News Column

Review: When Harry met Keynes: The no-holds-barred combat that led to the founding of the IMF. By Richard Toye: The Summit: The Biggest Battle of the Second World War - Fought Behind Closed Doors by Ed Conway 480pp, Little, Brown, pounds 25

August 2, 2014

Richard Toye



During the second world war, the British and Americans led a bold effort to create a new international economic architecture, in the hope of ensuring future stability and peace. That they pulled it off, more or less successfully, was not so much a miracle as the product of a specific set of propitious historical circumstances. But they didn't achieve it by being nice to each other. During the planning phase, that led to the crucial Bretton Woods conference of 1944, John Maynard Keynes, Britain's key negotiator, contemptuously threw some draft minutes prepared by the Americans to the floor, declaring them "intolerable". Harry Dexter White, Keynes's opposite number, shot back: "We will try to produce something which Your Highness can understand."

Such anecdotes help turn Ed Conway's account of potentially dry events into highly readable history. They also suggest a serious point. Keynes and White's rudeness to each other was a slightly twisted indication of their mutual respect, a form of no-holds-barred combat in a highly privileged intellectual and political arena. It was said to be the happiest day of White's life when he was permitted to call his long-admired sparring partner "Maynard", but that did not make the two men's relationship any less fraught. As for Keynes, his insulting behaviour towards the Americans - as others saw it - was, in his view, merely the frankness necessary to productive colloquy. If, by contrast, he was infinitely patient with his Cambridge undergraduates, this was no doubt partly because he did not take them particularly seriously as intellectual opponents. Clocking a choice piece of Keynesian abuse was a sign that, in his eyes, you had proved yourself worthy of receiving it.

But Keynes's verbal robustness (which he alternated with conventional charm) often spilled over in to casual antisemitic slights. His elitism, moreover, included a tinge of disdain for those who fell outside the Anglo-American charmed circle; he notoriously referred to the 44 nations gathered at Bretton Woods as a "monkey house". And, more worryingly from the diplomatic perspective, he didn't seem to appreciate that not everyone shared his worldview. Comments that might have seemed deliciously provocative in Bloomsbury did not necessarily go down well with the hard-boiled US politicians who, in the end, held the fate of the new economic order in their hands. The two new organisations that emerged from the conference were the International Monetary Fund and the International Bank for Reconstruction and Development. Keynes, by then a very sick man, was present when they were inaugurated in 1946, and humorously hoped that "no malicious fairy" would curse their development. "I don't mind being called malicious," growled US treasury secretary Fred Vinson, "but I do mind being called a fairy."

The Bretton Woods institutions fell far short of Keynes's original vision for a "Clearing Union" that would exert as much discipline on countries that ran a balance of payments surplus as on those that ran a deficit. In practice, that idea implied a huge redistribution of resources from the US to the rest of the world, and unsurprisingly the Americans found it unacceptable. They wanted, and got, a more limited Fund that would provide short-term relief for countries in difficulties while at the same time creating pressure for them to adjust their economies. They also rejected the concept of an international currency. Conway's clear-sighted book, though, is gratifyingly free of hand-wringing lamentations that the world would have been a better place if only Uncle Sam had had sufficient imagination to be more open-handed. In fact, the Americans were generous up to the limits of their capacity - not their economic capacity, but their political one. Roosevelt's officials knew they had to get any agreement past Congress, and even with former Republican isolationists on the back foot after Pearl Harbor, anything that smacked of bailing out foreigners was going to be a tough sell. The British liked to think that if the Yanks had all the money bags, then they themselves had all the brains; but what White had that Keynes lacked was a set of highly sensitive antennae that equipped him to understand what was saleable on Capitol Hill. That realism in the end served the world better than the acceptance of Keynes's blandishments would have done, however compelling the latter's intellectual case was in the abstract.

But what would all this have meant if, in fact, White was actually a Russian spy? In 1948, he was publicly accused of having provided information to the USSR, a charge he emphatically denied in front of the the House Committee on Un-American Activities, a few days before he died of a heart attack. However, he was implicated in decrypted Soviet documents which, together with some circumstantial evidence, provide a powerful case against him. Conway, though, is rightly sceptical. However indiscreet White may have been, it does indeed seem doubtful that he ever regarded himself consciously as working for a foreign power. Unless the creation of the IMF was itself a Russian plot, the idea does not make a great deal of sense, but people will believe many things. In the 1950s, the Conservative MP Waldron Smithers speculated that the American failure to warn Keynes that White was a subversive had led to the British falling for "the Communist policy of exchange control" that the Bretton Woods system supposedly represented.

What Bretton Woods in fact did was create a system of fixed but adjustable exchange rates that avoided both the worst evils of the old gold standard and the problems caused by the competitive devaluation that had followed its abandonment in the interwar years. A long period of world prosperity followed, but the scheme had a fatal flaw, in that the dollar held an "exorbitant privilege" within the system as the sole currency that was directly convertible into gold. In the early 1970s, when the US was no longer in a position to keep paying out gold, the system collapsed. That occurred on President Nixon's watch; he offered a new brand of rudeness ("I don't give a shit about the lira") that reflected a contempt for foreigners that White and his colleagues had never felt, no matter how hard their bargaining.

Conway, who is economics editor of Sky News, has written an accessible and intelligent work, based on substantial archival research. He does not break much new ground, but his analysis is persuasive and his judgments are humane. Keynes once wrote that "a study of the history of opinion is a necessary preliminary to the emancipation of the mind." Those who wish to advance that project could make a far worse beginning than to investigate this crucially important episode in the life of the global economy, in which power politics and ruthless intellectual endeavour collided with surprisingly beneficent effect.

Richard Toye is the author of The Roar of the Lion: The Untold Story of Churchill's World War II Speeches. To order The Summit for pounds 20 with free UK p&p call Guardian book service on 0330 333 6846 or go to guardianbookshop.co.uk.



For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Guardian (UK)


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters