. Yet too the text attempted to square these
concerns once again with the League’s insistence on the importance of freer trade.46 With a
stalemate as to how to reconcile this decades old dilemma, the document simply concluded with
the suggestion that new international economic institutions needed to be created to tackle these
problems and provide advice to governments.47
45
League of Nations, International Currency Experience; Lessons of the Inter-War Period (New York: United
Nations, 1947).
46
League of Nations Secretariat, The Transition from War to Peace Economy: Report (League of Nations,
1943).Clavin, Securing the World Economy.
47
Louis W Pauly, The League of Nations and the Foreshadowing of the International Monetary Fund, Essays in
International Finance no. 201 (Princeton, NJ: International Finance Section, 1996).
17
A comparison of Nurkse’s work at the League and his latter work suggest that he perceived
the possibility that League’s concern with international trade surpassed his own concern with
serious questions of growth for impoverished societies. Perhaps in sensing the near impossibility
of resolving the tension between the goals of trade liberalization and domestic development, after
the War Nurkse did not seek an affiliation in any of the post-World War II international
institutions. Yet even though Nurkse went his own way, his work at the League both served as
the template for the Bretton Woods agreement, and also filtered into the structures and economic
policies pursued in the group of intergovernmental organizations established at the end of
WWII.48
Whatever their differences, the work of Ohlin, Manoilescu and Nurkse each mark serious
attempts to deal with the technical complexity of structural imbalances in the world economic
system in the inter-war period. In a moment when those economic imbalances could and did
have disastrous political consequences, each theory emerged within and in some way generated
different political world-views. Beyond the influences of specific theorists, the League of
Nations’ recruitment of diverse experts to address economic questions both signaled and also
shaped the increasingly central role that economic advisors played in policy making in the
twentieth century. That legacy continued long after the League closed its doors.
Conclusion
In 1941 when Franklin D. Roosevelt and Winston Churchill published the Atlantic Charter, it
was in some ways a revision of Wilson’s Fourteen Points, modified for the post World War II
world. Along with familiar calls for greater equality and cooperation, there also existed lingering
liberal tensions about how those principles might affect the privileges of the haves and the claims
48
Ibid.
18
of the have-nots.49 The fourth article of the Atlantic Charter contained a familiar refrain: “All
States, great or small, victor or vanquished, of access, on equal terms, to the trade and to the raw
materials of the world which are needed for their economic prosperity.” Yet, the fifth article
emphasized a new set of variables that had been absent in Wilson’s first call to international
governance, namely, the importance of “securing, for all, improved labor standards, economic
advancement and social security.” The United Nations thus came into being with a set of liberal
recommitments to the wealth of nations on the one hand and the equality of nations and welfare
of populations on other. Just as the League of Nations struggled in articulating and addressing
the contradictions of and conflicts between those two goals, so too would the United Nations. In
both cases, economists and economic theories shaped the structure and content of the ensuing
and political debates.
49
John Toye and Richard Toye, The UN and Global Political Economy: Trade, Finance, and Development (Indiana
University Press, 2004).