April 15, 2004
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I am delighted to be here this evening, and I'm glad that you could all join us to mark the opening of this splendid new exhibition. This is one of a regular series of exhibitions in the IMF Visitor Center, and on this occasion we are very grateful to have the Smithsonian National Museum of American history as co-sponsor. Without access to the National Numismatic Collection-one of the largest such collections in the world-I think the displays would have looked somewhat less enticing than they do!
We in the Fund are grateful to Linda Kamel for her efforts to use our exhibition space here in the Center in an imaginative way. The consistently high standard of displays reflects her ingenuity and the generous co-operation of the co-sponsors.
In the Fund we deal with money every working day, of course, and are in one sense keenly aware of the relationship between money and sovereignty.
But we rarely have time to reflect on the history of this relationship, which is why this exhibition is so fascinating.
As you wander round the displays-and I hope you will take the time do so later-you will see quite how deep-rooted the relationship is. Indeed, I am struck by how many of the most topical issues of modern day international finance have echoes in the past.
The introduction of the euro, for instance, went right to the heart of the debate about what national sovereignty means. It is exactly the debate now going on in Britain, Sweden and Norway-and indeed, in the fifteen countries that will soon join the European Union. Are countries-both their governments and their populations-willing to see their national currency disappear in return for apparently intangible benefits such as greater efficiency and access to a larger market?
Governments are often torn, because the ability to print money can offer important advantages, especially for those who want to avoid fiscal discipline. And ordinary citizens have shown perhaps unexpectedly strong attachment to the pound, the franc, the peseta and the lira. Trust in a currency takes a long time to build up.
Europe's monetary union isn't exactly a novel idea. Several experiments were tried in Europe in the nineteenth century-among the Scandinavian countries (where enthusiasm for the euro is notably lacking) and the short-lived Latin monetary union-an idea, I believe, inspired by Napoleon.
But a similar debate about money and sovereignty took place here in the United States in the eighteenth and nineteenth centuries. And the Roman Empire was the first fully-monetized society. This exhibition reminds us that, at its peak, the Empire had a population of 100 million people: it was and, in a sense, the forerunner of today's Single European Market.
Dostoyevksy once described money as "coined liberty". I don't think he was talking about the liberty of states at the time. But there is no doubt that the right to issue a national currency has long been jealously guarded by states, and sought after by those seeking national independence. Currency is seen as a symbol of national sovereignty which is why the prospect of abandoning a national currency is so painful a prospect to many people.
The link between money and national identity is also clear from the importance that has always been attached to the design of notes and coins. The importance of symbolism goes right back to the Greeks-who, by the way, did not invent but rather adopted the idea of coinage. The eagle on American coins was first used as an image on Greek coinage.
Given the constraint of the form-a small, usually round piece of metal, or a small piece of paper-the range and ingenuity of currency designers is impressive. That is clear from this exhibition, and it is also clear from the permanent display of all IMF member currencies to be seen along one of the corridors in the main part of the headquarters building.
But history shows us that lovingly-executed or imaginative design does not guarantee success or longevity. Currencies can lose their value rapidly because of inflation or political upheaval, or both. I'm sure many of us have seen film footage of Germans during the hyperinflation of the 1920s, when half a day's pay needed a wheelbarrow to transport home. Hyperinflation was a chronic problem for many countries in the 1970s and 80s, especially in Latin America. [And who now, for example, would attach any value, other than sentimental, to the Ostmark, the currency of the now-defunct East Germany?]
One of the Fund's most important tasks is to help countries achieve the macroeconomic stability that helps keep inflation in check and so maintains the domestic purchasing power of currencies. We are, in a sense, preaching the rewards of virtue: and in the context of this exhibition, it is interesting to see what Socrates had to say on this subject:
I tell you that virtue does not come from money: but from virtue comes money and all other good things to man, both to the individual and to the state.
On that note, let me welcome you to this exhibition. I wish you an enjoyable evening.
Thank you.
