Inventing the World’s Money

Do we need another book on Bretton Woods, the conference in 1944 in New Hampshire that established a new monetary system following World War II? The answer is yes. The two excellent existing histories of Bretton Woods, by Richard Gardner (1956) and Armand van Dormael (1978), are now dated.1 New historical materials have become available. Since the crash of 2008 the arcane subject of the world’s money has become urgently relevant. So a fresh look at the famous conference is warranted.

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International Monetary Fund
Assistant US Treasury Secretary Harry Dexter White and John Maynard Keynes, adviser to the UK Treasury, at the inaugural meeting of the International Monetary Fund’s Board of Governors, Savannah, Georgia, March 1946. White and Keynes had clashed at the Bretton Woods Conference in July 1944, which conceived the IMF as part of a new postwar international monetary system.

In The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order, Benn Steil has brought together three interesting stories, usually told separately: the life of John Maynard Keynes; the espionage activity of the US Treasury official Harry Dexter White; and the making of the Bretton Woods agreement itself. Steil, a senior fellow at the Council on Foreign Relations, understands the economic issues at stake and has done meticulous research on the history. Every good story that has ever been told about the major actors involved and the happening itself is in his book, and a few more besides. For those who come fresh to the subject, and even for those who know most of it, it is an excellent and revealing account.

At its heart is the clash between the British economist John Maynard Keynes and Harry Dexter White. This is not just a battle between two economists but a competition between two nations, Britain and the United States, for postwar position. For the US the stake was hegemony; for Britain independence. Steil tells the story of how Keynes tried by intellectual superiority to overcome Britain’s weak bargaining position with the United States. In contrast to Keynes, White is merely dour and abrasive. But he compels interest because he has a secret: he was a Soviet agent. Steil’s is the most successful effort yet to link the espionage activity of Harry White to the position he took in monetary politics, though bringing together these two sides of his character remains an elusive task.

The Bretton Woods agreement, as Steil says, set up the “new world order” that dominated postwar monetary history until its collapse in 1971, when Richard Nixon canceled the convertibility of the US dollar into gold. Since then we have lacked a monetary system. Instead we have had a free-for-all with floating, managed, and fixed exchange rates. Excessive accumulation of dollar reserves by countries like China contributed heavily to the financial collapse of 2008. So it is instructive to learn how the leaders of 1944 tried to deal with the problem of …

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  1. 1

    Richard N. Gardner, Sterling-Dollar Diplomacy: Anglo-American Collaboration in the Reconstruction of Multilateral Trade (Oxford: Clarendon Press, 1956); Armand van Dormael, Bretton Woods: Birth of a Monetary System, (Holmes and Meier, 1978).