Ec Professors Challenge De Gaulle's Golden Rule
DeGaulle's "fancy gamesmanship" and the devaluation of the English pound pose no serious threat to the stability of the American dollar, Richard E. Caves, chairman of the Economics Department, said in an interview yesterday.
De Gaulle had said at a Paris press conference yesterday that the recent financial upheavals leading to devaluation would soon endanger the American dollar. De Gaulle charged that the United States "exports inflation," and said that American businessmen are buying economic control over many French industrial enterprises.
He demanded that the United States agree to major reforms of the world monetary system and help to establish a pure gold standard in international finance.
Dollars Are Degrading
"De Gaulle doesn't know what he's talking about," Caves said. "He supports the gold standard as a way of removing the dollar from international markets. He finds the dollar personally degrading."
The reforms agreed upon this summer at the conference of the International Monetary Fund are more valuable than any of De Gaulle's proposals, Caves said. The IMF is establishing "special drawing rights" to facilitate borrowing by countries which face serious deficits in their balance of payments. By contrast, said Caves, De Gaulle's scheme is "wildly irrational."
But Paul A. Samuelson, professor of Economics at M.I.T., said last night that although De Gaulle's chief advisor was "an idiot," his programs were "not without merit." He also wrote in a Washington Post article that the British devaluation should have come three years earlier, when the Laborites "could have thrown the blame on the Tories."
Gottfried Haberler, Galen L. Stone Professor of International Trade, joined Caves in criticizing De Gaulle. "De Gaulle's economics are rotten," Haberler said. "The United States has not exported inflation. The purchasing power of the dollar has been better preserved than almost any other currency."
Despises The U.S.
Haberler also defended the United States' investment in Europe. "Countries are happy to receive American capital," he said. "It strengthens their economies. De Gaulle was speaking for political reasons. He hates and despises the United States."
Wassily W. Leontief, Henry Lee Professor of Economics, was less optimistic. "The British devaluation puts the dollar on the firing line," he said. "The new economics, so called, has not been able to prevent a steady increase in price wage inflationary pressure."
Caves added that the devaluation would strengthen the case for a domestic tax increase. "But American politics are intrinsically unpredictable," he said.