ABSTRACT
The previous chapter outlined the benefits to be expected from trade and how these are reduced by tariffs and quotas. It must be emphasized that this rationale for free trade is implicitly assumed in the constitution of the international organizations set up by the Allies, with Britain as an important participant, after the Second World War. The Allies were very concerned to get away from the instability and unemployment, and the transmission of unemployment through competitive devaluations and protection, which had been such a feature of the international economy in the interwar period. As described in Chapter 2, they established the International Monetary Fund to assist with short-run balance of payment problems, and the World Bank to provide loans for reconstruction and development.
