F&D BOOK DISCUSSION
Authors Debate Impact of Bretton Woods on IMF, Past and Future
Managing Editor, F&D
May 15, 2013
- Bretton Woods conference epitomized multilateral cooperation
- Views diverge on Harry Dexter White: hero or Soviet spy?
- IMF’s new “intellectual suppleness” bolsters its credibility
Expert panelists engaged in animated debate over Bretton Woods architects Harry Dexter White and John Maynard Keynes and offered insights into how the IMF came about and how that history affects the global economy, in a book discussion sponsored by F&D magazine.
The authors of three books on the IMF and Bretton Woods and The Economist U.S. economics editor Greg Ip discussed their books and the future of the IMF, in a first-ever F&D-sponsored event moderated by University of Waterloo professor Bessma Momani, during the IMF-World Bank Spring Meetings on April 19.
The discussion was kicked off by Jim Boughton—former IMF historian and author of two histories of the Fund—describing the context of the Bretton Woods conference, which was ultimately an attempt to create financial stability and global peace.
He vigorously disputed the argument in Benn Steil’s book, The Battle of Bretton Woods, that Harry Dexter White “had a soft spot for socialism” and was in fact a spy for the Soviets. Boughton pointed out that the Soviet Union and the United States were not enemies at the time, and Dexter White was simply doing his job as a U.S. Treasury official by meeting regularly with his Soviet colleagues.
Kurt Schuler, co-editor of The Bretton Woods Transcripts, described his discovery of the previously unpublicized transcripts of the founding conference, complete with handwritten notes, on an out-of-the-way shelf in the U.S. Treasury’s library. While the results of the conference were well known, it was fascinating to read the blow-by-blow accounts of compromises that had been reached and who had advocated what.
An underlying theme in the transcripts was the need for the institutions to take into account the views of countries both large and small, Schuler added. That gave their decisions the universality needed for international legitimacy. For example, a suggestion from a Mexican delegate led to the requirement that decisions by the IMF’s Board of Governors attain not only a two-thirds majority of the votes, but also the support of one half of the institution’s member countries.
The spirit of multilateral cooperation described in the transcripts presented a romantic view of the Bretton Woods conference, observed Momani.
By contrast, Steil viewed the conference more cynically, arguing that it had succeeded because the United States held all the cards. It controlled two-thirds of the world’s monetary gold stock at Bretton Woods and Dexter White, determined to undermine the U.K.’s upper hand in the global economy, actively engineered the outcome in a power play against John Maynard Keynes and his countrymen.
The shifting roles of those superpowers and the influence of the G7 major industrial countries on the future of the IMF between the mid-1970s and 2008 is the subject of Joseph Joyce’s book, The IMF and Financial Crises: Phoenix Rising? One major result, Joyce recalled, was the emergence of economic surveillance as a primary duty of the IMF, but one that was never clearly defined. Then the onset of the global financial crisis contributed to a sudden power shift, with the G7 passing their mandate onto the G20 including emerging economies.
Partly in response to these changes, the Fund has become more flexible in recent years, observed Joyce. He recalled his shock when he first read about the IMF, known for its ideological rigidity, supporting capital controls in some situations.
Ip agreed, noting that over the past 10 or 15 years there had been an “admirable increase” in the IMF’s transparency. Over the long term, that was important for the Fund’s reputation, bolstering “the lMF’s credibility as an organization that people ought to listen to even if they don’t necessarily have to obey.”
Asked to look into a crystal ball, Ip said “I don’t know what the next Bretton Woods will be or the next international financial conflagration will be but I’m pretty sure that whatever it is the IMF will be at the center of it, because for all the flaws that it’s had and the criticisms it has received it’s what we have and it has always remade itself in response to whatever the crisis of the day is.”