Benn Steil’s vivid and masterly account of the last formal attempt to create a rule based international monetary system (the Bretton-Woods-System) for the post WWII world is not only informative and entertaining but also sheds ample light on the non-economic issues surrounding the power brokers, their interests, and personalities. Beyond that, the book demonstrates (once again) why the Bretton-Woods-System was short lived and had to fail (in 1971). When making full convertibility the stringent criteria for the duration of the Bretton-Woods-System it lasted only 10 years - from 1961 to 1971. Without the gradual deterioration of the US (Truman) and UDSSR (Stalin) relationship after WWII which triggered the birth of the Marshall Plan (1947) for the economic rehabilitation of Europe, the Bretton-Woods-System would probably have faltered even earlier.
Among the many books and scientific articles about the Bretton-Woods-System Steil’s account stands out as a very readable and excellently researched summary of the actual process of the long drawn out negotiations between the two protagonists (and their masters) of this “Battle” – Harry Dexter White (1892-1948) and John Maynard Keyes (1883-1946) during the latter years of WWII. As Steil develops the many aspects of the story of the negotiations, the reader is able to grasp the emotional aspects between the two combatants (and others) and the powerful economic interests the two parties represented at the time. The outcome is known and Steil’s story illuminates the whys.
There are several points in Steil’s account which have raised objections. They relate to the role of Harry Dexter White towards the Soviet Union (was White a spy?) and to White’s involvement in the (sharp) demands of the pre-Pearl-Harbor-Ultimatum to Japan (so called ‘Hull-note’ in November 1941). While the latter may have had important consequences for the course of WWII, they both are questions the historians must resolve - ad fontes.
Is there a lesson in Steil’s account? I guess so. In order for the Bretton-Woods-System to have worked more successfully, a more stringent adjustment mechanism for current account surplus countries (like the US at that time) should have been made mandatory. Bearing this lesson in mind and looking at today’s ill constructed Eurozone or at the trade imbalance between the US and China (since 1985!) it seems likely that “something’s gotta give” – sooner or later.