Magazine article Financial History

The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order

Magazine article Financial History

The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order

Article excerpt

What if some of the most powerful and smartest people got together and tried to set up a new system of international com- merce and finance? Could we usher in a new era of cooperation that could amelio- rate global tensions on these issues? In 1944, with WWII still raging, that is what Britain and the US attempted at a New Hampshire resort hotel called Bretton Woods.

You would think the story of an "eco- nomic conference" would be pretty dull - technocratic, bureaucratic, heavy on the math. But in The Battle of Bretton Woods, author Benn Steil gives the back story on the conference that narrates more like a high stakes poker game. At the table is the first modern economist "rock star" playing against another economist who turns out was spying for the Russians. Oh, those crazy economists!

Steil focuses on Britain's predicament as WWII entered its final stages. The pound had been the "currency" of pre- war international trade and finance, with London as its geographic center. Britain's policies had reflected both its national and its wider colonial interests and ambitions. But as the war took its toll, Britain had limited financial firepower to bring to bear on the debate on post-war finances. For all intents and purposes, it was broke, with extensive obligations to the US.

The US, on the other hand, was at a zenith in its international prowess, having provided the resources needed to finalize victory. The Treasury Department had no intention of returning to the pre-war, British-led set-up. Instead, it envisioned a more transparent system that would lead to freer trade and eliminate cur- rency manipulation and trade barriers as sources of conflict. This was idealism, yes, but tempered by the certainty that the US would play the dominant role in any new construct. And if Britain ended up being taken down a couple of pegs, well, so be it. In 1942, the US called for work to begin on a new post-war trade and finance system.

Steil adds needed spice to the story by going into depth on the professional and personal profiles of the two economists assigned to work out the details. Leading the charge for the US was Harry Dexter White, son of a Boston peddler, who had an unusually fast rise at Treasury in the late 1930s. White had no doubt he was the smartest guy in the room; he was difficult and abrasive. …

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