The Economic and Financial Organization (EFO, ) was the largest of the technical arms of the League of Nations, and the world's first international organization dedicated to promoting economic and monetary co-operation. It took shape in the early 1920s and was in activity until the creation of the United Nations in 1945. It has been described as having had seminal influence on postwar economic institutions, notably the International Monetary Fund (IMF).

Background

The establishment of the EFO took place in the aftermath of unprecedented transnational cooperation initiatives among allied powers during World War I, which were also pioneering experiments in planned economy imposed by the circumstances. These included the Wheat Executive established in late 1916, and the Allied Maritime Transport Council established in late 1917. They had brought together enterprising civil servants such as Italy's Bernardo Attolico, France's Jean Monnet, and Britain's Arthur Salter, who would play key roles in the war's aftermath. In February 1919, the Paris Peace Conference established a Supreme Economic Council to manage the postwar economic emergencies, but that was soon undermined by a growing division of views between France and Italy on one side, advocating a continuation of the wartime joint action, and the UK and U.S. on the other side, preferring a rapid return to market-oriented business as usual.

In late 1919, Dutch financial community leaders Gerard Vissering and Carel E. ter Meulen organized two conferences in Amsterdam whose participants included economists Gustav Cassel and John Maynard Keynes. On the basis of their conclusions that a collective intergovernmental effort was needed to remedy the postwar disruptions, a petition circulated in January 1920 by the Times in the UK and the New York Times in the U.S. collected 150 signatures of luminaries such as Gustave Ador, Robert Cecil, Arthur Twining Hadley, Herbert Hoover, J. P. Morgan Jr., Fridtjof Nansen, Richard Vassar Vassar-Smith, Paul Warburg, and others including from Denmark and France, an early example of cross-national advocacy. In early February, the British government made it known that it would favor the convening of an international conference by the League of Nations, which had just been formally established in January 1920. The League Council endorsed that proposal during a meeting in London on , setting the scene for the Brussels Conference that would be held in September–October 1920.

Establishment and setup

In 1919, a prefiguration team of the League, located at 117 Piccadilly in London, had started to collect and publish economic statistics, which remained the initial focus of the Economic and Financial Section that was soon established within the League Secretariat, and spent much of 1920 preparing the conference. Walter Layton led that fledgling team and moved with it to Geneva in the course of 1920. Per Jacobsson joined the staff in April 1920. In 1922, Salter took over from Layton's acting successor Frank H. Nixon, and led the EFO until 1931, expanding its staff from seventeen to sixty during that period. By then, it was significantly larger than any other section of the League Secretariat.

Following a recommendation of the Brussels Conference, the League's inaugural Assembly meeting in November 1920 endorsed the expansion of the scope into an organization that would be able to formulate policy recommendations to member (and non-member) states, despite initial misgivings from the United Kingdom. On that basis, the League established a Joint Provisional Economic and Financial Committee () composed of experts nominated by the League's Council, and thus not officially representing their respective governments. After that, the EFO's work agenda was determined by the Second Committee of the League's Assembly, which dealt with all so-called technical issues (under the formal authority of the League's Council) and met once every year in September.

In 1923, the Provisional Committee was made permanent and divided into an Economic Committee, dealing primarily with matters of trade and industry organization and composed mostly of government officials, and a Financial Committee focused on monetary and fiscal issues with a greater participation of central and private bankers. The two committees' setup was flexible and inclusive enough that American delegates participated in them from 1927 despite the fact that the U.S. was not a member of the League. Similarly, Japanese delegate remained on the two Committees for some time after Japan withdrew from the League in 1933. The Economic Committee was granted permanent formal status within the League in 1927, initially with a membership of 15 that grew over subsequent years, and the Financial Committee in 1937. In the meantime the Financial Committee kept a smaller size of 10 members, who typically came from central banks and finance ministries of member states and the U.S.; Belgium, France and the UK were represented in it by finance ministry officials, while Switzerland and the Netherlands delegated private-sector and central bankers.

There were also a number of sub-committees of fixed duration, frequently including leading economists of the time, and standing committees on fiscal and statistical matters. The organisational setup of the EFO, like that of the League of Nations in general, was deliberately obscure as the related opacity of decision-forming was viewed as helpful to manage the sensitive matters of economic and financial diplomacy.

Financial Committee membership

As of late 1923, the Financial Committee's members included

Albert-Édouard Janssen (National Bank of Belgium) Otto Niemeyer (Bank of England) South African financier Henry Strakosch Dutch financier Carel ter Meulen Italian banker Giuseppe Bianchini Jean Parmentier (French Finance Ministry) (Czechoslovak Finance Ministry) Sekiba Teiji (Japanese delegate at the Reparation Commission).

A decade later, the Committee still included Janssen (as Chair), Niemeyer, Strakosch, and ter Meulen, as well as

French finance ministry official Gabriel Dayras German banker Polish economist Feliks Młynarski Norges Bank governor Nicolai Rygg the Bank of Japan's Shimasuye Shozo Argentine banker Carlos Tornquist Italian lawmaker .

Niemeyer, Strakosh and ter Meulen, who had been core committee members from the outset, all resigned in 1937, together with Młynarski.

The other individuals who sat on the Provisional Economic and Financial Committee between 1920 and 1923 and/or on the Financial Committee between 1923 and 1931 were

Aoki Takeshi (Bank of Japan) Arai Kentarō (Japanese Finance Ministry) Joseph Avenol (French Finance Ministry) Federico Ettore Balzarotti (Credito Italiano) Basil Blackett (British Treasury) Louis de Chalendar (French Finance Ministry) Léopold Dubois (Swiss Bank Corporation) (Banco de Bilbao) (Danske Landmandsbank) (National Bank of Belgium) Carl Melchior (M. M. Warburg & Co.) (Japanese Finance Ministry) American lawyer Jeremiah Smith Jr (Italian Finance Ministry) Tsushima Juichi (Japanese financial attaché in London) Marcus Wallenberg Sr (Stockholms Enskilda Bank).

International financial and economic conferences

The EFO was the linchpin of the four interwar international financial and economic conferences, namely the Brussels Conference of 1920, the Genoa Conference of 1922, the Geneva Conference of 1927, and the London Conference of 1933, even though only the latter two were formally organized under the League's aegis. In the first three, the EFO was broadly successful at cementing an international policy consensus on the underpinnings of financial stability, including sound fiscal management and independent central banks, even though it made less headway towards restrictions on cartels and trade protection. One flaw of the EFO doctrine, however, was insufficient insistence on banking supervision, in part a reflection of the fact that the United States, which had the most advanced supervisory practices of the time, was not a member of the League. Partly for that reason, the European banking crisis of 1931 shattered the 1920s orthodoxy, leading to the complete failure of the London Conference in June 1933 after which the League made no further similar attempts.

The League also sponsored a less ambitious International Conference for the Simplification of Customs Formalities, which was held in Geneva from October 15 to November 3, 1923.

Stabilization loans in the 1920s

Unlike the postwar IMF, which has significant resources of its own, the EFO itself had no financial firepower but could resolve collective action problems among private investors and governments that desired to foster financial stability but were unable or unwilling to do so on a purely bilateral basis. Its first endeavor, albeit of limited impact, came in early 1922 with support to a loan to Czechoslovakia led by Baring Brothers.

Austria

The EFO's first real action came later in 1922 with the financial distress of Austria, which was considered desperate enough that the allied powers did not want to take responsibility for it themselves. Austria was buffeted between the competing interests of Britain (which had high credit exposure to it), France (which was obsessed with the prospect of German-Austrian unification), Czechoslovakia and Italy (which had competing designs on Austria as its respective neighbours on the north and south). Jean Monnet, by then the League's deputy secretary-general, convinced the Council to take on the challenge, in conjunction with eloquent pleas by Austrian Chancellor Ignaz Seipel. Monnet had the intuition that the respective British, French, Czechoslovak and Italian interests could be leveraged into a cooperative plan, and had it conceived during a lakeside gathering with Salter and Basil Blackett. As he put it, "that real danger of foreign intervention could be literally flipped and transformed into a positive endeavor of joint action. It was about channelling the very forces that could have been tempted to take advantage of the crisis into contributing to the preservation of Austrian independence." A special committee on Austria, formed to prepare the assistance program jointly with the Financial Committee of the League, brought together Seipel with Britain's Arthur Balfour, Czechoslovakia's Edvard Beneš, France's Gabriel Hanotaux, and Italy's Guglielmo Imperiali.