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Book Review: The Summit – Bretton Woods, 1944

By (February 17, 2015) No Comment

The Summit – Bretton Woods, 1944:the summit cover

J. M. Keynes and the Reshaping of the Global Economy

by Ed Conway

Pegasus Books, 2015

Before he held his current job as Sky News Economics Editor, Ed Conway held similar jobs at London’s Daily Telegraph and Sunday Telegraph, before which he was a economics reporter at the Daily Mail; since he’s still a young man, it’s accurate to say he’s spent most of his life explaining economic arcana to English majors and other species of fiscal deadweight. His previous book, 50 Economic Ideas You Really Need to Know, was an unobtrusive masterpiece of clarifying the mostly obvious for the mostly oblivious. So his new book, out from Pegasus and titled in the US The Summit – Bretton Woods, 1944, represents something of a gamble. Its subject is the multinational economic summit convened in the American state of New Hampshire at the height of the Second World War in 1944 and attended by a host of economists and government officials intent on remaking the economy of the world in the likely event of an Allied victory over the Axis powers. Considering the fact that half the delegates to Bretton Woods wouldn’t have agreed with the other half as to what the conference was doing, Conway’s attempt to explain the whole thing to what one US magazine infamously dubbed a “post-literate” readership borders on the quixotic.

The result is stellar. The Summit manages to be a near-perfect blend of complexity and readability, and this despite the fact that Conway’s subject is convoluted and has roots reaching back centuries. The powers that assembled at Bretton Woods, including the UK delegation led by the legendary John Maynard Keynes and the American delegation led by the crisp and argumentative Harry Dexter White, fought on ideological battlefields long prepared for them by such iconic figures as Sir Isaac Newton and David Hume, and they grappled with issues ranging from international financial treaties to the much-vexed gold standard. And smoothly, imperturbably, Conway explains his way through it all with a considerably graceful clarity. His description of the old gold-standard system, for instance, is gem of non-simplistic simplification. After reminding his readers that “tying a currency to a precious metal was inherently deflationary,” he lays out how it worked internationally:

But when it came to international trade, the system promised to be self-correcting. When country A had a trade deficit with country B (i.e. it imported more goods from that country than it exported), it would gradually pass its gold reserves on to B. With less gold circulating in country A, its prices would fall (and workers would face pay cuts), while they would rise by a similar amount in country B. This change in prices would encourage country B to start buying more of those cheaper goods from country A, and the system would correct itself – or so went the so-called Price Specie Flow theory developed by eighteenth-century philosopher David Hume.

In a canny choice, Conway puts at the heart of his story a conflict of personalities: crude, lugubrious British eminence Maynard Keynes and clipped, imperious Boston native and U.S. Treasury official White, who clashed on a broad range of questions about restructuring the world’s economic structures in order to serve the dual purposes of stabilizing the postwar economy and keeping that economy under the domination of Britain and the United States. And Conway never lets the juicy personal conflicts obscure the fact that Maynard Keynes and White often agreed as much as they disagreed:

As they saw it, Bretton Woods would do away with the worst effects of the gold standard and the interwar years of instability and depression. Fixing currencies against the dollar would ensure that international trade was protected from exchange rate risk. Nations would determine their own interest rates for purely domestic economic reasons, whereas under the gold standard, rates had been set primarily in order to keep the country’s gold stocks at an acceptable level. Countries would be allowed to devalue their currencies if they became uncompetitive – but they would have to notify the International Monetary Fund in advance: this element of international co-ordination was intended to guard against a repeat of the 1930s spiral of competitive devaluation.

Using an unprecedented number and variety of primary sources (many of which have never been mined before, making this quite the best book on the subject), Conway tells a tangled story of personalities and policy minutiae at a conference whose seismic after-effects are still being felt today, and Conway is every bit as masterful in detailing those after-effects as he is at telling the main story. The most notorious of those postscript stories involves White himself, whose name cropped up in Soviet records as a key Treasury figure involved in passing sensitive documents to the Russians. The standard historical narrative regarding White has been one of offhand condemnation – that he was a traitor and a spy. White himself died of a massive series of heart attacks in 1948 and so never had the chance (even if he’d been so inclined) to make his own case, and the ranks of his defenders, never very deep, have by now thinned virtually to nonexistence. So it’s much to Conway’s credit that he refuses to convict a prickly but patent patriot of treason:

In the end, White behaved as he did not because he intended to destabilise capitalism and the United States. He did so because he intended to strengthen both and – most of all – to prevent another war. Achieving that would mean maintaining Russia as an ally, rather than allowing the relationship to degenerate into one of mutual mistrust.

And Conway likewise deserves credit – of a slightly more guilty-pleasure type – for keeping a sharp eye on one other player in his story: Richard Nixon, who not only facilitated what a less courteous historian than Conway might have called a witch-hunt against White but also, decades after Bretton Woods, single-handedly dismantled many of its most stabilizing tenets, including the U.S.’s cooperation with the convertibility of gold. President Nixon took this step, as he took so many steps during his administration, out of rancorous spite as much as sober policy-making (“We’ll fix those bastards,” as Conway pricelessly quotes the President), and Conway’s account of those tense days at Camp David in 1971 only further underscores the importance of Bretton Woods as a subject in the first place.

That subject now has its benchmark history in Conway’s exceptional popular history. Readers – especially those who spare some nervous glances at the morning news’ latest financial upheavals – are strongly urged to read Conway’s book.