A Biography of Robert Triffin

Pierre-Hernan Rojas
Assistant professor at the Institut Catholique de Paris.

Ivo Maes, with Ilaria Pasotti
Robert Triffin: A Life
Oxford University Press, New York, 2021, 262 pp., £48

Robert Triffin’s intellectual heritage rests on one major tenet: namely, that an international monetary and financial system (IMS) based on a single national currency is inherently unstable. Dealing with the primacy of the dollar in the Bretton Woods system, Triffin (1960) forecasted worldwide deflation because the USA could not fuel world economic growth by means of the main source of international liquidity – the dollar – without undermining other countries’ confidence in the convertibility of dollar balances into gold. This diagnosis – the Triffin dilemma – conferred on Triffin a prominent role in international monetary debates as a policy-oriented economist. A biography of one of the twentieth century’s most outstanding economists, who left his mark on many policy proposals, was very much lacking. Who better than Ivo Maes, a reputed historian of economic thought, and Ilaria Pasotti, his former PhD student who wrote her dissertation on Triffin?

The book covers Triffin’s life in seven chapters. In each chapter, the authors build a coherent narrative of his intellectual and professional life based on his published works and on archival material. Chapter 1 deals with Triffin’s intellectual background as a student at Louvain (1929–1935) and Harvard (1935–1938). Chapter 2 is about Triffin’s years at the Federal Reserve Board (FRB) in Washington (1942–1946), when he led money-doctor missions in Latin America. Chapter 3 covers the period between his departure from the FRB for the International Monetary Fund (IMF) in 1946, and his involvement as the US representative of the Economic Cooperation Administration in the implementation of the European Payments Union (EPU) in 1950. Chapter 4 covers the period when Triffin, a professor at Yale University since 1951, put great effort into alerting the international community that the Bretton Woods system was inadequate for the growing needs of international liquidity. Chapter 5 surveys Triffin’s involvement in a closer European monetary integration, first at the EPU and then as the monetary expert on Jean Monnet’s Action Committee for the United States of Europe. Chapter 6 deals with Triffin’s retirement from Yale University and his appointment at the Université Catholique de Louvain in 1977, during which Triffin remained involved in European monetary debates. Chapter 7 concludes.

Maes and Pasotti begin by casting light on how Triffin’s mind was shaped by the inter-war years. As a left-wing Catholic, Triffin was fascinated by Henri de Man’s New Socialism and by Albert Einstein’s anti-militarism. Triffin’s pacifism and his quest to foster understanding and peace among people was forged at the same time as the rise of Nazism. At Louvain, with Paul Van Zeeland, Albert-Edouard Janssen and Leon-Hugo Dupriez, Triffin learnt monetary and banking economics and an empirical approach to test business-cycle theory in Europe. The 1929 crisis and the deflationary spiral of the 1930s made a lasting impression on Triffin, who remained obsessed with the monetary problem of the interwar period, especially because of the decision-makers’ incapacity to achieve unanimity in devising a new order after the 1931 sterling devaluation. At Harvard, Triffin turned to pure theory. Under the influence of Joseph Schumpeter, Edward Chamberlin and Wassily Leontief, he wrote a thesis on general equilibrium and monopolistic competition. This graduate work made Triffin an expert on imperfect competition theory, shaping his perception of international monetary phenomena.

Needless to say, the book raises the problem of international liquidity, the life-long concern of Triffin. He clearly understood the extent to which the USA could exploit its “exorbitant privilege” of issuing the dollar to finance its national economic policies (Vietnam War, over-consumption), forcing other countries that unconditionally demanded its assets to adjust. During his money-doctor missions in the 1940s, Triffin pointed to asymmetries of the IMS (in terms of specialization and commodities exported by peripheral countries, and in terms of key currencies), causing inequalities among countries. The balance-of-payments in Latin American countries was governed by international capital flows and fluctuations of imports and exports, not by cost maladjustments. To maintain their domestic stability, Latin American countries needed to draw on international reserves to finance compensatory policies. Again, in the second half of the 1940s, Western European countries were unable to restore current account convertibility because of the scarcity of dollars. Together with European officials, busy implementing the Marshall Plan, Triffin recommended a clearing union in Europe as a remedy for bilateralism and trade and exchange controls. His proposal gave rise to the EPU (1950–1958), which was seen as going against the Bretton Woods system and substituting regional (supranational) for global monetary integration.

Maes and Pasotti systematically assess Triffin’s contribution to political decision-making. Triffin never seems to have missed an opportunity to harp on his analysis to political and economic institutions (central banks, governments, the European Commission, etc.) and individuals (Monnet, President Kennedy, etc.). The EPU’s success in the 1950s convinced him to advocate closer monetary integration in Europe coupled with a reform of the IMF to enable it to issue supranational liquidities. The (supranational) region was the level at which monetary reforms should be implemented to bring about a multipolar international monetary system. Maes and Pasotti explain in detail Triffin’s plan for the creation of a European Central Bank that could lend and rediscount to national central banks with a unit of account that could also serve as a means of payment between countries, and a way of centralising participating countries’ international reserves. Until his death, Triffin unfailingly supported Europe’s monetary and financial integration with a specific regional form of liquidity and the centralisation of reserves in a supranational regional fund.

This book is very timely. The Bretton Woods system ended in 1971, but the dollar remains the world’s principal currency. Emerging market economies largely demand US-dollar-denominated assets to invest their surpluses, rather than to finance domestic economic development policies. The creation of the Special Drawing Rights (SDRs) in 1969 did not solve the fundamental flaw, namely the continuing use of the dollar as an international currency. Moreover, SDRs are obtained on a quota basis with rich member countries securing most SDRs. Triffin’s work is therefore still relevant today. As the authors argue, Triffin was “both [an] imaginative and creative mind, thinking outside the box, coming up with new ideas that could be put into practice in the policy process” (154).

One shortcoming of the book might be pointed out. On regional monetary integration, the book only deals with Western Europe, while Triffin also had experience with regional monetary schemes in Latin America (1952), Africa (1963) and Asia (1967). Indeed, Maes and Pasotti remind us that Triffin thought of European monetary integration as a first step towards a decentralised reform of the IMS. One of Triffin’s arguments, in the face of the IMF’s reluctance to participate in the EPU machinery, was that a global approach to monetary issues was extremely difficult to coordinate. Triffin, as a pragmatist, pointed out the practicability of closer supranational regional integration with a limited number of countries to deal with immediate issues such as monetary or commercial policy. From the 1950s, Triffin advocated clearing and reserve schemes in other parts of the world.

This kind of analysis is not explored in detail in the literature. Maes and Pasotti might have taken the opportunity to contribute to a better understanding of Triffin’s view of a polycentric monetary system grounded on the use of supranational currencies issued by regional central banks. In spite of this minor lacuna, Maes and Pasotti wrote an outstanding book on Triffin that is a must-read for economists.

(For more information on Robert Triffin please see: www.triffininternational.eu)