The Summit: Bretton Woods, 1944,
by Ed Conway, Pegasus
In July 1944, a few weeks after the Allied D-Day invasion of Europe, 44 international delegations gathered at the Mount Washington resort in New Hampshire to talk about economics, not war. They were in Carroll, N.H., officially, but the coal magnate who’d built the hotel had given the railroad station and post office the name Bretton Woods, and that would be the name associated with the groundbreaking, three-week parley. Its purpose, as Ed Conway writes in his surprisingly colorful book The Summit: Bretton Woods, 1944, was “to replace the mangled global monetary system responsible for the Great Depression (and, by extension, for the war) with something that worked.”
As Conway notes, no one had ever before successfully modified the international monetary system, which had “evolved incrementally—from the early days of mercantilism to the British Empire–dominated gold standard which collapsed in 1914, through to the flimsy system of currencies and rules erected after the Great Depression in the 1930s.” To avoid a repeat of the post–World War I turmoil that had sparked World War II, experts agreed that a more interventionist model was needed, but few people had much idea how it should function.
It fell to two government officials to find a solution. One was Britain’s John Maynard Keynes, the celebrated, Cambridge-educated economist, and the other was Harry Dexter White, a senior U.S. Treasury official who’d later be accused of passing secrets to the Soviet Union. As Conway notes, Keynes and White were the “odd couple” of international economics. Keynes was tall and patrician, and a member of the House of Lords. White was a short, shy, self-made man from a rough side of Boston who earned a Ph.D. from Harvard. Their relationship was “rocky, caustic and occasionally aggressive; the pair would shout at each other in meetings, bully each other in an attempt to get their ways, and, afterward, abuse their rival to friends.” But they respected each other—and the two men pieced together the framework of a new system that, to a large extent, reflected America’s new standing as the world’s economic powerhouse.
Bretton Woods instituted a fixed exchange-rate system designed to constrain international cash flows by keeping the currencies of the major nations stable and convertible. It would, through regulation, prevent extreme trade imbalances and inflation from creating social upheaval. The U.S. dollar became the world’s reserve currency. Currency devaluations would be policed by the new International Monetary Fund while the International Bank of Reconstruction and Development (later the World Bank) would make loans to war-impoverished nations.
The U.S. Marshall Plan of postwar aid to Europe eclipsed Bretton Woods for a time, and neither Keynes nor White saw the fruit of their visions. Keynes failed to persuade the United States to give cash-poor Britain a massive grant. He secured a large loan instead, and died in April 1946. President Franklin Roosevelt’s death ended White’s influence at the Treasury Department, and Whittaker Chambers and other Americans who’d admitted to spying for the Soviet Union subsequently implicated him as part of their network. White denied the charges during testimony before the House Committee on Un-American Activities on August 13, 1948. Three days later, at age 55, he overdosed on digitalis and died from a heart attack at his New Hampshire farm.
The Bretton Woods system promoted steady international growth that lasted until the early 1970s, when today’s more volatile floating exchange rate was adopted. But the name Bretton Woods still invokes a period of order and discipline, and that is a credit to the contrarian economists who created it out of the tumult of World War II.
—Richard Ernsberger Jr.
Originally published in the October 2015 issue of American History magazine.