From Doctors to Forecasters: The Transformation of International Economic

Expertise in the 1920s

Jamie Martin

Harvard University

*Draft: Please do not cite or circulate*

Note: this presentation is a condensed amalgamation of two chapters of my dissertation. It offers a synthesis of some of the main points of each chapter to sketch a larger argument important for the project as a whole.

In the years just after the conclusion of the First World War, many European and

American internationalists longed for the creation of a world economic administration,

attached to the League of Nations, to mange postwar reconstruction and relief and to

bring order to an international economic system upended by an unexpectedly devastating

war. Nothing like this had ever existed during times of peace, and the prospects for

establishing it in the early postwar years did not seem promising. Few states were willing

to countenance the limitations on their sovereignty that this new kind of international

administration would require. Supporters of this project did have the precedent of

wartime inter-Allied economic cooperation to look to for encouragement: the system

created in 1917 to coordinate the global Allied war effort, they argued, offered a

workable compromise between international economic management and national

sovereignty. By putting national experts into direct contact with their counterparts in

other states, this system had allowed representatives from different states to plan and

coordinate policies in an international forum that lacked binding authority to force states

to carry them out. National sovereignty was not violated. Instead, a new conception of

mediated sovereignty had been created.1 Just like the inter-Allied bodies, the technical

work of the League of Nations was to be based on the principle of “voluntarily

coordinated” international activity, which meant that the League could in no way be

considered a “super state.” This was a new way of organizing international relations, with

technical agents from around the world creating a purportedly “non-political” form of

permanent global administration.

While arguments like these were widespread during the immediate postwar years,

they sounded less persuasive once the emergency conditions of the war began to recede

from view. In 1920, when Woodrow Wilson and Herbert Hoover insisted that the

wartime inter-Allied bodies be dismantled, it became clear to many that internationalist

ambitions for a postwar world economic organization needed to be set lower – or, at

least, re-described. When the League of Nations took on its earliest economic and

financial work in the months that followed, one of the major challenges it faced was

convincing states that this work would not pose any serious risk to their traditional

prerogatives. This was a dispiriting task: as leading League official Arthur Salter later

recalled in his memoirs, Frank Nixon – the first provisional head of the League’s

Economic and Financial Section – was ready to give up in 1922. The prospects for this

section actually doing anything useful “were so poor,” Nixon apparently stated, “he

proposed that it should be reduced to the smallest dimensions and put, so to speak, into

cold storage for an indefinite time.”2

But the economic work of the League did not die in the early 1920s. It gradually

expanded in a variety of influential directions, which are only now beginning to be fully

1 Felix Morley, The Society of Nations: Its Organization and Constitutional Development (Washington: The Brookings Institution, 1932), 227-260.The Brookings Institution, 1932), 227-260. 2 Salter, Memoirs of a Public Servant (London: Faber and Faber, 1961), 174-175.

mapped out by historians.3 One of the areas that has yet to receive attention was how

keeping this economic work alive in the 1920s required League officials to develop an

elaborate array of strategies to describe and shape this work in ways that aroused as little

suspicion as possible from member states eager to protect their sovereignty. This paper

focuses on how League officials responded to controversies surrounding the

establishment of two major economic projects in the early to mid 1920s: first, the

provision of technical and financial advising to postwar European states, which evolved

by the mid-1920s into an ambitious system of external financial administration; second,

the sponsorship of early research on the international aspects of the business cycle.

League officials sought to win legitimacy for these two projects, in large part, by

deflecting attention away from their controversial political implications. In the case of

postwar financial reconstruction, this involved a strategy of “internationalizing”

mechanisms of semi-colonial financial administration developed in places like Ottoman

Turkey, China, and Egypt in the nineteenth and early twentieth centuries; for business

cycle research, it required demonstrating that this research was inherently apolitical and

mostly irrelevant to policy-making – that it neither violated the tenets of economic

orthodoxy, nor called for states to carry out any specific course of action on the national

level. These two tasks – international financial assistance and business cycle research –

would become two of the most important activities of international economic

3 The three most comprehensive accounts of the League’s economic work are Patricia Clavin, Securing the World Economy: The Reinvention of the League of Nations, 1920-1946 (Oxford: Oxford University Press, 2013); Yann Decorzant, La Societe des Nations et la naissance d'une conception de la regulation economique internationale (Brussels: Peter Lang, 2011); Michel Fior, Institution globale et marches financiers: la Societe des Nations face a la reconstruction de l'Europe, 1918-1931 (Brussels: Peter Lang, 2008).

administration, lasting well beyond 1945 and up until this day. But in the 1920s, as these

ambitious projects were being developed for the first time, the task of ensuring their

success required constant reassurance that they were, in essence, far less ambitious than

they appeared.

**

In the early 1920s, when the League of Nations first began to imagine what kinds

of economic services it could provide, it looked for inspiration to older practices of

international technical assistance and “money doctoring” that had been developed in

overseas colonies or in the semi-colonial territories over which European empires and the

United States exercised effective control. The first efforts on this front came in response

to the dire shortages in raw materials faced by European states during the immediate

postwar period. In February 1921, the League’s Council called for a survey of the

worldwide production and distribution of raw materials and foodstuffs – one of the

League’s first major economic studies – that would build on the kind of global statistical

inventory work conducted by the Allies during the war. Responsibility for this project

was handed to the Italian statistician Corrado Gini, who had served as a member of the

Inter-Allied Scientific Food Commission during the last year of the war and was chair of

Statistics at the University of Padua. Gini’s report, completed in August 1921, offered a

totalizing statistical snapshot of the world’s supply of vital commodities: cereals, wool,

cotton, coal, oil, iron, and chemical manures. It measured levels of production,

consumption, imports, and exports of each good in every settled region of the world

outside of sub-Saharan African (with the exception of South Africa). While the scope of

the study was ambitious, it suffered from a general lack of data: calculating the world’s

total supply in certain goods was hindered by the fact that most countries relied heavily

on privately-compiled statistics of production, which usually contained contradictory

information. Some larger business organizations gathered their own data, but this also

tended to be unreliable. These gaps in the data did not obstruct the major aim of Gini’s

study, which was to suggest ways out of the postwar raw materials shortage. And it was

on the basis of these recommendations that the League developed some of its earliest

programs of international economic advisory work.4

According to Gini, the principal cause of the raw materials crisis was a lack of

purchasing power on the part of importing states. What had been a problem of scarcity in

the immediate postwar period – with demand for raw materials far outpacing their supply

– had by 1921 been replaced by a problem of markets, as states struggled to purchase

goods due to their weakened financial positions. Gini saw the task of rebalancing the

world’s trade in commodities as ultimately requiring the total reconstruction of states

hobbled by postwar financial dislocations, including much of Central and Eastern

Europe, particularly the new states carved out of the Russian and Austro-Hungarian

Empires, as well as the Balkan States and Portugal. In these countries, heavily

depreciated currencies – combined with unpredictably fluctuating exchange rates – made

the import of raw materials and foodstuffs prohibitively expensive. These states were

caught in a “vicious circle,” Gini wrote, needing stable exchanges to attract loans but

unable to stabilize their exchanges without credits from abroad. What they needed to

break this circle was a series of thoroughgoing administrative and fiscal reforms,

4 League of Nations, Report on the Problem of Raw Materials and Foodstuffs (Geneva: 1921), 81-251.

including the implementation of heavy new taxes and fiscal austerity, to stabilize their

currencies and exchanges and to restore confidence in their solvency.

The problem was that many of these states had neither the kind of sophisticated

financial administration needed to pursue these reforms nor a professional corps of

experts to direct them. (This problem was particularly pronounced in the successor states

to the Russian Empire, Gini pointed out, as financial positions within the imperial

bureaucracy had tended to go exclusively to ethnic Russians.) The intensely political

nature of the kind of financial and fiscal reforms that were needed, moreover, made it

difficult for politically unstable states to pursue them safely. What they needed was the

assistance of highly-trained technical advisers from abroad, who could transform their

financial and fiscal administrations in ways that did not attract too much attention on the

street. There were obvious precedents to this kind of work in colonial and semi-colonial

territories outside of Europe: “England, by means of technical advisers,” Gini wrote, “has

been able to direct the economic policy of several Asiatic States with advantageous

results to their economy and her prestige.”5 But bringing these colonial methods of

financial administration directly back to Europe would cause severe political distress:

while states like China and Turkey had allowed “foreign Commissions to administer their

revenues,” Gini wrote, it was doubtful “whether any European people would submit to

such interference.”6 One way to get around this problem would be to have the ostensibly

impartial League of Nations appoint and pay for the work of financial advisers as part of

a large-scale international program of postwar reconstruction.

5 Ibid., 72.6 Ibid., 48.

In August 1921, Gini wrote directly to Eric Drummond, the Secretary General of

the League, about the possibility of establishing an official League program along these

lines. Gini insisted that the economic problems facing Europe were due, in large part, to

the unsophisticated financial administrations of its many new states – a problem that the

League could directly address.7 Drummond agreed, though he admitted the difficult

questions to which Gini’s scheme was likely to give rise: “the exact status of the

proposed expert; his relationship to the League; the responsibility for the payment of his

salary and expenses.”8 In September, the League’s Council asked the Economic and

Financial Committee to compile a list of experts who could perform these functions, as

well as to draft a contract establishing the terms of their service, modeled on an earlier

contract between the Imperial Government of Persia and a group of Belgian financial

advisers who had traveled to Persia to reform its financial and fiscal systems.9 The

colonial and semi-colonial precedents to this kind of work made those who were tasked

with organizing it in Europe do so with great hesitancy. Several members of the Financial

Committee doubted whether it was even viable. Offering the help of League-appointed

foreign experts was a “question of extreme delicacy,” one member suggested at a

February 1922 meeting. Few states, “from the point of amour propre,” would be willing

to hire non-nationals to play any kind of significant role in their administrations. Poland

and Lithuania were, so far, the only two states that had directly expressed interest in the

League’s technical aid. And it was not clear exactly what they were looking for, since

7 “Memorandum à Sir Eric Drummond.” League of Nations Archives, Geneva, Swizterland. (hereafter, LNA) R356/14697/14697.8 “Proposed Appointment of Technical Advisers on Economic and Financial Subjects.” LNA R356/14697/14697.9 J. Melot to Paternotte, 7 December 1921. LNA R356/18330/14697.

their requests had been “couched in somewhat vague terms.” When asked for

clarification, neither had responded.10

Nevertheless, in October 1921, an official letter was sent out to the League’s

member states offering the services of experts appointed by and paid for by the League to

perform a variety of services: reforming their monetary systems; establishing or

reorganizing their public services – railways, post, telegraphy, public works – and

improving their fiscal administrations.11 These states received a copy of Gini’s raw

materials report, which explained the limited and strictly non-political services these

advisers would provide. As predicted, some member states rejected the League’s

overtures immediately. In August, Devawongse Varopakarn, the Minister of Foreign

Affairs of Siam, insisted to Drummond that his country – even with its “administration is

in the process of reorganisation on modern and western lines” – would not be accepting

the League’s help.12

League bureaucrats clearly understood the political stakes of offering the services

of foreign experts to its member states. But they also recognized the important political

ends to which the provision of technical expertise could be put. In the case of Albania, for

example, providing the services of League-sponsored experts soon came to be seen as an

important part of a larger strategy of state-building in the volatile region of Southeastern

Europe. The Albanians – who were only then, as one League official put it, “in the

process of creating that machinery of government which economists tend almost to take

for granted in civilised communities” – agreed to League assistance with their financial

10 “Appointment of Technical Advisers to be Placed at the Disposal of Certain Governments.” LNA R356/14697/1469711 Drummond, Letter to Member States. 17 March 1922. LNA R356/19362/14697.12 Varopakarn to Drummond. 9 August 1922. LNA R356/23674/14697.

and fiscal administration, and the improvement of their roads, railways, and agriculture.13

The colonial parallels to this work were obvious. In August 1923, Salter solicited

recommendations for a legal adviser to help the Albanian government build a “primitive

parliamentary system” and a “simple system of tribunals.” The right person for the task

would possess the same skills and disposition as a good colonial officer: he would be a

young man, between the ages of 30 to 33, “with some, but not a specialized, legal

training, plenty of enterprise, initiative, and good horse-sense who could easily adapt

himself to the special conditions of the country.” A bachelor was preferable, as living

conditions would be somewhat rough in the “mountainous, primitive, agricultural,

sparsely populated, and until recently rather barbarous country” now “trying, with the aid

of the League of Nations, to civilize itself.”14 In 1923, the adviser chosen by the League

to direct Albania’s financial reform was M.J.D. Hunger, a former colonial administrator

of the Dutch East Indies.

After its halting start in 1921-22, the League was soon sending experts and

financial administrators across Europe to direct ambitious programs of financial

reconstruction and reform. These programs took off in earnest after the first attempts to

coordinate an international response to the financial instability of postwar Central and

Eastern Europe appeared to be failing. The programs of financial reconstruction that the

League developed in the 1920s in Austria, Hungary, Greece, and Bulgaria are a well-

known part of its economic work.15 But little attention has been given to the difficult

challenge that League officials faced at the outset of these programs: convincing critics

13 Nixon to Albert Calmes. 28 July 1922. LNA S116.14 Salter to M.L. Gwyer, 31 August 1923. LNA S115.15 The best account is Nathan Marcus, “Credibility, Confidence and Capital: Austrian reconstruction and the collapse of global finance, 1921-1931.” Unpublished PhD Dissertation. New York University, 2012.

that these programs were not gross violations of the sovereignty of the states under

reconstruction. The task of the League was to figure out how to re-describe a form of

external financial administration, first developed in the colonial and semi-colonial

worlds, as the work of a purely neutral international organization.

This was particularly important in the case of Austria, hobbled by severe inflation

and financial instability in the immediate postwar years. From 1919 to 1921, foreign

assistance to Austria had largely come in the form of credits for emergency food relief.

But by the spring of 1921, it was clear that a more general scheme of reconstruction was

needed. Responsibility for leading it was handed to the League of Nations in March 1921.

The initial recommendations the League offered for Austria were mostly orthodox: to

stabilize the currency, an independent central bank, fiscal austerity, and an immediate

halt to the printing of currency were needed. Once these reforms were completed, the

Austrian state could look for foreign credits to pay for the imports it needed, with security

on these credits provided by customs receipts and revenue from the state’s tobacco

monopoly, forests, and real estate mortgages.

What was more ambitious was how League officials imagined these reforms

would be overseen and implemented. They called for handing supervision over the credit

scheme and the management of Austrian securities to a “Commission of Control,” jointly

appointed by the League and the Austrian government. Outside funds would be paid

directly to a Commissioner of Control, who would then released them to the government

if reforms were proceeding according to schedule. If they were not, he could refuse to

make the funds available. The Commissioner, who was to live in the state under

reconstruction for a set period of years, could also decide what these funds were spent on;

in Austria, he had control over the entire budget. He could demand the Government to

designate certain assets as security for foreign loans and could veto any actions that

threatened to weaken the value of these assets.16 Authority for overseeing this project fell

to the League’s Council, but it was largely planned and coordinated by the Financial

Committee, made up of ten to twelve bankers, central bank officials, and Treasury

officials – a “corps d’élite of international finance,” as Frank Nixon called it.17 The

members of the Financial Committee were chosen from several different countries in

order to give the impression of impartiality, and none could be directly proposed for his

post by the governments of his home state. (Similarly, the Commissioner General could

not be a national of the state in which he was working nor one of any bordering states,

and his staff was to come from a variety of different countries.) The League’s help with

the painful reforms needed to win the confidence of foreign creditors was to be conducted

as far as possible outside of the realm of national politics to avoid stirring up unrest and

political conflict. The meetings of the Financial Committee were held in total secrecy,

and the work of League employees within each state was, in general, designed to keep its

visibility to an absolute minimum.18

This kind of externally-administered financial control, overseen by an

international organization, had never been attempted before in a country in the heart of

Europe. The Austrian government was, unsurprisingly, nervous to accept it: in March

1922, the League’s offer of a financial advisor was rejected, out of fear of the public’s

16 For descriptions of these mechanisms, see League of Nations, The Financial Reconstruction of Austria: General Survey and Principal Documents (Geneva, 1926) and League of Nations, Principles and Methods of Financial Reconstruction Work (Geneva, 1930). 17 Nixon to Basil Blackett, 23 May 1922. LNA S116.18 League of Nations, Principles and Methods of Financial Reconstruction Work, 18.

reaction to an apparent breach of Austrian sovereignty.19 But the situation was rapidly

deteriorating. In September 1922, the Austrian Chancellor Ignaz Seipel pleaded Austria’s

case before the League Council. The “humiliation” of foreign control was better, he

admitted, than allowing the country to experience complete economic collapse.20 The

question of how to avoid this kind humiliation, as much as possible, became one of the

principal challenges of the League’s financial reconstruction work. The fundamental

problem at the heart of all of the League’s earliest work, as Nixon put it, was that

the reconstruction of Europe turns entirely upon the reconstruction of the finances of the different Government (because so long as their finances are not sound you get inflation and steady depreciation of the exchanges), but the Governments in question are not willing to submit to a foreign control. On the other hand, the bankers in England or America, who might consider making loans to these new and impoverished countries, are not going to take the risks involved without having some kind of control on the spot.21

What Wall Street and the City demanded of Austria, if loans were to be given out, was

the kind of far-reaching international control that had been developed to administer

Ottoman, Egyptian, and Chinese public debt in the late nineteenth and early twentieth

centuries. Despite these demands of British and American capital, however, it was

obvious to members of the League that these forms of administration could not be

brought back wholesale to Europe without enormous political risks: “none of these new

States, which are as proud as they are poor,” Nixon wrote, “will admit this kind of

control.”22

The challenge of this project in Austria, which boasted one of Europe’s strongest

social democratic parties and best-organized and disciplined public unions, was that it

19 “Report from the Financial Committee to the Council of the League of Nations Regarding the Reconstruction of Austria. March 1922.” LNA S116.20 League of Nations, Official Journal. 11.1. November 1922, 1499.21 Nixon. 5 August 1922. LNA. S116.22 Ibid.

would place a League employee, the Commissioner General, “between the upper and

nether millstones of internal politics,” as Nixon put it in May 1922. The “reform of

Austrian finances,” he wrote, “is as political a task as it is possible to imagine. Sofar from

a controller being able to keep his financial supporters out of Austrian politics, it is his

business to purse a policy which will lead him straight to the heart of their most acute

conflicts.”23 Among banking circles in England, the Netherlands, and the US, calls for

recreating an Ottoman-style Public Debt Administration or a Chinese-style Maritime

Customs Union were becoming increasingly widespread. But giving foreign lenders

direct control over Austrian finances could lead to a situation in which these lenders

would pressure their governments to intervene – even occupy the state – in order to

secure repayment. This was a common outcome of foreign financial control, Nixon

admitted, and certain private interests would look to provoke it. The entire prospect was

fraught with enormous risk when brought back to Europe: “the anomaly inherent in the

control by private groups of the finances of a civilised European country is such as to

invite trouble.” The racial and civilizational aspects of this problem were paramount:

Austria, Nixon wrote, was facing the prospect of “Turkification.”24

What the League of Nations could offer was a form of mediation between foreign

creditors and the Austrian state that would make foreign control look far less threatening

– and far less colonial. The League was to act as a “shock-absorber for the financial

machine,” to deflect attention away from the influence that foreign capital had over

economic policy in Austria. The League was the only institution up to this task of acting

as an intermediary and of preserving the illusion of Austria’s sovereignty. Defenders of

23 Nixon, “Financial Intervention in Austria.” LNA S116.24 Ibid.

the League worked tirelessly to make this case in the early 1920s, and were faced with a

constant stream of criticism that this program of financial reconstruction represented an

unprecedented violation of the sovereignty of a “civilized” European state.25 Not only

was the League disregarding international law, they insisted, but it had “seized occasion

of a country’s need to institute a foreign tyranny.” The League was treating the Austrians

no better than the “uncivilized” populations of the territories in which these mechanisms

of foreign control had been perfected. Responding to these criticisms involved elaborate

justifications of how the League of Nations, as an international organization, could not, in

any way, be rightfully seen as this kind of quasi-imperial power itself. Its political

impartiality, and detachment from any territorial claims, was presented as evidence that

the dangerous implications of its importation of these mechanisms of control back into

Europe had been neutralized. How they actually functioned, however, had to be

concealed as much as possible: “the greatest care has been taken to create a system at

once elastic,” as Salter described it, “and, so far as possible, invisible.”26

**

The League’s financial reconstruction projects came to be seen as some of

greatest successes of the short-lived international organization, helping to lay the

foundation for the later “structural adjustment” schemes of the IMF.27 Another League

project that laid crucial foundations for international economic work after 1945 was its

25 See, for example, the international legal arguments in support of the League’s program in the John Fischer Williams, Chapters on Current International Law and the League of Nations (London: Longmans, Green, and Co., 1929), 378-419.26 Salter, “General Survey,” in League of Nations, The Financial Reconstruction of Austria: General Survey and Principal Documents, 82.27 On this point, see Louis W. Pauly, “The League of Nations and the Foreshadowing of the International Monetary Fund,” Essays in International Finance, 201 (Princeton: Princeton University Press, 1996), 1-52.

sponsorship of business cycle research in the 1930s, which resulted in pioneering

contributions to the early discipline of macroeconomics.28 When this program of business

cycle research was first being put into place in the early 1920s, it forced League officials

to confront a challenge that was similar to the one occasioned by its financial

reconstruction work: that this research represented an awkward meddling in national

politics, and could lead to an unpalatable violation of the sovereignty of League member

states.

The international study of economic crises first took off in the early 1920s not at

the League, but at the International Labour Office (ILO), when the ILO began its

sponsorship of research on the nature and causes of unemployment. At the founding

conference of the ILO in Washington, D.C. in November 1919, a resolution was passed

calling for the establishment of a commission to oversee the collection and publication of

employment data at the national level and the rendering of it into internationally

comparable form. The aim of this commission was to bring the “world of science” into

the service of the ILO in order to improve the statistical understanding of unemployment

and to spearhead new research on its underlying economic causes. 29 The new powers and

far reach of the ILO, it was hoped, would make possible the realization of a long-standing

internationalist goal, one that had been stymied by the outbreak of war in 1914: the

harnessing of technical expertise for the amelioration of modern industrial

28 On this see, for example, Mary Morgan, History of Econometric Ideas (Cambridge: Cambridge University Press, 1990), 101-130; Louis Pauly, Who Elected the Bankers? Surveillance and Control in the World Economy (Ithaca, NY: Cornell University Press, 1997), 62-78.29 Louis Varlez to William Beveridge, 20 October 1920. Archives of the International Labour Organization, Geneva, Switzerland. (hereafter, ILO) U 2/2/1. On the ILO and unemployment research, see Ingrid Liebeskind-Sauthier, “Modern Unemployment: From the Creation of the Concept to the International Labour Office’s First Standards,” in Sandrine Kott and Joelle Droux (eds), Globalizing Social Rights: The International Labour Organization and Beyond (Houndmills: Palgrave Macmillan, 2013), 67-84; Isabelle Lespinet-Moret and Ingrid Liebeskind-Sauthier, “Albert Thomas, Le BIT, et le chômage: expertise, catégorisation et action politique internationale.” Les Cahiers Irice 2 (2008): 157-179.

unemployment. The aim of the ILO’s Technical Commission on Unemployment was first

to get states to improve their collection of employment statistics and then to standardize

this data so that it could be compared at the international level. Even more difficult – and

controversial – was understanding the underlying economic causes of unemployment, a

problem that many had only recently come to think as primarily economic in nature,

strictly speaking, and not social or moral.30 While economic downturns had occurred with

seemingly cyclical regularity in industrial states since the early nineteenth century, it was

not yet clear how they related to conditions of employment. And official research on their

causes and future occurrence was still only in an early phase.

The search for a better scientific understanding of how crises related to

unemployment occupied much of the ILO’s research work during the first half of the

1920s. To carry out this work, however, the ILO needed the help of the League’s

Economic and Financial Section, which was seen as bearing primary responsibility for

economic questions and as having access to more relevant statistical data than did the

ILO. But League officials were nervous to provide this help, and attempted to evade

responsibility by arguing that unemployment was fundamentally a social problem and

thus not one of their priorities. In March 1923, Albert Thomas, head of the ILO, wrote to

Drummond with a formal request for the assistance of the League’s Economic and

Financial Section with the ILO’s unemployment work. He insisted that it was the

fundamentally economic nature of unemployment, not just its social aspects, that

necessitated collaboration with the League: “It is generally admitted that, under the

modern regime of international economics,” he wrote, “the crises of unemployment

30 On this point, see, for example, Robert Salais, L'invention du chomage : histoire et transformations d'une categorie en France des annees 1890 aux annees 1980 (Paris : Presses Universitaires de France, 1999).

return periodically almost in a circle, and that they are subject to a certain number of laws

which it is possible to define.”31 The supposed division of labor between the

organizations meant that ILO officials did not wish to carry out “investigations of its

own:” studying the business cycle, the final frontier in unemployment research, required

the League’s involvement.

League officials initially rejected these overtures. In May 1923, Salter responded

to Thomas that the League’s Economic Committee had decided that unemployment was

the ILO’s responsibility, since the problem was social, not economic. The League refused

to take responsibility for recommending any politically controversial policies that would

be needed to address conditions of employment.32 If either of the organizations was to

study economic cycles, this had to remain exclusively the responsibility of the League.

This was an economic problem; unemployment, they argued, was not. The following

December, Thomas reiterated that their cooperative work would be organized in a way

that kept it safe from controversy, and that the divisions of labor between the social and

economic remit of the two organizations would be respected. But he insisted that the

study of trade cycles not be kept solely to the League, nor detached from acute and

immediate questions of policy, since economic fluctuations hit working classes the

hardest. Before the war, Thomas pointed out, labor groups had seen revolution as the

only solution to cyclically-recurring unemployment; “systematic international efforts”

could now be offered as an alternative.33

31 Thomas to Drummond. 22 March 1923. Printed in International Labour Office, Official Bulletin 9 (1924): 44-58.32 Salter to Thomas, in Ibid., 61-65.33 Thomas to Drummond, in Ibid., 65-73.

Despite the League’s hesitance, collaboration with the ILO on this project began

in 1924 with the appointment of a Mixed Committee on Economic Crises. This body

included several leading League bureaucrats and financial experts, as well as labor

leaders, international civil servants, and a small handful of economists and statisticians –

including Ernst Wagemann, J.R. Bellerby, and Karl Pribram – appointed by the ILO. The

meetings of this body accomplished little, and were fraught by controversy. While the

ILO called for an ambitious scheme of business cycle research, oriented around practical

policy-making, members of the League’s financial committee feared this would result in

advocacy for the kind of economic policies at the national level that they dreaded. Of

particular concern was the increasingly popular view at the ILO that the cause of periodic

economic ups and downs could be found in the fluctuation of price levels. While these

cycles were the necessary concomitant of a modern industrial society, on this view, their

severity could be softened if prices could be brought under control through active

monetary policies. This view, according to League critics, not only violated economic

orthodoxies, but also implied an uncomfortable role for the League on the international

stage: as providing advice for its members states on the pursuit of unorthodox and

untested economic policies, which would place the League into the center of national

distributional conflicts. League members of the Mixed Committee insisted that price

stabilization take back seat to ongoing efforts to return to the gold standard and to the

disciplinary policies that it required.34

Persistence by ILO members eventually resulted in a compromise to lead a joint

scheme of research on economic forecasting. This kind of work had recently taken off in

34 See Procès-Verbal. Provisoire de la première séance tenue le 2 juin 1925. Commission Mixte Des Crises Economiques and Comite Financier, Réponses du Comité Financier aux questions qui lui ont été soumises par la Commission Mixte des Crisses Economiques. ILO U/6/1/2.

the US with private business forecasting firms, like Babson’s and Brookmire’s, and at

Harvard University. In Europe, it was also now underway at Cambridge and in London,

and in the mid-1920s would spread across Europe and the Soviet Union. Those

responsible for unemployment work at the ILO were desperate to harness this kind of

research – which was still largely conducted by private organizations – for their larger

project of finding official measures to ameliorate unemployment. In 1924, they published

a major report on the use of “economic barometers,” which outlined a collaborative

research program with the League. The first aim of the program was to democratize the

kind of work done by private forecasting firms, and to make it available to larger

audiences than had been privy to it thus far. The more people that had access to this

information and could act on it, the ILO report stated, “the steadier will be the course of

economic life.”35 The second principal aim was to develop methods for how forecasting

could be conducted on the international level and to gain a better understanding of how

economic fluctuations in one state caused them in others.

The result of these efforts was the formation in late 1926 of a Committee of

Experts on Economic Barometers, which brought together a internationally influential

cast of economists and statisticians, including Wagemann, Gini, Allyn Young, and Arthur

Bowley. Despite its high profile, this organization was not able to accomplish very much

either. Nor was it directly focused on policy-making. This was by design: the League

members resisted efforts to entangle their organization in any kind of research that could

be taken to have controversial political implications for member states. Perfecting the art

of forecasting was seen as far safer, since it was more detached from immediate policy-

making. While it could have implications for official use, it could also be easily

35 International Labour Office, Economic Barometers (Geneva, 1924), 7-11.

depoliticized by emphasizing its use for prediction over its use for prescription. Its early

development in the private realm, as a tool for business, cemented this belief in the

possibility of detaching it from policy. Forecasting could be as scientifically neutral as

meteorology.

By 1930-31, the role of the League as economic research institution would begin

to change, as the cooperative League and ILO work on economic barometers gave way to

the much more ambitious League-sponsored business cycle research of the 1930s, led by

economists such as Bertil Ohlin, Jan Tinbergen, and Gottfried Haberler. This research

was much more explicitly oriented around specific questions of governance and financial

policy. Many of the world’s best-known economists came to Geneva in the 1930s, and

their meetings on the business cycle were fraught by intense controversy; accounts of

their arguments, methodological and political, fill countless pages of official minutes.36

These were very different from the kinds discussions held at the League in the 1920s.

The obvious immediate cause for this transformation in the League’s research work was

the outbreak and global contagion of the Depression and the attending rise of new forms

of national economic expertise and governance. But this development must also be seen

in light of a larger story about how international bureaucrats transformed their

understanding of economic governance as they learned to operate in an international

arena that was largely hostile to their efforts.

For most of the 1920s, the League was reluctant to move from a short-term focus

on emergency postwar reconstruction and relief to longer-term research, worried that this

would bring down upon it more of the intense criticism that it had faced for its financial

36 See, for example, the voluminous minutes held in Volym F:16 of the Bertil Ohlin Papers. Riksarchivet, Stockholm, Sweden.

reconstruction work in Austria and elsewhere. It had little wiggle room to justify this kind

of research work until the Depression demonstrated its extreme urgency, and it became

clear how little was understood – and what paltry data had been collected – about how the

world economy functioned as a systematic whole. While it would not take off until the

1930s, the foundations for this research were set in the 1920s, in much less propitious

circumstances. How members of the League and other international organizations learned

to manage early suspicions about their economic work – and how these organizations

transformed as a result – is a crucial and understudied development in the history of

twentieth-century global governance.