Bretton Woods: Birth of a Monetary System

330 Pages·1978·31.729 MB·English

by  Armand Van Dormael (auth.)

BRETION WOODS
BRETION WOODS
Birth of a Monetary System
Annand Van Donnael
©Armand Van Dormael1978
Softcover reprint of the hardcover 1st edition 1978 978-0-333-23369-6
All rights reserved. No part of this publication may be
reproduced or transmitted, in any form or by any means,
without permission
First edition 19 78
Reprinted 19 79
Published by
THE MACMILLAN PRESS LTD
London and Basingstoke
Associated companies in Delhi
Dublin Hong Kong johannesburg Lagos
Melbourne New York Singapore Tokyo
British Library Cataloguing in Publication Data
Van Dormael, Armand
Bretton Woods
1. United Nations Monetary and Financial Conference,
Bretton Woods, 1944
I. Title
332.4'5 HG3881
ISBN 978-1-349-03630-1 ISBN 978-1-349-03628-8 (eBook)
DOI 10.1007/978-1-349-03628-8
This book is sold subject
to the standard conditions
of the Net Book Agreement
For Suzanne
Contents
Preface ix
Acknowledgements xi
Prologue 1
1 KEYNES AND THE 'NEW ORDER' 5
2 BRITAIN AND THE DOLLAR PROBLEM 12
3 THE 'CONSIDERATION' AND ARTICLE VII 21
4 THE CLEARING UNION 29
5 THE.STABILISATION FUND 40
6 HARRY WHITE CATCHES UP ... 48
7 ... AND TAKES THE LEAD 59
8 THE PLANS ARE PUBLISHED 76
9 THE PUBLIC DEBATE 92
10 THE WASHINGTON CONVERSATIONS 99
11 AN 'AGREEMENT' ON PRINCIPLES 109
vii
viii Contents
12 THE OPPOSITION IN WHITEHALL 127
13 THE JOINT STATEMENT OF PRINCIPLES 135
14 TOWARDS THE CONFERENCE 139
15 REHEARSAL AT ATLANTIC CITY 156
16 THE BRETTON WOODS CONFERENCE 168
17 'SELF-CONTRADICTORY OR HOPELESSLY OBSCURE' 224
18 THE TREASURY CAMPAIGNS 240
19 CONGRESS DEBATES 251
20 A FUND FOR A LOAN 266
21 SAVANNAH: PAX AMERICANA 286
Epilogue 304
List of Abbreviations 308
Notes 309
Index 319
Preface
The Bretton Woods agreements were the first successful attempt con
sciously undertaken by a large group of nations to shape and control their
economic relations. The stated objective of Bretton Woods was 'the
expansion and balanced growth of international trade'. The principal
method used to achieve this end was the restoration of orderly exchanges
between member countries: 'stability without rigidity and elasticity
without looseness'. This, it was hoped, would prevent another worldwide
depression. More than twenty years of painful experience had convinced
the founding fathers of Bretton Woods that world trade could not be
prosperous and that a high level of production could not persist in the face
of currency disturbances and their paralysing sequels. During a quarter of a
century the rules established at Bretton Woods were gradually and
increasingly accepted by member nations. This period coincided with the
most remarkable surge of sustained economic growth in history. World
trade increased to undreamed-of proportions. Prosperity, growing year
after year, soon came to be taken for granted. If economic growth and
monetary stability were correlated, Bretton Woods was successful beyond
all expectations.
The collapse of the system in the early 1970s was followed by a boom.
Soon, however, the delicate machine balancing production, consumption,
investment and employment was stalled, causing the worst recession since
the Great Depression. Coincidence? Causal relationship? With the answer
to these questions this book is not concerned. Nor does it draw any
theoretical or ideological conclusions. This is a story. History is a great
simplifier. It tells what happened, how and why. If it does not provide
solutions to current problems, it often holds salutary lessons.
Bretton Woods brought together a group of extraordinary people.
Never before had so many economists and government officials carried the
ix
X Preface
search for a practical world monetary order so deep and so far. While there
was general agreement about the objectives, there were sharp disagree
ments over matters involving the national interest, or personal pride and
prejudice.
Since the breakdown of the arrangements established at Bretton Woods,
governments all over the world are once more groping for a mechanism
that will set the process of balanced growth in motion again. People
engaged in the controversies over the desirable features of a new inter
national monetary order avowedly use arguments based on the interpre
tation of history. As a guidepost for those responsible for the creation of
such a monetary order, this book may prove to have some value.
Acknowledgements
First and foremost, I want to express my gratitude to Professor D. E.
Moggridge for his guidance. As editor of the Keynes Papers he had taken
the trail I was trying to follow.
I am grateful to Mr Paul Bareau, Dr Edward M. Bernstein, Mr Redvers
Opie, Professor E. F. Penrose, Mr Louis Rasminsky and Mr L. P.
Thompson-McCausland. Having been witness to the events I describe in
this book, or having played an important role in them, they provided me
with reminiscences and written material.
The International Monetary Fund and the Senate Committee on the
Judiciary supplied me with copies of very useful publication6. For
permission to cite documents, I should like to thank the Board of
Governors of the Federal Reserve System, the Department of the
Treasury, the Princeton University Library, the Franklin D. Roosevelt
Library, the National Archives, the Controller of Rer Majesty's Stationery
Office (Public Record Office and Crown Copyright materials) and the
Library of Congress. Most of the newspaper articles quoted in this book
were made available by the Royal Institute of International Affairs. To
each of the members of these institutions who made my research more
productive and enjoyable I owe a debt of gratitude.
Waterloo, May 1977 A.V.D.
xi