Floating convertibility: The emergence of the robot plan, 1951–52

Abstract

Robot was a plan to make sterling convertible. Its implementation would have had fundamental consequences for the British economy and economic policy. Though the importance of Robot has meant that it has been the subject of a great deal of comment, accounts of the episode have tended to concentrate on the question of who was responsible for the plan's rejection. The emergence of Robot has received nothing like as much attention. Accounts of Robot that have dealt with its emergence are deficient in two respects. First, they have failed to explain why Robot emerged at the precise time it did. The Conservative government at first tried to deal with the balance of payments crisis of 1951–52 by implementing direct reductions in imports and expenditure. By the end of January 1952 these appeared to have been largely ineffective. At the same time, though the Commonwealth finance ministers’ conference set balance of payments targets for the Sterling Area as a whole, these were not to be enforced until the second half of the year. It was only from the United States that immediate and substantial assistance could be obtained. When it became clear that the United States was not going to provide aid of an amount and at a time acceptable to the United Kingdom, the conditions were created in which a radical change in policy could be ‐ indeed had to be ‐ considered. The second deficiency in existing accounts is their misrepresentation of the plan's original rationale. In portraying convertibility as something the opportunity for which arose out of the introduction of a variable exchange rate, they stand the Bank's line of reasoning on its head. The Bank's overriding concern was for the status of sterling. In their view the balance of payments deficit should be remedied by deflation. It acted, in any case, only to aggravate the threats with which sterling was already faced. Convertibility and the blocking of the sterling balances were necessary in order that these threats be removed. Greater variability in the exchange rate — and not a de jure variable rate — was proposed only because without it even a limited form of convertibility could not be maintained.