At a time of financial crisis and loss of confidence in the international financial system not unlike the global financial crisis of 2008 in spirit if not specifics, a team of academics, policymakers, bankers and corporate leaders sought to reform the system and build support for their reforms. Drawing on archival and published sources, I have attempted to create a picture of the personalities, issues, debates and compromises that led to the adoption of flexible exchange rates and a modified Triffin Plan with special drawing rights in the International Monetary Fund (IMF). The work focuses on the contribution of the Bellagio Group of non-governmental, academic economists to an understanding of the problems and an exploration of alternative solutions.
Led by economist Fritz Machlup, the Bellagio Group was engaged in a grand experiment. Machlup called it a ‘test’ to find out whether this group could identify the differences in factual and normative assumptions that might explain the differences in prescriptions for solving the problems of the international monetary system. By design, the selection of the members of this study group would include the foremost protagonists of the most widely discussed monetary plans, distinguished scholars in the field of international finance and renowned teachers.
Contemporary policymakers and students of public policy and macroeconomics will find in Machlup's approach an analogue to the current Group of Twenty Finance Ministers and Central Bank Governors (G20), engaged in creating a framework for strong, sustainable and balanced growth, while putting out the fires of global and regional financial crisis.