INTERNATIONAL FUND AND BANK

The Governors of the above organisations are now meeting in
Washington. Following an earlier interview with Hugh Dalton, at
his request, he dined with me last night. Inverchapel, Berendsen
and Oldham were present also, and Brigden, who as official
observer will report by telegram and airmail on all details. As
you know, the United Kingdom Government is anxious that Australia
should join and be represented by an executive Director.

In conversation, Dalton gave as his opinion that three important
aspects of the present situation have changed the outlook since
pre-war years. These are-
(A) The present United Kingdom Government will remain in power for
at least four years, during which the International Fund will be
tested, and it will not hesitate to withdraw from the Fund at any
time should the Fund attempt to impose any policy inconsistent
with its own policy of full employment. This it could do
immediately an occasion arose without penalty. No public statement
of this kind will be made but the intention is a firm one which
will persist.

(B) The Bank of England is now under the control of the United
Kingdom Government and will follow policies consistent with the
above.

(C) The Fund has now adopted the United Kingdom interpretation of
a 'fundamental disequilibrium' designed to protect the position of
a Member Government desiring a change in a rate of exchange to
prevent unemployment. On this point Dalton made a further
statement this morning in Plenary Session, which will be the
subject of a later telegram.

Brigden will report results of present meetings by telegraph and
will despatch all relevant papers this week.

It is clearly evident that there is a genuine desire for Australia
to become a member of the Fund and to be represented by an
executive Director, partly in recognition of Australian leadership
in the field of employment policy, and while no formal
postponement of election is practicable, I am assured that
everthing possible will be done to delay action on the election of
another Director until Australia has had an opportunity to decide
her position.