When we trace back the history of the European economic and monetary union and we try to identify who best deserve(s) to be regarded as “father(s) of the euro”, the name of Robert Triffin should stand on top of the list. Beyond that, the Belgian/American/(European) economist played a prominent role in shaping our understanding of the (mis-)functioning of the international monetary system after the Second World War and in making clear the strategic choices that policy-makers had to face at a global level.
Robert Triffin, born in Flobecq (Belgium) on 5 October 1911, made his studies at the University of Louvain, then went to Harvard University, where he studied with giants of economic thought like, among others, Alois Schumpeter and Wassily Leontief. He made his Ph.D. dissertation on “Monopolistic Competition and General Equilibrium Theory”: it was – as he liked to remind – “the first Ph.D. in Economics ever received in the United States by a Belgian student”1. Back to Belgium, in 1939, he decided to seize the opportunity offered him by Harvard with a three-year instructorship. That was the beginning of a new and exceptionally fruitful phase of his life. In 1942 he became an American citizen and joined the Federal Reserve Board; in 1946 he moved to the International Monetary Fund. For more than three decades he combined a professional and academic career, in an ideal geographic triangle including the United States, Latin America and Europe.
Within the institutional framework designed in Bretton Woods, in his activity as civil servant Triffin focused on the benefits of cooperation among states and on fostering the multilateralisation of payments. At the IMF he worked extensively on monetary and banking reforms in Latin American countries, then in 1947 the Fund appointed him as its first Head Representative in Europe. In 1949 he joined the Economic Cooperation Administration (ECA), the US agency set up to manage the Marshall Plan, a position from which he played a prominent role in the creation of the European Payment System, a fundamental pillar of the continent’s post-war reconstruction.
In 1951 Triffin goes back to academic activity as professor at Yale University, where he will teach and research for about 25 years. At the same time, Triffin develops and spreads his ideas and proposals in the policy-making arena as advisor of some of the leading political figures of the 20th century, from John Kennedy to Jean Monnet. He was also a committed pacifist all his life long, always stressing his gratitude and empathy towards the ideals of Albert Einstein and Teilhard de Chardin.
During the Fifties and Sixties he will become the most acute and relentless critic of the inconsistencies of the Bretton Woods regime and, following its collapse, of the subsequent dollar-based (non-)system. The built-in instability of the former was analysed in his books Europe and the Money Muddle (1957) and Gold and the Dollar Crisis (1960), where he stated what was to be known as the “Triffin dilemma”, i.e. the fact that when the main international currency is a national currency there is an inescapable trade-off between domestic and global policy needs – or, to put it in Triffin’s words, the dilemma resulting from “the impossibility to feed indefinitely needed increases in world reserves through the accumulation of effectively gold-convertible liabilities”2.
In Triffin’s view, the road to a stable international monetary system passes through both the de-nationalisation of the reserve currency and – also on the basis of his experiences in Latin America and Europe – the active support to “regional” integration processes. His analyses favored the introduction of the IMF’s Special Drawing Rights (SDR) in 1969, as a potential future “supranational currency”. It is also the perspective of contributing to the re-launch of Europe’s monetary integration that motivated Triffin to accept, in 1977, the invitation from the University of Louvain-la-Neuve and to resume, in 1981, his Belgian citizenship.
In the following years, Triffin fed passionately with ideas and proposals the setting up of the European Monetary System and of the ECU (European Currency Unit), as a potential first step towards a European single currency. His forward-looking approach is also testified by his support to the private use of the ECU, notably by a group of leading European banks, with a unique blend of top-down and bottom-up approaches.
Robert Triffin died on 23 February 1993 in Ostend (Belgium). Not far from there, on 7 February 1992, the representatives of the EC’s 12 member states had signed the Maastricht Treaty, opening the way to the Economic and Monetary Union and to the euro as a single currency: an historical achievement for Europe, a lifetime “reward” for Triffin.
Triffin for the 21st century
On 3-4 October 2011, on the occasion of the 100th anniversary of Robert Triffin’s birth, the Triffin International Foundation (TIF) organized a conference in Brussels on “The International Monetary System: Sustainability and Reform Proposals”. The TIF was founded in 2002, at the University of Louvain-la-Neuve – with the Compagnia di San Paolo, an Italian foundation based in Turin, as co-founder –, to preserve the intellectual heritage of Robert Triffin and to address the new problems of the global economy, notably in the field of the international monetary system, in the light of Triffin’s values and ideas. The TIF is chaired by Alexandre Lamfalussy, with Alfonso Iozzo and Bernard Snoy as vice-chairs and Jean-Claude Koeune as secretary general.
At the end of 2009, the TIF launched the so-called “Triffin 21 Initiative” on the reform of the international monetary system. In that framework, two major steps were the late Tommaso Padoa-Schioppa’s lecture “The ghost of Bancor: the economic crisis and the global monetary disorder”, at Louvain-la-Neuve, on 25 February 2010, and the seminar “Towards a world reserve currency”, on 14-15 May 2010, in Turin. Besides, the TIF gave its support to the “Palais-Royal Initiative” led by Michel Camdessus, Alexandre Lamfalussy and Tommaso Padoa-Schioppa, whose final report, “Reform of the international monetary system: a cooperative approach for the 21st century”, was delivered to the French Presidency of the G-20 in 2011.
The conference in Brussels covered the two (interdependent) sides on which the TIF is active: the first day’s programme reviewed Robert Triffin’s life and work and “the great international monetary debates in his time”, through the contributions of brilliant young researchers and famous historians, and the testimonies of personalities who knew him well in his academic or institutional activities.
The second day was focused on Robert Triffin as “an inspiration for the challenges of the 21st century”, starting from the current international economic and financial crisis, but with a broader view to the deep changes and growing imbalances in the global landscape, notably with the persistent inability of the United States to tackle its “twin deficits”, the difficulties the eurozone is experiencing and the emergence of new powerful economic actors.
The speakers and discussants addressed the origins and causes of the crisis and its possible medium to long-term solutions, with special attention to the inadequacies in financial regulations and supervision, the new institutional role of the IMF, the initiatives to be taken by the G-20 – in particular, Michel Camdessus underlined the policy proposals formulated by the previously mentioned “Palais-Royal Initiative”.
Triffin’s analyses and arguments support us in identifying a persistent flaw in the present monetary arrangements as a systemic root of the crisis. More generally, in the age of financial globalisation, as pointed out by Fabrizio Saccomanni, “the world economy is confronted with a ‘global Triffin dilemma’ in which the excessive indebtedness of the issuers of financial assets is now affecting the value of the assets themselves; of all assets, not just of reserve currencies, as in the early Triffin dilemma”. Thus, an orderly process of “deleveraging” is what has to be achieved.
In the search for a stable international monetary system, the European experience with the ECU – both in institutional arrangements and in private markets – sketches a model worth to be studied and transposed, mutatis mutandis, to the global level, with the SDR as a possible consistent global monetary anchor. Till now, the use of the SDR has been severely limited and its basket composition should be reviewed to reflect the 21st century multi-polar economic reality. But – as stressed by Alfonso Iozzo in his contribution – for sure “today Robert Triffin would launch a new plan: to count on the diffusion of the use of the SDR, especially among monetary authorities and states, to support the necessary reform of the international monetary system. The context and the conditions are, as usual, different from those of the historical experience with the ECU, but his intuition remains valid”3.
Robert Triffin was a unique compass helping us to understand the driving forces of world economy in the 20th century. While we try to muddle through one of the worst crisis ever experienced by advanced economies, he can still be – also thanks to the action of the TIF – a formidable source of inspiration for building a more stable and fair international economic system.
1 From Robert Triffin’s acceptance speech on the occasion of the conferment of the First International “San Paolo Prize for Economics” in Turin, on July 1987
2 Ibidem
3 See also next article