Dollar Hegemony and Dismantling an Empire
In his book, The Battle for Bretton Woods: Harry Dexter White, John Maynard Keynes, and the Making of a New World Order, Benn Steil identifies a meeting of nations in Bretton Woods, New Hampshire as “the most important international gathering since the Paris Peace Conference of 1919” and “the beginning of global American hegemony” (Steil 13). What emerged was a convoluted monetary scheme whose purpose is at the heart of the author’s thesis: “This book tries to refute the conventional wisdom that Bretton Woods was the product of an amiable Anglo-American collaboration, and was instead part of a more ambitious geopolitical agenda aimed at eliminating Britain as an economic and political rival.” (Steil 17) This thesis is most successful when it discusses the interactions of White and Keynes within their national agendas. However, stories of White’s espionage should remain in the appendix, as they are often not relevant, with many long and frequent digressions that serve only to weaken the author’s main points.
Much of the information in the book is communicated relative to its two central characters, White and Keynes, both seeking to create a financial system capable of guaranteeing global economic hegemony for their respective countries. White, leading America, would try and seize control of trade and the international monetary system from British imperialism, while Keynes, leading, Britain, tried to preserve itself as the global financial center with a dominant currency, an empire, and Imperial Preference ensuring exclusive markets for British exports (Steil 31). Both White and Keynes are given lengthy biographies, although broadly the book’s focus is on White’s perspective. Keynes serves as a sort of antagonist and foil. The dichotomy Steil sets up between the two is compelling, and often does well demonstrating the thesis.
Steil first establishes the turbulent economic conditions in Europe. The suffering of the Great Depression was compounded by war debt burdens, Steil explains (Steil 18). When Britain devalued its currency to boost exports and protect its depleted gold reserves, it initiated a global currency war as countries competed for the same advantages. Trade collapsed as competitive devaluations escalated, and protectionism was more frequently deployed as a solution. Britain would eventually respond by severing sterling from gold and blocking sterling-dollar convertibility in its colonies (Steil 18). The FDR administration, in turn, faulted Britain with deepening the Depression (Steil 28). It is this growing animosity that would color all future British interactions, which is Steil’s setup.
Harry Dexter White, an economist, a Soviet Spy, and the eventual Assistant Secretary of the Treasury, is portrayed by Steil as “a little-known US Treasury technocrat with a fierce will and greater ambition” (Steil 33), and reflected the FDR administration deep mistrust of Britain (Steil 25). To White, Britain was an obstacle to recovery from the Great Depression (Steil 30). Working up from an academic position at a university in Appleton, Wisconsin, with expertise in finance and progressive politics, White would become the intellect behind much of Treasury Secretary Henry Morgenthau’s financial policy, despite having held no formal position for most of his career at Treasury (Steil 34). It is from this invisible but indispensable position White would ascend to direct US economic policy.
As World War II rocked Europe, Britain was in dire need of American money to sustain its empire (Steil 82). In Steil’s view, Britain was pressured into making a ‘“Faustian bargain’: give up the one thing that seemed to guarantee its continued existence as an empire in exchange for enough money and goods to make it through the war” (Steil 70). He writes “At every step to Bretton Woods, the Americans had reminded [the British], in as brutal a manner as necessary, that there was no room in the new order for the remnants of British imperial glory.” (Steil 105) The US pursued these wartime economic negotiations in such a way as to guarantee its postwar dominance, illustrated by the Lend-Lease negotiations. (Steil 60). The primary British negotiator was John Maynard Keynes (Steil 61).
Keynes is an interesting and important figure in Steil’s book, as the foil for White in most pre-Bretton Woods negotiations, although he ultimately had little impact on much of the negotiations, and at Bretton Woods was almost totally excluded (Steil 180). According to Steil, Keynes was “congenitally undiplomatic” (Steil 66) and “played a bad hand badly, irritating American negotiators with his penchant for demonstrating their intellectual inferiority and tending to pick the wrong fights.” (Steil 66) This seems harsh, however, considering his bargaining position was weakened, Steil himself admits, by Britain’s failure to repay its World War I debts, and his country’s desperate need for aid.
As a negotiator in Lend-Lease, what Keynes would ultimately have to swallow is so-called “Article VII”. Article VII was a provision of Lend-Lease, Steil explains, which was designed to aid the British war effort in exchange for an end to Imperial Preference, to be implemented after the war (Steil 140). America was also well aware of Britain’s desire to maintain global dominance and kept a tight hold on the credit made available to them accordingly (Steil 140). This lean credit would ensure the British remained weak, relative to America, which helped solidify America’s creditor status and primary authorship of the new economic order (Steil 140). The funds provided were just enough to keep Britain fighting, which kept America out of the war, enabling them to further develop their commercial pre-eminence (Steil 142). Keynes, for his part, found the terms abhorrent (Steil 144). Critical to his thesis, Steil identifies this as the first major blow to Britain’s imperial power directly inflicted by the US (Steil 146).
Two years later In July 1944, representatives of 44 nations gathered in Bretton Woods, New Hampshire to design an international monetary system (Steil 220). The outcome was fixed, however, as Steil explains (Steil 234). Keynes was isolated at the talks. Five years of preceding negotiations between Keynes and White were mostly ignored when the time eventually came to hold the conference, which White specifically engineered to have only one outcome by assigning himself to the executive International Monetary Fund Commision. From there, he could make alterations to the drafts without outside scrutiny (Steil 230).
The Keynes plan was barely considered, and in the end, the White Plan was adopted (Steil 226). As Steil puts it, “White wanted to make the US dollar, and only the US dollar, synonymous with gold, which would give the US government a virtual free hand to set interest rates and other monetary conditions at will, not just for the United States, but for the world.” (Steil 225) This would be in tandem with two American-dominated institutions, the International Monetary Fund and the World Bank. Steil claims these institutions would only bolster American influence, and accelerate the decline of the British empire as intended, by displacing sterling as the dominant currency, untangling the Silver Bloc countries and dominions where sterling-dollar convertibility was previously blocked (Steil 240).
However, what does not always come across is that, specifically at Bretton Woods and unlike in the aid negotiations, British decline was anything more than incidental to America’s rise, and the specific question regarding America’s intent is not always answered adequately, despite what the author’s asserts in his thesis. He establishes convincingly that Bretton Woods was to be, for the Americans, an extension of their own imperial pursuits, like what is demonstrated in the Suez Crisis, or through the economic advantages secured by becoming the world’s reserve currency. Similarly, he describes quite successfully how Lend-Lease and other loans extended to the British intentionally weakened the British position. But for a book titled The Battle of Bretton Woods, some discussion of the Bretton Woods system itself and its intentions seems lacking, or otherwise tangled in hypertechnical language.
Steil’s book is at its weakest when it discusses White’s connections to the Soviet Union. His case is convincing that White was, in fact, a Soviet agent, but there are times when the author clearly wants to be writing a biography of Harry Dexter White and not Bretton Woods, going into considerable depth on White’s espionage but never making any attempt to relate it back to his greater thesis on Bretton Woods. Steil does conclude in passing that White’s spying did not have any effect on the type of policy he produced, but this idea is never fully explored (Steil 18). Usually, these kinds of references take the form of isolated anecdotes, but just as often they take up several pages. One chapter is dedicated entirely to the subject. White’s espionage is brought up too frequently to simply enhance the storytelling and sticks out sorely as not being relevant. Similarly, an oversized biography of Keynes is included and also seems like a digression.
What the book’s broad scope and typical meandering presents, however, are several opportunities to compare with America: A Narrative History. The two books’ interpretations are most closely aligned on the topics of the Great Depression and World War II. Both fault Hoover’s tariffs for worsening the depression. Both books present a similar overview of WWII, although predictably, as the chief economist for the Council on Foreign Relations (Steil 2), Steil puts greater emphasis on the collapse of trade as the major cause.
Both The Battle of Bretton Woods and America: Narrative History discuss the Suez Crisis in detail. In 1956, when Nasser nationalized the Suez Canal, the British, French, and Israelis conspired to invade Egypt and depose him, only to be forced to retreat after Eisenhower threatened sanctions. Against Britain in particular, Eisenhower, used America’s influence at the IMF to block emergency funds they had requested. For the British, it was a humiliating reminder that they were no longer an imperial power, and bolstered America as a superpower (Steil 332). America Refers to Eisenhower's IMF threat as “harsh economic sanctions” (Shi 1068).
Another interesting connection between the two books is Harry Dexter White’s politics. He has exactly one direct reference in America, as just Harry White (no ‘Dexter’). It is a letter he sent, urging “Fighting Bob” to run for president when White was in college. Steil expands on that in his own book and offers an interesting account of his politics after he left college. Despite all appearances that he was a Soviet spy (Steil 19), his ideology always seemed to stay first firmly Progressive, and then firmly New Deal Democrat (Steil 255). It was only After FDR died, and White had resigned from Treasury, that he voted for Henry Wallace in 1948 in his presidential run (Steil 340). Further connections can likely be made to New Deal policy, which Steil says is probable White had a hand in crafting from his position with FDR’s Treasury Secretary Morgenthau (Steil 270)
Curiously, something mentioned only briefly and barely discussed in Steil’s book is the Marshall Plan (Steil 349). The Marshall Plan was a truly immense aid agreement offered by Truman to several European countries, which would serve to prop up, among others, the British, who would, in turn, be obligated to subsidize American business with their awarded grant money (Shi 1007). In Steil’s account, the Marshall Plan is referred to only vaguely as something that “helped lift the IMF’s feet off the ground in spite of its earlier struggles” (Steil 338). But the plan’s greater consequences would seem important, both supporting and undercutting Steil’s thesis.
The ghost of the League of Nations is something both books frequently invoke. Steil talks about “Wilson’s League of Nations floundering in the Senate” (Steil 37) as haunting over the Bretton Woods negotiations, and ascribes the League’s failure to “typical American isolationism”, in Steil’s words (Steil 37). While agreeing more broadly about early 20th century American isolationist sentiments, America: A Narrative History explains the “floundering” Steil describes was more concerned with the binding collective security provisions of Article X and to what extent they would interfere with Congress’ own power to declare war (Shi 839).
The sources Steil uses are quite varied and reflect what was clearly exhaustive research, with a 21-page long reference list (Steil 401). Certainly, his most cited reference is the three-volume biography of Keynes by Robert Skidelsky’s, (Steil 399). Almost all citations referring to Keynes are to that book. Primary sources are cited prolifically, ranging from diaries to internal cables to newspapers. On average, every other page has at least one quote referring to a primary source.
One primary source, in particular, is of note. In his archival research, Steil stumbled across a previously unpublished essay by Harry Dexter White. In it, he speaks openly about his view and opinions of the Soviet Union and calls western attitudes towards the Soviet Union hypocritical. The source is quoted frequently throughout the book with seemingly little relevance. It is speculation but the author’s excitement for his discovery appears to be his motivation for digressing so frequently on White’s espionage. Readable photographs of the essay are included in the appendix (Steil 349).
Works Cited
Shi, David Emory, and George Brown Tindall. America: A Narrative History. Brief 10th ed., vol.
2, W.W. Norton & Company, 2016.
Steil, Benn. The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the
Making of a New World Order. Princeton University Press, 2013