BRETTON WOODS AND THE CREATION OF THE INTERNATIONAL MONETARY FUND
On Thursday 22nd July 1944, 77 years ago today, delegates who had been meeting in the Mount Washington Hotel at Bretton Woods in the New Hampshire Hills, gathered in the dining hall to hear the closing speech of Henry Morgenthau, the US Treasury Secretary. Dressed in evening-wear for the final conference dinner, the delegates were displaying clear signs of exhaustion. They had worked day and night for three solid weeks in an attempt to set up a World Bank and create a new international monetary system.
730 delegates from 44 countries had been invited to Bretton Woods. The horde of delegates had been joined at the conference by their teams, a large press corps and by hundreds of hangers-on. Altogether more than 3,000 people were packed into the Mount Washington Hotel, a shambolic and rundown edifice, very like the Overlook Hotel in ‘The Shining’, Stanley Kubrick’s 1980 horror movie. As they sat down to the closing banquet, many of the delegates were pessimistic, certain the conference had failed. They knew that the Russian delegation had so far refused to sign up to the final agreement, apparently on Stalin’s direct orders. What they didn’t know was that the second in command from the US Treasury team - Harry Dexter White, was a suspected Soviet spy.
On the other side of the Atlantic World War II raged on. The D-Day Normandy Landings had taken place on Tuesday the 6th of June, only 45 days earlier. There was no doubt the war was at last turning in the Allies favour. But Roosevelt, who had just announced his intention to seek election for an unprecedented fourth term, had decided that it was essential to fix financial arrangements for the post-war world, after the anticipated defeat of Germany and Japan. Roosevelt saw Bretton Woods as a vehicle for paving the way towards the creation of the UN and as a way of securing America’s place as a global economic superpower.
The Mount Washington Hotel was playing host to a melting pot of monetary brainpower that could, if successful, provide the world with economic stability for decades to come. The 730 delegates were mostly economists and bureaucrats, bank chiefs and experts in fiscal policy, keen to fashion a new world order that could avoid economic crises like the Great Depression, that had marked the 1920s and 30s, laying the foundations for global conflict. It was a tall order. There was only one real celebrity at Bretton Woods. John Maynard Keynes, the towering 6ft.6in giant with his centre-parted receding hair and bushy white moustache, was an economic genius. Keynes’ main rival was the second in command from the US Treasury team - Harry Dexter White. At the Bretton Woods Conference, the 51-year-old White more or less took over from his boss, the US Treasury Secretary Henry Morgenthau Jr., who owed his position more to his close friendship with President Roosevelt than to his fairly limited knowledge of economics.
What had started off as an affable, smiling and easy-going relationship between White and Keynes, soon developed into an ill-tempered and cantankerous clash of personalities. The pair often ended up shouting at each other across crowded committee rooms. Harry Dexter White wanted the IMF to prevent nations from devaluing their own exchange rates, thereby ceding sovereignty to the Fund. The British Treasury and the Bank of England were appalled. Giving away UK sovereign control over the value of sterling was, in their view, tantamount to high treason. Worse still, it looked like the Americans wanted both the World Bank and the IMF headquarters to be based in Washington DC.
The growing confusion, endless work, sleepless nights and rising tension were beginning to take their toll. Many had noticed that during the conference White seemed to spend an inordinate amount of time ensconced with the Russian delegation, so much so, that some began to wonder what was going on, although no-one at that time suspected that Harry Dexter White might be a traitor. The Americans were adamant. They said that Congress would never vote in favour of creating the IMF and the World Bank, with America as the biggest net contributor to both, if there were any doubts about the headquarters being in America. White threatened to put the matter to a vote at the summit, knowing that he had the support of all the Latin American countries. Keynes saw the writing on the wall. He had no option but to throw in the towel. White had won another major battle and the pressure on Keynes was mounting.
By the time of the final plenary session and dinner on the evening of 22 July, it looked as if the summit might indeed have been sunk. Morgenthau called the room to silence. He said: “I have just received word that the Soviet Union has decided to increase its subscription to the International Bank for Reconstruction and Development from $900 million originally agreed upon, to $1,200 million.” There was an eruption of cheering and applause. Keynes, even if he had not got his own way at Bretton Woods, had achieved a great deal, playing a key role in persuading the world to adopt a better system of financial governance, which stood the test of time.
On 21st April 1946, Easter Sunday, at the age of 62, John Maynard Keynes suffered a fatal heart attack. His 94-year-old father and 85-year-old mother walked together up the aisle at his memorial service in Westminster Abbey. Harry Dexter White’s career ended somewhat less nobly. For some time, he had been under surveillance as a potential Communist spy by J. Edgar Hoover and the FBI. White was summoned to appear before the House Committee on Un-American Activities on August 13, 1948. But the pressure was too much for him. On 16 August 1948, Harry Dexter White was felled by a massive heart attack. He died at the age of 55. The two towering intellects and key architects of the World Bank and IMF had fought like wildcats from the outset. Both died prematurely; one a hero; the other an alleged traitor.