This topic and also the work of Sir J. M. Keynes and his 'General Theory on Interest, Inflation and Unemployment' as well as his 'Treatise on Money' should be read by everyone, imho.

This is one of the topics on which I read extensively for my PhD work, but then was forced to cut out of my thesis when it was accepted only as an MPhil rather than doctoral thesis. :-(


ShiraDest,
26.10.12015 HE
( )

This topic and also the work of Sir J. M. Keynes and his 'General Theory on Interest, Inflation and Unemployment' as well as his 'Treatise on Money' should be read by everyone, imho.

This is one of the topics on which I read extensively for my PhD work, but then was forced to cut out of my thesis when it was accepted only as an MPhil rather than doctoral thesis. :-(


ShiraDest,
26.10.12015 HE
( )

This is an excellent work of economic history that explains what the Bretton Woods international structure was, how it came about. It finishes with the effects of the system, but that is only a small part of the book. Steil explores the personalities involved, particularly Harry Dexter White and John Maynard Keynes, and how they affected the outcome.

His main argument is that the United States bullied the UK into accepting Bretton Woods because the British needed US money for postwar reconstruction. As part of that, White outmaneuvered Keynes before, during and after the conference. White was able to do this because he managed the conference and because the US had all the power. Keynes and the British had no room to maneuver and no good backup plan if they pulled out of the agreement.

The core of the agreement was to set up the World Bank and IMF to promote stability in currencies and trade. The dollar became the basis for international trade, in essence the world's currency, because it was convertible to gold. Keynes resisted both of these ideas, but White was able to get them through the conference and into the final agreement. The Bretton Woods structure effectively signaled the end of the British Empire's preferential trading system, which was the backbone of the British economy before the war. The fact that the British accepted this demonstrates that they were effectively supplicants to the US, which is why the US got to dictate the rules.

The book finishes with the effects of the system, which Steil says were based on flawed ideas. "Harry White was wrong" about using gold and the dollar as a stable basis for international trade. The problem was that to provide enough dollars for the world to use in trade meant opening the US to a constant outflow of gold if those dollars were redeemed and converted to gold. The constant outflow of gold was a problem by the Kennedy Administration, but Kennedy refused to alter the system significantly. Nixon finally pulled the US out of the system, which hurt US allies who had saved dollars rather than converting them (at the behest of the US) while helping those countries which had unloaded dollars (against US urging). He then offers a few thoughts on US-China relations, being careful to point out that the US-UK relationship at Bretton-Woods is not a strong analogy, but the failures of Bretton Woods gives us some framework to see the problems that still exist in a dollar-based economic system.

The book is very easy to read, except for the sections where it goes into some details on the economic theories involved. For those with a mind for economics (not me), this book is excellent. For these without a good grasp of economics, this book is very useful even though some of the ideas were hard to follow. ( )

This is an excellent, highly readable account of how the post-World War II global financial system, much modified over the past 69 years but still plugging along, came into being. Adopting a biographical approach similar that used by Liaquat Ahamed to explain the global Great Depression (Lords of Finance: The Bankers Who Broke the World), Steil focuses on the key architects of the Bretton Woods scheme: American official Harry Dexter White and British economist John Maynard Keynes. Readers with some knowledge of the economic problems of the Great Depression will probably find this book easier going, but anyone with a general knowledge of economic policy should find it comprehensible.

As Steil's careful, critical analysis makes clear, the final structure (which created the International Monetary Fund, the World Bank, and ultimately the World Trade Organization), owed more to White and the overwhelming economic power of the United States at the end of the war than to Keynes and Britain. Economists and historians have been over this ground many times before, but this is the first book I've found that provides a clear, non-technical explanation of just how the Bretton Woods system was negotiated. White got the institutions and, more importantly, the gold/dollar system of fixed exchange rates that he wanted, but the system, unstable from the beginning, ultimately was brought down in 1971 by the contradictions inherent in using a gold-pegged dollar as an international reserve currency.

One difficulty in explaining how the Bretton Woods system came about is the fact that the formal multilateral negotiations (at Bretton Woods, NH, in July 1944) in many ways simply rubber-stamped the results of the more than two years of studies, arguments, and negotiations between Britain and the United States that preceded it. Steil's narrative approach combines his examinations of the lives of White and Keynes with analysis of the substantive differences between the two. As a result, the reader doesn't arrive at the actual conference until page 201, but by that time she has a sound understanding of the competing views and what's at stake.

Further, Steil goes beyond the origins of the Bretton Woods system to explain its subsequent operation and eventual collapse. He provides a useful basis for understanding how we moved from a fixed-rate, gold-based regime to the current system of floating exchange rates - precisely the kind of global regime that US policymakers in the 1940s feared and tried so hard to avoid.

Steil is highly critical of both White (later accused of spying for the USSR) and Keynes, but he seems particularly intent on highlighting the arrogance, inconsistencies, prevarications, and diplomatic failures of Keynes as Britain's representative. He's no particular fan of Keynes' economic theories, either. In the end, however, one wonders whether Steil's major disappointment with Keynes was his utter failure to persuade White and the Americans to adopt a new international currency ("bancor"), rather than basing international trade and finance on the US dollar.

It's hard to imagine how Keynes could have won this argument, given Britain's wartime weakness and dependence on American aid, but had such a measure been adopted, it might have had a better chance of weathering the turmoil of the 1970s and perhaps even continuing to the present. As Steil notes, China and others recently have called for just such a system, not tied to any one country. But the dollar, though no longer tied to gold, remains the principal reserve currency, for better or worse. ( )

Keynes, John Maynard (Subject); White, Harry Dexter (Subject)