nation's financial collapse. It seems clear that the loan policy embodied the compromises of Bretton Woods in light of the fact that the United States was never able to force Britain to abide by the stated terms of the loan: (1) the elimination of the sterling area dollar pool, (2) the introduction of free currency convertibility, and (3) the substantial reduction of empire trade preferences. Britain adopted these conditions only in the late 1950s, a decade after the U.S. loan had been secured. While U.S. bankers pushed for full convertibility and the elimination of the dollar pool, other liberal internationalists, especially capital-intensive industrialists, insisted that the primary goal of the loan should be to ensure that the British currency did not collapse, a fate that would have surely increased the radical strains within the British labor movement.
The compromise of Bretton Woods, specifically the maintenance of capital controls, was in part a reflection of the strength of organized labor in Great Britain, France, and Italy at the end of World War II. During World War II, union membership in Great Britain rose by approximately one-third to eight million workers, some 45 percent of the workforce. The political strength of the working class was evident in the landslide victory of the Labor Party in 1945. Laborites advanced an eleven-point program that advocated a series of nationalization measures and increased government spending to maintain a full-employment, high-wage economy in the aftermath of World War II. Faced with these demands, the British government was incapable politically of pressing for currency convertibility and the removal of capital controls.
Thus capital-labor relations after World War II provide a partial explanation of the compromises of the Bretton Woods system. However, a more complete understanding of the Bretton Woods financial regime requires a detailed analysis of the interaction among business coalitions in the construction of that regime. In the next chapter, we examine the role of business and political elites in the construction of Bretton Woods and develop an overview of the defining features of what we describe as a Bretton Woods financial regime. The role of business and political elites in the construction and unraveling of such a financial regime is the thread that ties the remaining chapters together.