840.50/3437: Telegram

The Ambassador in the United Kingdom (Winant) to the Secretary of State

106. The following is for confidential use by groups concerned with the Article VII conversations and belongs to the series indicated in paragraph 1 of Embassy’s 56, January 4, 1944:

Long Term International Investment:7 Keynes8 in personal conversation said that he had not yet had time to work out fully and set down his views on international investment but that he would concentrate on it as soon as he had cleared away some immediate tasks.

He restated his general thesis regarding private losses and public gains in past international investments, and the difficulties of constructing an international organization which will reduce the first without reducing the second. According to this thesis, the financial losses of individual investors have greatly exceeded financial gains made by them but there has been a very large net gain to borrowing and lending countries and to the whole world as a result of the economic development made possible by the international investments, including a large part of those which brought losses to the actual investors.

Keynes pointed out that the United States Treasury proposal for a United Nations bank of reconstruction and development aims at “sound” international investment and this soundness applies particularly to the financial prospects of the investments. Therefore, international investment in projects that raise productivity but fail to [Page 4] bring financial returns might not come within its operations even though many projects that fail even to produce sufficient direct financial returns to service the loans are of the greatest benefit. Keynes, of course, appreciates the political difficulties of setting up an international investment body without stressing financial “soundness” as a fundamental principle. He will concentrate on this problem shortly.

Keynes stressed the importance of international loans that can be used by borrowers to obtain consumption goods to sustain workers engaged on capital projects. In some of the Asiatic countries external aid is needed for this purpose rather than for the import of capital goods.

Further information on the development of British thinking on this subject will be detained as opportunities arise.

  1. For additional documentation regarding monetary and financial matters, see pp. 106 ff.
  2. John Maynard Keynes, Economic Adviser to the British Government.