Book Reviews

Whitewashing History

Benn Steil

The Battle of Bretton Woods

John Maynard Keynes, Harry Dexter White, and the Making of a New World Order

Princeton University Press, Princeton, New Jersey, 2013, 472 pp., $29.95 (cloth).

The landmark conference of 1944 at Bretton Woods, New Hampshire, in the United States, made the name of the resort town synonymous with institutions of international monetary cooperation. But even the principal authors of the Bretton Woods Agreements, which established the International Monetary Fund and the International Bank for Reconstruction and Development, did not regard them as a success.

The British negotiator and renowned economist John Maynard Keynes expressed dismay that Bretton Woods failed to create an IMF that could act like the “super-central bank” he envisioned. Instead, the IMF spent its first decades as a more modest agency, as conceived by U.S. Treasury official Harry Dexter White. In 1970, Edward Bernstein, a U.S. Treasury spokesman at Bretton Woods, reflected that “the international monetary system has not functioned as well as it should.”

Clearly, a history of Bretton Woods should take account of such skepticism about the system and its effects. But Benn Steil (senior fellow and director of International Economics at the Council on Foreign Relations) advances a more radical interpretation. Dwelling on White’s role as an alleged secret agent who not only communicated with the Soviets about American postwar policy, but also—as Steil tells it—worked on behalf of the Soviet Union to involve the United States in World War II, the author describes White as the architect of a Bretton Woods system guaranteed to produce, in his words, an “economic apocalypse.”

There is enough reliable evidence from Soviet archives to suggest that White clandestinely gave information to Soviet intelligence, though it is impossible to know how much, or whether the Soviet Union put it to substantial use. Even most historians sympathetic to White acknowledge that he engaged in espionage. But Steil goes much further, suggesting that White, acting in the Soviets’ interest, substantially wrote U.S. diplomatic notes in November 1941—notes that proposed terms so patently unacceptable that the Japanese had to break off negotiations and attack Pearl Harbor, bringing the United States into the war.

It is a dubious claim for many reasons. Neither White nor the Treasury was at the center of U.S.-Japanese negotiations. At the time of the supposedly critical note, the Japanese task force bound for Pearl Harbor was already at sea. The 2002 history Steil uses to support the case relies, itself, on documentation that historians John Earl Haynes and Harvey Klehr have determined to be fake.

White’s espionage isn’t the only area in which Steil makes far-reaching claims based on inadequate evidence. When discussing monetary policy, Steil writes favorably of “the pre-1914 gold standard, with its automatic mechanisms for regulating the price of credit and the cross-border flows of gold.” This description, while consistent with economic models of how a gold standard could work, does not reflect historical scholarship on how it actually did work.

Even under the gold standard, paper was the principal circulating medium. Note-issuing central banks did not adjust the amount of circulating currency in a mechanical response to the flow of trade, automatically following rules. Rather, monetary authorities set interest rates—and therefore the amount of money in circulation—at a level they thought would generate a profit, at which their government could comfortably borrow...