The Bretton Woods Conference and the Birth of the International Monetary Fund

Margaret Garritsen de Vries

Planning for Bretton Woods

This chapter is reproduced from “Caravan,« the newsletter of the International Monetary Fund‹s Retirees Association. For additional information on the founding of the IMF and its early years, see Margaret Garritsen de Vries, The IMF in a Changing World, 194‹ – 1985 (Washington, D.C.: International Monetary Fund, 1986); Alfred E. Eckes Jr., A Search for Solvency: Bretton IYoods and the International Monetary System, 1941 – 1971 (Austin and London: University of Texas Press, 1975); and J. Keith Horsefield, The International Monetary Fund, 1945 – /965: Twenty Years of International Monetary Co-operation (Washington, D.C.: International Monetary Fund, 1967).

Bretton Woods was probably the most successful economic conference ever held.

One of the main reasons for its success was the years of planning that went into it. By January 1944, three years of intensive drafting and redrafting by U.S. and U.K. officials had taken place and these officials had met often to exchange ideas and drafts and to negotiate their positions.

The drafts of the officials both of the United States and of the United Kingdom reflected their familiarity with the history of exchange rates and of international monetary cooperation going back to the early nineteenth century. They were, for example, conversant with the advantages of stable exchange rates that the automatic classical gold standard had provided while it lasted, from 1876 to 1914. They were also familiar with the efforts of officials to restore the gold standard after World War I and how that gold standard could no longer be so automatic.

To avoid the scramble of countries to obtain gold, officials held an international conference in Genoa, Italy, in 1922, out of which came a recommendation that central banks cooperate in »managing« the operations of the exchange rate mechanism and make wider use of gold with currencies such as the pound sterling that were convertible into gold. That conference foreshadowed ideas – the need for international cooperation and for a »gold exchange standard« – that were later incorporated into the plans for Bretton Woods.

In any event, the »managed« gold standard collapsed in the 1930s, and attempts to secure international cooperation failed, notably at the world economic and monetary conference in London in 1933. However, to give international sanction to the devaluation of the French franc in 1936, France, the United Kingdom, and the United States issued a Tripartite Declaration that recognized international responsibility for exchange rates. The governments of these three countries agreed to hold consultations on exchange rate action and take stabilizing action. Belgium, the Netherlands, and Switzerland announced their adherence to the Tripartite Declaration. In this way, the Tripartite Declaration can be viewed as a precedent for a more comprehensive and inclusive monetary agreement.

Thus it was in the 1930s that U.S. Treasury officials began thinking about an institution for international monetary cooperation with regard to exchange rates. About that time, Henry Morgenthau Jr., secretary of the U.S. Treasury, appointed a group of international economists, including Jacob Viner and Harry Dexter White, who had been studying the balance of payments of a number of countries, to work on exchange-rate stabilization. Both Viner and White had been students of Frank W. Taussig of Harvard University, well known as an international economist, free trade advocate, and teacher. In fact, it was this group in the U.S. Treasury that helped put together the Tripartite Declaration.

Further momentum toward international monetary arrangements took place in February 1940. An Inter-American Committee, assisted by a group of experts, including White, recommended the establishment of the Inter-American Bank. In June 1940, Edward M. Bernstein, who likewise had been a student of Professor Taussig and then a professor himself at the University of North Carolina at Chapel Hill and the author of his own textbook (Money and the Economic System), also joined the economists at the U.S. Treasury as director of monetary research.

The intensive planning that eventually led to Bretton Woods, however, really began in the early part of 1941, when White and his associates in the U.S. Treasury started thinking in earnest about a comprehensive international monetary agreement. They had in mind two possible organizations, one to stabilize exchange rates and another to help to provide the long-term capital that would be needed for reconstruction once World War II was over.

At the same time, officials in the U.S. State Department under Cordell Hull, convinced that economics had been the missing ingredient in the failed League of Nations` efforts to secure world peace, were thinking in terms of a liberal international trade regime after the war. The regime they envisaged was one that would be free of all restrictions, especially discriminatory ones. In line with that thinking, when John Maynard Keynes of the British Treasury came to Washington in July 1941 to discuss with U.S. authorities conditions for U.S. wartime financial aid to Britain, the State Department gave him a draft agreement for defense aid that would include a provision for postwar arrangements in which there would be no discrimination by the United States or the United Kingdom against imports from any other country.

This provision upset Keynes. It would abolish the British imperial preference system that had been negotiated in Ottawa with the members of the Commonwealth in 1932. Keynes, who had been working and writing on monetary and exchange rate problems since World War I and who had come to prominence after the war with his criticisms of the reparations provisions of the Treaty of Versailles, was inclined, however, to look with favor on stabilizing exchange rates. He returned to London induced to think further about various proposals that he had been devising for postwar currency stabilization. He had long regarded the gold standard as an unsatisfactory basis for the monetary system, and the prolonged deflation of the 1930s had reinforced his view that the gold standard was a »barbaric relic.« Hence, like the officials of the United States, he, too, believed that it was possible and desirable to have a high degree of exchange-rate stability without the rigidity of the gold standard. Thus the U.S. and U.K. officials had a common starting point. Keynes, however, worried that the United States might return to the deflationary policies of the 1930s, and so favored a plan that would give the U.K. authorities freedom to pursue domestic full employment policies without their having to be concerned about the impact on the U.K. balance of payments.

The Plans Emerge

By mid-1941, the time was ripe for serious thinking about monetary plans. In August, President Roosevelt and Prime Minister Churchill, meeting in the Atlantic, agreed to the Atlantic Charter, which, among other provisions, emphasized British commitment to postwar international cooperation, including help in forming a United Nations. (Six months later, in February 1942, under the Mutual Aid Agreement [Lend-Lease], the British were also to agree to a postwar multilateral payments system in exchange for a U.S. commitment to maintain full employment and to help Britain financially after the war.)

It was against this background that on Sunday, December l4, 1941, at 2:00 A.M.– the day of the week and the hour of the day were just one week after Pearl Harbor – Morgenthau asked White to prepare a stabilization plan that would include all the Allies. Edward M. Bernstein began to carry out the bulk of the technical work. The State Department’s ideas about a trade agreement, which had drawn negative responses from the British, were thus, in effect, to be superseded by a monetary agreement to be worked out by the Treasury.

Meanwhile, work was proceeding in London. Keynes, working with Lionel Robbins, James Meade, and others, had gone through several drafts of a currency plan, and on February 11l, 1942, circulated his Proposals for an International Currency (or Clearing) Union. This union was to keep accounts for central banks in the same way as central banks in each country keep accounts for commercial banks. The accounts were to be denominated in a new international currency to be known as bancor. Exchange rates were to be fixed in terms of bancor and could not be changed without permission of a governing board. Within limits, member countries could run up debit balances with the union. The union would charge interest on both debit and credit balances, a provision that was interpreted by creditors (that is, by the U.S. planners) to mean that both creditor countries and debtor countries would share the burden of balance-of-payments adjustment.

Two months later, in April 1942, the White plan, entitled Preliminary Draft Proposal for a United Nations Stabilization Fund and a Bank for Reconstruction and Development of the United and Associated Nations, was circulated. The plan thus covered not only what eventually became the International Monetary Fund but the World Bank as well. The task of the U.S. Treasury and the U.K. Treasury was to reconcile the British plan for the Clearing Union with the U.S. plan for the Stabilization Fund. The exchange-rate provisions would be easy to reconcile, as Keynes held the same view as White. But the financial provisions of the Clearing Union were not acceptable to the United States. The U.S. plan put more emphasis on exchange-rate stability and less on the generous provision for international liquidity than did its British counterpart, although the Fund, under the White plan to be made up of a pool of national currencies and gold, was to total at least $5 billion. All members of the United Nations were eligible to join, provided they were committed both to eliminating controls over foreign exchange transactions and to establishing fixed exchange rates, to be altered only with the consent of the Fund.

Eager to move ahead as fast as possible, a few weeks later in mid-May Morgenthau sent to President Roosevelt the preamble of the White plan with a proposal for an international conference to consider the plan. He also suggested that an interdepartmental committee be set up to coordinate action within the U.S. government, a suggestion that Roosevelt agreed to on the same day. Within nine days, representatives of the Treasury Department, the State Department, the Export-Import Bank, and others had begun to meet as such a committee, and by the end of May a technical subcommittee, chaired by White, was also holding frequent meetings. To broaden the input from economists in other sectors of the government and to help gain support for an international monetary organization, economists of the Federal Reserve Board, the Department of Commerce, and other government agencies were eventually added to the group.

Reshaping the Plans

Now that preliminary versions of both the Keynes and the White plan had been circulated, it was time for reshaping. This started in August 1942 and consumed most of the next eight months, until April 1943. A fifth draft of the Keynes plan was given to the U.S. Treasury, and its differences from and similarities to the White plan were intently studied by the Treasury and the interdepartmental committee. While, as noted above, the two plans had many features in common, vital differences existed. One crucial difference was that the Stabilization Fund was to be based on a mixed bag of national currencies., while the Clearing Union was to operate with a new international currency (bancor). The union also had less strict rules than did the Fund for its use by countries with balance-of-payments deficits.

The U.S. committee was concerned about the potential financial liability of the United States and about the rights of creditor countries, that is, countries with balance-of-payments surpluses. Hence, the committee had serious reservations about the Keynes plan, which had generous liquidity provisions and easy access to liquidity for countries in deficit. In addition, the White plan contemplated the abolition of exchange controls, an important feature for the United States, whereas the union did not put much emphasis on the abolition of exchange controls and even advocated the use of capital controls.

In an effort to get the two plans closer together, White went to London in the autumn of 1942 for discussions with Keynes and other British Treasury officials. The British officials, in an effort to engage in a dialogue with other members of the British Commonwealth, held discussions with representatives of Australia, Canada, India, New Zealand, and South Africa. These discussions resulted in some minor changes to the British plan, and Keynes sent the revised draft to White. The U.S. Treasury, on its part wanting to come up with a version of a plan that might be broadly acceptable, began considerable redrafting of the Stabilization Fund proposals, going through six drafts in November and December of 1942.

White and Keynes and other officials of both governments were keenly aware that any monetary agreement would have to have the support of their legislatures. Various versions of the White plan, for example, had been sent regularly to members of the U.S. Congress. To help gain the support of the U.S. Congress and of the British Parliament, it was necessary also to have wide public support.

Criticism had begun to surface in both countries. In the United States, many congressmen, especially those who had long preferred that the United States play an isolationist rather than an internationalist role, were concerned about binding international commitments. Some economists and many businessmen objected to government institutions that would regulate, or at least interfere with, the free operation of exchange markets. Some bankers feared a government-sponsored and subsidized competitive institution that would be lending money to governments at below commercial rates. In the United Kingdom, in addition to fears that the United States would again experience serious deflation as in the 1930s, there were fears that new international commitments would jeopardize the traditional close ties within the Commonwealth. Hence, by early 1943, the technical experts undertook to familiarize more of the public with the plans. White, for example, delivered a paper to the American Economic Association in January 1943. Within a few months, the two plans were being noted in most professional journals in the English-speaking world and in a host of speeches and pamphlets.

Meanwhile, the experts on both sides of the Atlantic continued to work on their plans. By February – March 1943, White had sent a revised version of his plan to Keynes, who had come to realize that the major objectives of the Clearing Union could equally be achieved under the Stabilization Fund and that the eventual draft would have to be based on the Stabilization Fund. In April, both plans were published and the public debate became vigorous in both countries. All of Bernstein’s (Edward M. Bernstein, director of monetary research, U.S. Treasury) time was now being devoted to preparing for the Bretton Woods Conference.

It was time to get the support of other countries. White sent his revised version to thirty-seven countries, with an invitation to an informal conference to discuss the plan. In the summer of 1943, the representatives of forty-six countries in Washington were invited to discuss the U.S. plan, and the U.S. authorities began bilateral talks with a number of countries; for example, Canada, France, Australia, China, Brazil, Mexico, and Chile.

Reconciling Differences

By the fall of 1943, it was imperative for the United States and the United Kingdom to reconcile their differences in order to come up with an agreed-upon plan. Accordingly, from September 15 to October 9, Anglo-American negotiations began. Nine meetings on the two plans were held in Washington, with discussions centering on fourteen points of difference. These meetings resulted in a joint statement, but it included alternative versions on a number of points. Then in November and December some eight drafts and redrafts of the Joint Statement of Experts were exchanged by White and Keynes across the Atlantic. In January – February 1944 the experts got together again in Washington and redrafted their joint statement another three times, having reached agreement on another six points of difference.

A consensus was now emerging. The major remaining difference concerned the nature and use of a proposed international currency: whether the bancor, as under the Keynes plan, would be a currency to be issued by the Fund, or whether the unitas, as then discussed in the White plan, would be used, but only as an accounting unit. On April 4, 1944 the U.S. and British negotiators finally reached agreement on a Joint Statement of Experts. Among other features of the agreement, the capital of the Fund was to be $8 billion.

All was now ready for an international conference of all the Allied governments. On May 25, 1944, the U.S. secretary of state invited forty-four governments to send representatives to a conference at Bretton Woods, New Hampshire, beginning July 1, 1944, »for the purpose of formulating definite proposals for an International Monetary Fund and possibly a Bank for Reconstruction and Development.«

The Bretton Woods Conference

Selecting the Site

Bretton Woods was selected as the site for this conference for a number of reasons. The U.S. Treasury was in charge of the arrangements, and Secretary Henry Morgenthau Jr. wanted a location isolated from the wartime busyness and frenzy of Washington so that the participants could focus their sole attention on the plans for the postwar era. He favored a resort hotel. The Mount Washington Hotel in the remote town of Bretton Woods, New Hampshire, was in the East and it was large and had adequate conference facilities.

In addition, 1944 was an election year and Senator Charles Tobey of New Hampshire, the ranking Republican on the Banking and Currency Committee, was facing a bitter primary election in his state. Senator Tobey, like many other Republican senators of the time, was isolationist-minded and strongly opposed to the United States’ »surrendering authority to international organizations.« President Roosevelt and Morgenthau, conscious that Woodrow Wilson had ignored Congress and had thereby damaged his prospects of winning approval of the League of Nations, were eager to gain the support of Republicans, if at all possible. Hence, when Senator Tobey urged the New Hampshire location, which was to give him high visibility in his home state, the U.S. planners agreed.

Climate also favored New Hampshire. The British in particular found Washington’s tropical heat in July onerous, and Keynes, who had a heart condition, preferred a cool place. An additional reason, which seems incredible now, was that most resort hotels at the time were anti-Semitic, and Secretary Morgenthau could not even make a reservation at most hotels. The Mount Washington Hotel was not anti-Semitic, possibly because a long-standing Hasidic (Orthodox) Jewish community was located nearby.

Fears of Failure

The U.S. planners were by no means confident that the Bretton Woods Conference would be successful, or whether it would in fact take place. And even if the invitees did respond and send delegates, it was still possible that the conference would be a failure.

First, there was no time to lose. The U.S. Treasury planners, like those Americans who were then shaping the United Nations, were concerned that World War II might end before they had put in place an institutional framework for a new world order. By the end of May 1944, when the invitations to Bretton Woods went out, early victory in Europe appeared quite possible. In fact, D-Day was to occur less than two weeks later, on June 6. The Bretton Woods planners were convinced that they had to take advantage of the wartime collaboration of the Allied nations. Willingness to collaborate might suddenly end once the war was over, and there could be a resurgence of the intense economic nationalism that had prevailed before the war. The basic long-term problems of global political and economic organization had to be resolved beforehand.

Second, the U.S. Treasury sensed that the British were not as enthusiastic about postwar monetary relations as the United States had hoped. British cabinet officials were increasingly divided on postwar issues. Some of them anticipated a revival of the American isolationism that had long characterized U.S. policy. They worried that the Americans, especially Congress, might reject international commitments and oppose macroeconomic measures to ensure full employment, the most important point on Keynes’s agenda. A bitter debate in the House of Commons in early May had also revealed that many members of Parliament were concerned that the proposed Fund and the lifting of exchange restrictions would bring an end to Britain’s special relations with its sterling area partners. At the same time, the new Fund would not adequately shelter Britain from the economic depression that they considered very probable in the United States.

British officials had reason to worry, and so did the Democrats who then held office in the Roosevelt administration. It was an election year in the United States, which included a presidential election. The Democratic and Republican nominating conventions, in fact, would also be taking place in July. The Republicans were optimistic that they could sweep the elections in November, which could spell bad news for those who wanted new international arrangements. Many leading Republicans, especially in the Senate, such as Robert A. Taft of Ohio, were openly outspoken against »international financial panaceas« designed to place »American dollars in foreign hands.« Charles S. Dewey, h congressman from Illinois (and a distant cousin of Thomas E. Dewey, who was to be the Republican presidential candidate), had an alternative, more limited plan. In these circumstances, Keynes desired to expedite the negotiations for the International Monetary Fund, and the U.S. planners were even more eager to get the Articles of Agreement for the Fund drawn up in final form before the autumn elections.

Early in April 1944, to help speed up the process of arranging the conference, Morgenthau asked the president to approve an accelerated timetable. As a result, invitations were sent out on May 25 and the conference was scheduled for July 1. Moreover, although throughout the preparations White and his technicians had taken the initiative, generated proposals, and handled bilateral consultations with the United Kingdom, now Morgenthau himself began to take an active part in completing the final arrangements. The Bretton Woods Conference was the first of the major international conferences to be convened for the purpose of establishing an international organization (the United Nations conference, at Dumbarton Oaks and San Francisco, did not take place until 1945 and the conference, resulting in the Food and Agriculture Organization, in 1943 was relatively small), and Morgenthau regarded success at Bretton Woods as essential to President Roosevelt’s political fortunes.

To this end, once the United States and the United Kingdom had agreed on a joint statement, Morgenthau undertook to involve the Russians. It was, he believed, essential that both the United Kingdom and the USSR participate, as a test of their willingness to cooperate with the United States in getting these new postwar organizations operating and fully functional after the war. The Russians, however, while wanting to appear to be associated with the plans for the Fund and the Bank so that they could be seen as important players in the world, revealed little enthusiasm for monetary cooperation. They agreed to send a delegation to the Bretton Woods conference but it would not include the commissar of finance. Britain, too, said it would not send cabinet-level officials to the conference. And both the British and the Russians asserted that participation in the conference in no way foreclosed their option to reject eventual membership in the Fund.

The U.S. Delegation

Assured that at least there would be a conference, Morgenthau, with President Roosevelt’s involvement, then carefully selected the U.S. delegates. To gain public support for the proposed Fund and Bank, they chose delegates of high rank who represented diverse executive, legislative, and public constituencies. Morgenthau himself was to lead the seven-person delegation, with Fred Vinson (the head of the Office of Economic Stabilization and later secretary of the treasury and chief justice of the Supreme Court) as his deputy and, among others, Dean Acheson (of the State Department) and Marriner Eccles (chairman of the Federal Reserve Board) plus Harry White, Senator Tobey (mentioned above), and Senator Robert F. Wagner, chairman of the Senate Committee on Banking and Currency. Senator Tobey was the only Senate Republican on the delegation: some Democrats objected to his selection and even the president was unsure of his choice. (As events turned out, Senator Tobey became an enthusiastic supporter of international cooperation, and administration aides gave him maximum publicity in his home state during the conference.)

In all there were forty-five U.S. delegates, technical advisers, legal advisers, assistants to the chairman, and technical secretaries. Several of these participants were later board or staff members of the Fund. White was, of course, the first U.S. executive director (undoubtedly missing the chance to be managing director: even at that time, rumors were beginning to surface alleging that he was a Communist and even a Russian spy). Among those who were part of the U.S. contingent and who later joined the Fund were Waiter Gardner (deputy director of the Research Department), Richard Brenner (Legal Department), and George F. Luthringer (alternate executive director and later director of the Far East, Middle East, and Latin America Department). There was also one woman appointed by President Roosevelt as a delegate, Mabel Newcomer, a professor at Vassar College, and three women served as legal adviser, assistants, or technical secretaries. The secretariat for the conference also included a few familiar names of persons who subsequently came to the Fund – Frank Coe (the first secretary of the Fund) and Alice Bourneuf (Research Department) – and of people who later returned to academic life, such as Raymond Mikesell and Arthur Smithies. Orvis Schmidt joined the World Bank. Eleanor Lansing Dulles, sister of John Foster Dulles, also served on the secretariat.

Briefing the Delegates

Preparing the U.S. negotiations presented more than the usual difficulties. A number of the delegates – including the congressional representatives – were no more familiar with the Fund and Bank proposals than was the average citizen. Fortunately, the delegation had been carefully selected and did not include any prominent opponents of the proposals. Moreover, President Roosevelt had carefully circumscribed the delegation`s authority, and he reminded them that they had the responsibility for demonstrating to the world that international postwar cooperation was possible. Nevertheless, the U.S. Treasury experts prepared extensive background memoranda on such potentially controversial topics as the allocation of quotas in the Fund, gold contributions, access to the Fund’s resources, voting structure, and management. To help inform both the delegation and the general public, the Treasury experts also prepared a detailed commentary called Questions and Answers on the International Monetary Fund, which was issued as a public document on June 10, 1944. This document posed thirty-five questions that delegates and the general public might ask about the new Fund and then provided detailed answers.

Atlantic City

By June it appeared that only technical issues stood in the way of a successful conference. To help resolve these issues, Treasury experts arranged another preliminary drying session at Atlantic City in the second half of June. Morgenthau had doubts about this procedure, for it seemed to shift actual decision making from political officials to technical experts. Nonetheless, representatives from twelve countries joined the four principals (the United States, the United Kingdom, the USSR, and China). Their deliberations, however, did not prove as successful as White had hoped, because security arrangements for the invasion of Europe interrupted Atlantic shipping and delayed until June 23 the arrival of the Queen Mary, which was carrying the British officials and the officials of the European governments-in-exile. Five working days did not permit the deadline-conscious experts to resolve many of their disputes and many issues still required top-level political decisions. Nor were these experts able to complete a dry of the Articles of Agreement for the Bank. These delegates boarded a special train from Atlantic City on Friday, June 30, for the all-night trip to Bretton Woods. Others left on a special train from Washington. Even as the train wound its way through New Jersey and New England, two lawyers from the U.S. delegation undertook to transform the documents resulting from the Atlantic City meeting (where some seventy amendments to the joint statement had been proposed) into the basic material for the next stage. Obviously there was still much work left to do at Bretton Woods.

Convening the Conference

The Bretton Woods Conference opened on July 1, 1944, and although it was initially scheduled to end on Wednesday, July 19, it was extended until July 21. The Food and Agricultural Organization (FAO) conference at Hot Springs had lasted ten days, and it had been thought that twice this length of time would suffice for Bretton Woods. Also, the Democratic convention, with the likelihood of President Roosevelt`s renomination there and the desire of some of the U.S. high-level delegates to attend, was scheduled to start on July 20.

The Mount Washington Hotel, named for the nearby mountain peak, proved adequate but was not without some inconveniences. It had been closed for two years and was just being prepared for reopening when it was taken over for the conference; and the renovations were not wholly completed by the time the delegates began to arrive. Insufficient office space, inadequate accommodations, rusty plumbing, and an inexperienced staff were supplemented by Boy Scout messengers and military personnel. The rooms were remarkably small and the old-fashioned heating system did not work satisfactorily. (At the time of the fortieth anniversary of the Bretton Woods Conference, the rooms were marked with brass labels indicating which delegations has stayed in those rooms.) But the scenery was magnificent, the recreational facilities were excellent, and the hotel was separated from the road by a river crossed by a single bridge – a feature that readily permitted the proceedings to be secured against intrusion.

Not all the delegates could be housed at the hotel and some had to go into other hotels, up to five miles away.

Present at the Creation

Some 730 persons attended the conference, a number about three times as large as had originally been expected. They represented forty-four countries, most of the Allies of World War II. These countries were now being referred to, at least by U,S. organizers, as the United Nations. Thus, in addition to the United States, the United Kingdom, the USSR, and Canada (which had also suggested a monetary plan), the countries represented included: other countries associated with the United Kingdom (Australia, New Zealand, South Africa, and India, although India was not yet politically independent), the European governments-in-exile (Belgium, Czechoslovakia, Denmark, Recce, Luxembourg, the Netherlands, Norway, Poland, and Yugoslavia), a French delegation under Pierre Mendes-France, the Allies in Asia (China and the Philippines, although the Philippines was not yet independent) and in the Middle East and Africa (Egypt, Ethiopia, Iran, Iraq, and Liberia), and nineteen Latin American republics (Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras. Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay, and Venezuela).

It is of some interest now, fifty years later, to note how many countries were not Allies (or were even enemies) or were not politically independent (they were called territories) or were not politically or financially independent in their own right or did not even exist at that time and hence were not at Bretton Woods. Such a list includes, of course, Germany, Japan, and Italy, as well as several in Europe (Austria, Bulgaria, Finland, Hungary, Portugal, Romania, Spain, Sweden, and Turkey), in the Middle East (Afghanistan, Jordan, Lebanon, Syria, Saudi Arabia, and, of course, Israel, created in l948), and in Asia (Burma, Ceylon, Indonesia, and Thailand). Other than Liberia and South Africa, F.thiopia was the only sub-Saharan country present and, among the Latin Americans, Argentina was not present.

Many persons who attended, either as delegates or as technical advisers, were to come to the Fund in its early days, just as did many from the U.S. team listed earlier. Camille Gutt, on the Belgian delegation to Bretton Woods, was to become the first managing director. Several others were to serve on the earliest executive boards and several joined the Fund staff. These people, not listed in any particular order, included for example, Louis Rasminsky (Canada), Leslie Melville (Australia), Jan Mdlacek, Ernest Sturc, and Ervin Hexner (Czechoslovakia), Jean de Largentaye (France), A. B. Ebtohaj (Iran), J. W. Beyen, D. Crena de Iongh, and J. J. Polak (Netherlands), Allan G. B. Fisher (New Zealand), Felipe Pazos (Cuba), Y. C. Koo, Y. C. Wang, and T. C. Liu (China), B. K. Madan (India), Ernest de Selliers (Belgium), Rodrigo Gomez (Mexico), G. L. F. Bolton (United Kingdom), and George Blowers (then governor of the Bank of Ethiopia). Still others were to join the World Bank, including Antonin Basch (Czechoslovakia), Aaron Broches (Netherlands), K. Varvaressos (Greece), and Luis Machado (Cuba).

Keynes himself was chairman of the United Kingdom`s seven-person delegation, accompanied by, among others, noted academics Dennis Robertson and Lionel Robbins, as well as by several advisers. While some countries had fairly large numbers of representatives (for example, Brazil, China, Cuba, the Netherlands, Peru, the USSR, the United States), other countries had very few participants, especially some of the Latin American republics, and Ethiopia. Andreas Papandreou, recently reelected prime minister of Greece, was also on the Greek delegation.

Hard Work Brings Success

These delegates worked incredibly hard. They were determined to be successful. Commission I on the Fund was headed by Harry White, since the White plan was to be the basis of the Fund`s articles, and Keynes, concerned that the postwar world might be without adequate mechanisms for international investment and reconstruction assistance, agreed to head Commission II on the Bank. Plenary sessions went on all day to draft the Articles of Agreement for both institutions. Since work for the Bank was much less advanced beforehand than work on the Fund, the Fund’s articles were used as a model for those of the Bank, especially the provision with regard to the organization and structure of the executive board. So, in many respects, the Bank became the mirror image of the Fund. Many controversies over provisions of the articles were dealt with in informal negotiations, within drafting committees, and through bilateral negotiations, especially between the United States and the United Kingdom.

Harry White impressed foreign delegates with his fairness, inexhaustible energy, and leadership and is reported to have functioned effectively on no more than five hours sleep. Keynes drove himself and the other delegates mercilessly. But, according to reports of many who attended the conference and of entries in Morgenthau’s own personal diaries and those of non-Fund historians, the driving intellect of the Bretton Woods conference was Edward Bernstein. For example, one of those who participated in the original Bretton Woods Conference, Felipe Pazos, specified at the fortieth anniversary in 1984 that day after day Bernstein answered question after question from delegates who were unfamiliar with, or confused about, the many provisions of the Fund’s articles or how the proposed Fund would work – thereby, of course, helping to gain their support. A professor of history at Ohio State University, Alfred E. Eckes Jr., has written:

As a technician Bernstein had no equal, and he repeatedly impressed delegates and reporters with his encyclopedic knowledge of the provisions. As another American expert said praisingly, Bernstein was »really an amazing thinking and talking machine. You could push a button and the stuff would pour out with perfect clarity. He worked twenty-seven or twenty-eight hours a day without showing signs of strain.« (Eckes, A Search for Solvency, p. 139)

The Bretton Woods Conference was an incredible success. Fifty years later, it stands out as the most productive economic conference in modern history. And the name Bretton Woods has entered the language of international economics as a shorthand reference to the entire complex of the international monetary system established after World War II.

Obtaining Approval of the U.S. Congress

Once the Bretton Woods Conference was over, it was necessary for the United States to have congressional approval for U.S. participation in the two new organizations being planned, the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD, later referred to as the World Bank). The IMF (the Fund) was the more controversial of the two organizations. In fact, it had been to help gain congressional approval that the Treasury aides, as well as Secretary Morgenthau, had been informing members of Congress for some time about the plans for the Fund and why President Roosevelt had appointed two senators and two congressmen as four of the seven-member U.S. delegation to Bretton Woods (two congressmen were also technical advisers). Since U.S. participation was essential if the Fund was to become a reality, after the Bretton Woods conference had ended other countries waited to take additional steps until the U.S. Congress took action.

Congressional approval was by no means assured. After all, the League of Nations had failed to win congressional approval, and prior to World War II the United States had been strongly isolationist. But there were even more specific worries for those who hoped to obtain congressional approval for the new IMF. There were many opponents of the proposed Fund. As an illustration, on July 1, 1944, as the Bretton Woods Conference opened, the New York Times, the Wall Street Journal, and the Chicago Tribune all ran editorials that condemned government management of exchange rates. As another example, Robert Taft, senator from Ohio, frightened delegates from other countries when he asserted that the Congress would not approve any plan that placed »American money in a fund to be dispensed by an international board in which we have only a minority voice.«

In September 1944, Winthrop Aldrich, influential chairman of Chase National Bank, delivered a searing indictment of the Bretton Woods accords. The IMF, he said, would become a mechanism for instability rather than stability since it would encourage exchange-rate alterations. Like Aldrich, most bankers – including Allan Sproul and John H. Williams, president and vice president of the New York Federal Reserve Bank – favored a much more limited »key-currency« approach instead of the universal Fund, and they were determined to push such an approach. They called for the Bank, not the Fund, to take responsibility for exchange-stabilization lending and advocated that the Bank come into being and that the Fund be postponed.

In this situation, the U.S. planners decided to take their case directly to the U.S. public and devised one of the most elaborate and sophisticated campaigns ever conducted, at least up to that time. Morgenthau himself went out to give speeches to industrialists; and during the winter of 194S Edward Bernstein and Treasury lawyer Ansel Luxford turned salesmen and spoke frequently to banking and trade groups, to reporters, and to columnists. They also prepared radio scripts, pamphlets, and articles, and even subsidized short moving pictures. They avoided intricate details about par values or balance-of-payments adjustment and instead stressed the more comprehensible need for world secu-rity and expanding trade. They enlisted the aid of academics, such as Seymour Harris of Harvard and Jacob Viner. Viner, in fact, labeled the proposal for the Fund the »magnificent blueprint.« As Treasury officials and economists became caught up in selling that blueprint, they relied heavily on two main arguments: the Monetary Fund was essential for U.S. domestic prosperity and high employment; and the United States had to show its willingness to be a world leader in international cooperation in the postwar world. (It may be noted that these are the same arguments that President Clinton used nearly fifty years later to gain support for the North American Free Trade Agreement [NAFTA] and the Uruguay Round of the General Agreement on Tariffs and Trade [GATT] agreement.)

It was to take nearly a year before Congress voted. But when the crucial vote came in the House of Representatives on June 7, 1945, only eighteen Republicans voted negatively. Then came the battle in the Senate, where again Senator Taft, a very skillful debater, led the opposition, but shortly thereafter the Senate also agreed to the necessary legislation, and the U.S. Bretton Woods Agreement Act was passed. On July 31, 1945, President Harry S. Truman, having succeeded to the presidency after the death of President Roosevelt in April, signed the Bretton Woods Act.


With U.S. participation in the IMF and the International Bank for Reconstruction and Development (World Bank) now assured, it was necessary to encourage participation by other nations. The IMF could come into being only if nations that had 65 percent of the quotas agreed to at Bretton Woods were to ratify the Articles of Agreement by December 31, 1945. As of mid-November 1945, only six weeks before the deadline, only South Africa and Venezuela were ready to ratify. But further progress came quickly and by December 18 eleven countries had completed the necessary legislation and eight more were expected to do so shortly. These nineteen countries were enough to bring the IMF into existence. The U.S. planners arranged a formal ceremony at the State Department, and on December 27, 1945, twenty-nine countries signed the Articles of Agreement. By December 31 another six had also signed, so that thirty-five countries, with quotas representing more than 80 percent of the total, had given life to the IMF eighteen months after Bretton Woods.