All about the money

BY BILL NASSON

This is an enthralling history of the July 1944 Bretton Woods conference, designed to replace the tottering and toxic world monetary system after 1918 which had brought on the Great Depression and the ensuing catastrophe of the Second World War, with a new, stable and efficient international financial system to underpin the world economy and ensure that it would not again fall flat on its face. It is a riveting read from beginning to end, and not only for what might be expected of a fat (453 pages) piece of 20th Century economic history.

Where else would you be able to read of a team of American diplomatic negotiators playing volleyball against a team of Russian diplomatic negotiators on a New Hampshire hotel lawn after a fancy lunch ? Deliciously, the Soviets won.

In reading Ed Conway’s book, it was impossible not to be reminded of my time at the University of Cape Town in the 1980s (an era when a resting C.J. Rhodes still ruled the roost) when I taught a first-year course called The Making of the Modern World Economy in its former Department of Economic History, then a gymnasium of Marxist Enlightenment for the suburban middle classes. The course content included the subject of The Summit — the wartime gathering of leading economic policy-makers at Bretton Woods in the USA to construct a co-operative global framework to settle issues of money and capital through international consensus. Even though it was about spinning a safety net for the capitalist world economy, the Soviet Union was a significant party to it all, as this book is at pains to underline. Ensconced in the hastily-refurbished Mount Washington Hotel with numerous other government delegations from countries as diverse as Ethiopia and Colombia, Mikael Stepanov would have done his bit to drain the thousand cases of Coca-Cola shipped in by the American administration.

Mind you, with well over three thousand delegates and accompanying visitors at the conference, he might have had some competition. Apparently, the more raucous delegations were also fond of singing in the bar. How long would its whisky have lasted? Still, if there is a thought to be spared, it ought to go to the 15 panting local boy scouts recruited to run errands for the Bretton Woods throng. Were I to have had the rich pickings of Ed Conway’s book three decades ago, how much less dreary my lectures on ‘World War II and the reconstruction of the world capitalist order’ might have been.

If there is one intellectual figure who straddles these pages like a financial colossus, it is the massively influential British economist, John Maynard Keynes, unquestionably the principle architect of the whole post-World War Two economic order. A genius who predicted that the messy 1919 Treaty of Versailles would bring on another world war, who revolutionised capitalist economic thinking in the 1930s, and who led a global financial settlement to prevent mass depression and World War III, was also a staple of several of those First-Year lectures. Then, the more smarty-pants male undergraduates (from Economics or Commerce rather than Arts) would quibble in class over my pronunciation of the Bloomsbury wizard’s surname. Why was I calling him ‘Cains’ when all their lecturers referred to him as ‘Keens’?

The question was resolved best by turning to poetic rhyme. Or by turning to doggerel verse to instruct them in who was correct. So, I used to set them right by reciting a shrewd slice of British doggerel from the mid-1940s, about a supposed exchange between Britain’s crusty Ambassador to Washington, Lord Halifax, and the glitteringly clever Maynard Keynes. It ran, “One day in Washington, Lord Halifax whispered to Lord Keynes, ‘These Americans may have all the money, but it’s we who have all the brains.'”

That settled how to say the name of the man portrayed accurately by Ed Conway as “a genuine international celebrity, the only household name at Bretton Woods”. And it also illuminated a decisive moment in history as the end of the world war drew near.

For Lord Halifax’s whisper encapsulated perfectly the relationship between a bloated USA and a skinny Britain. To regain its own solvency, and for a devastated world to be re-floated on a raft of progressive new economic and social policies, the Americans would have to be taught by the mercurial Keynes what needed to be done for a future world of currency stability. In thrashing out the famous 1944 Bretton Woods accords, it involved British brains in persuading the Americans to dip into their bulging pockets and to back the US dollar as the new gold or the hub of the world monetary wheel. Keynes himself was acutely aware that that American assistance would come at a price, including that of seeing his country becoming relegated to “a satellite of the United States”. But he knew well that an economic deal would have to be done, whatever the cliff-hanging.

As its copious coverage of diplomatic brinkmanship suggests, The Summit can be enjoyed at more than one level. If you have no wish to pore over the intricate workings of the gold standard or fixed currency exchange rates, Conway’s story of economic diplomacy is an enthralling account of the high-octane dealings between the international delegates in their New England hotel. Once, the Mount Washington was the kind of hotel that would have refused admission to America’s two leading delegates, Harry Dexter White and Henry Morgenthau, because they were Jewish. Now, swallowing extra-hard, it was even hosting Sir Chintaman Desmukh and his Indian delegation. The high-minded and low-minded doings of the representatives of 28 countries who carried the Bretton Woods system into international law at the end of 1945 provide a fabulously entertaining drama of brinkmanship, chance, stubbornness, stupidity, and chessboard skills.

And it goes almost without saying that a book about Bretton Woods without John Maynard Keynes would be like a volume on Mozart which skips over the music. Of the many economically influential men depicted here, he emerges as far and away the most interesting and diverse. After all, who else had as many lives as he, sufficient to make a cat jealous – a Cambridge don, a civil servant, a market speculator, a shrewd businessman, a journalist, a writer, a farmer, a statesman, a theatre manager, an art dealer, a book collector and much more besides. Eton and Cambridge minted his voracious homosexuality. His later marriage to a Russian ballerina, Lydia Lopokova, partial to sunbathing in the nude, was passionately full-blooded. For all the salacious gossip which Keynes’s bohemian sex life attracted, there was, his most recent biographer argues, a serious element to it all. In his 2015 Universal Man: The Seven Lives of John Maynard Keynes, Richard Davenport-Hines suggests that his revolving-door sexuality was a key part of his largeness of mind and its liberalism, a view of the world anchored in tolerance, rationalism, and an optimistic belief in improvement and progress.

In that sense, there may have been a tantalising parallel between John Maynard Keynes’s bedroom liberalism and his impeccably open-handed public demeanour at the Bretton Woods negotiations. One of this book’s many telling vignettes is a photograph of a genial Keynes and an equally genial H.H. Kung, head of the Chinese delegation. “The pair,” Conway assures us, “got along famously”. It was probably no surprise. A descendant of Confucius, and then the wealthiest man in China, it was natural for Kung to sip tea with Keynes. Like the Briton he, too, knew the worth of money, and he, too, liked lavish parties.

Equally, at another level, if you wish to understand the enlightened capitalist economic thinking which led to Keynes becoming an “ism”, as in Keynesianism, The Summits marvellously-titled chapters (like “Bedlam” and “Starvation Corner”), provide a sound guide through the dense thickets of theory. In the seminal 1936 General Theory of Employment, Interest and Money, inspired by the Great Depression, Keynes flew his manifesto. Summarised simply by the present author, “when all others in an economy were reluctant to spend”, it was the duty of the government to “step in” and spend, if need be by borrowing to do so. That would “multiply growth across the economy” which would maintain consumption and keep down unemployment.

As prescriptive medicine, that kind of economic management was in the air by the time of Bretton Woods and its belief in a consenting internationalism. It was this utopian moment which produced, shortly thereafter, those institutions meant to be the props of stability, prosperity and growth for the world of market capitalism, the International Monetary Fund (IMF) and the World Bank. The world financial system’s increasing reliance on the dollar in the wake of Bretton Woods brought more than glory days. For the West, it ushered in glory years, even decades, of strong growth, low inflation, high employment, and negligible national debt. Of course, this financial bonanza depended on the USA sticking to good housekeeping and dipping into its pockets to ease the plight of economies which ran into trouble.

But, by the end of the 1960s, the cocks were crowing for Washington. For the burdensome costs of the Cold War and the Vietnam conflict were speeding up the end of universal market faith in “the US’s capacity to keep the value of the dollar”. With a fixed value dollar no longer trumps, the world built on Bretton Woods became a house of cards. Or, even more, it became a seething pit in which dog ate dog. In one of his book’s many pungent observations, Conway records that President Richard Nixon did not give a fig about the responsibilities of international economics. As he snapped to an adviser who tried to brief him on Italy’s currency woes: “I don’t give a shit about the lira.

What The Summit terms “the mangled state of the world’s monetary system” today is all a far cry from the world that Bretton Woods had managed to put together again after the crises of depression and war. Conway’s admirable book is a sort of praise-poem to a grand failure of the past century. As his readers are reminded, “in this messy world” what the Mount Washington hotel produced in 1944 was “something hopeful”. The vacuum left by the demise of Bretton Woods continues to gape. Now, as then, the author concludes, “the most important mission facing the world’s politicians and policymakers” is “to repair the world’s economic system and replace it with something better”. To which, surely the only possible response should be – “Amen.”

The Summit is published by Little, Brown.

Nasson is Professor of History at the University of Stellenbosch. His most recent book, World War One and the People of South Africa, was published by Tafelberg in 2014.