On Proposals for a Clearing Union

Abstract

Davidson has recently written, Post Keynesian economists should be working on developing a set of detailed blueprints on how to construct a better system for international liquidity for entrepreneurial economies (1982, p. 254). Davidson advocates a clearing union based on the proposals Keynes put forward as the official British contribution to the discussions which culminated in the Bretton Woods agreement of 1944. In the course of his appeal for a clearing union, Davidson refers to no similar appeals since Keynes. And to the author's knowledge virtually no arguments for a clearing union have been written since Davidson's 1982 book. What we do occasionally find in the literature on international monetary economics are scattered references to the clearing union which seem to completely misunderstand its intended role and functions. For all these reasons, let alone the last fifteen years of international monetary crises, it would seem to the author that, before the detailed blueprints, there is room for at least one more plea for a clearing union to achieve stable exchange rates so that the world's monetary system might better approximate a unitary monetary system. The intention of this paper is to bring to bear a different set of arguments which also point to the need for an international clearing union. While every country is involved with and has a vested interest in the international monetary system, the Third World has received most attention of late. This reflects the instability imparted by, in particular, Third World debt. We can take it as almost axiomatic that