Review of The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order by Benn Steil

[first appeared on the Society of U.S. Intellectual History Blog, August 11, 2013]

Benn Steil opens The Battle of Bretton Woods not during the Great Depression, but in 2008 as the United States settled into its most severe economic downturn since the 1970s. In the scramble for solutions, economists and financial leaders including George Soros, Joseph Stiglitz, and Fred Bergsten looked to the financial restructuring that occurred at the Bretton Woods Conference as “blueprints for revamping the international monetary system” (2). The spirit of cooperation that supposedly defined Bretton Woods made it especially attractive. Any substantial 21st century international economic reform would have to accommodate the growing economic might of the People’s Republic of China (PRC) and its particular blend of communism and capitalism.

The crucial question Steil poses is “can the story of Bretton Woods light the way” to international economic reform in the 21st century (2)? To Steil, looking to Bretton Woods – and the debates of its two principle protagonists Englishman John Maynard Keynes and American Harry Dexter White – for the clues to how to reform the world out of its economic slowdown evinces a fundamental misunderstanding about the historical circumstances that brought about the Bretton Woods Conference and what occurred at the Conference itself. Steil challenges the popular narrative of Bretton Woods by arguing that it was competition and rivalry, not cooperation and goodwill, that categorized British and American economic relations during World War II.  Instead, Bretton Woods was a conflict between a declining world power, Great Britain, and an ascendant power, the United States, who had divergent visions of the postwar world.

Steil personifies Great Britain and the United States in his two main characters: acclaimed English economist John Maynard Keynes and scrappy bureaucrat Harry Dexter White. Steil sees both men as ideal representatives of the national characteristics of their two respective countries. Keynes, despite his internationalism, is depicted as “thoroughgoingly British, and it was the British problems of his day that drove his theorizing” (93-94). Born into wealth and “raised comfortably” in Cambridge, England, his natural gifts combined with his pedigree – his father was Cambridge University economist John Neville Keynes – to make is rise to fame seem “effortless and preordained” (61). By the time he started debating White in the 1940s, Keynes’ The General Theory of Employment, Interest, and Money had catapulted him to international renown for proposing managerial solutions to the Great Depression. But as Steil points out, with Keynes’ success came ideological rigidity (88-89). Like Great Britain’s unwillingness to let go of its overseas empire despite its baleful effect on its international profile, Keynes would not compromise on the central tenets of his General Theory despite mounting evidence against it during World War II.

Steil’s portrait of White highlights both his differences from Keynes and the different political positions of Great Britain and the United States during Bretton Woods. White’s rise to prominence was hardly preordained. The youngest son of Lithuanian Jewish immigrants, White grew up with few privileges and planned to become a farmer, enrolling in the Massachusetts Agricultural College in 1911 (17-18). After serving in the American infantry in France during World War I, he moved around the northeastern United States until he “decided to make a go at an academic career” in 1922 by enrolling first at Columbia University and then at Stanford University (19). At Stanford, White became fascinated by economics and showed enough promise to pursue a doctorate at Harvard University in 1925. Unlike Keynes, White’s published work struggled to find an audience. With few opportunities available to him in academia, White quit teaching for government work in the Department of the Treasury. His combination of intelligence, combativeness, and hard work ensured White’s rise in the Treasury Department, but that was not enough for White. It is around this time – between 1935 and 1936 – that White’s accusers like Whittaker Chambers claim he became involved in spying for the Soviet Union. Steil shows restraint in balancing the claims made by Chambers and others with the facts of White’s non-Marxist economic beliefs and support of American democracy (39-44). In the end however, Steil’s portrait of White focuses on his Soviet ties for so long as to leave little doubt in the reader’s mind that he believes White to have been a Soviet agent. Keynes may have been arrogant, but he was never disloyal. White’s treachery in the 1930s foreshadows both the failure of Bretton Woods to achieve American economic aims and the Cold War.

The personification of Great Britain and the United States in Keynes and White is a strength of The Battle of Bretton Woods, but it also contributes to many of its weaknesses. Steil is a gifted writer, particularly at rendering seemingly esoteric economic debates understandable and relevant. I was particularly impressed by his discussion of what Keynes’ proposed universal exchange currency – the unitas – was and why it was ultimately rejected by White and the Americans in favor of the dollar (147-149). Attaching aspects of the debate to his two main characters, Steil is able to make the economic wrangling surrounding Bretton Woods less abstract and more intelligible to readers without an economics background. His willingness to engage in the more obscure parts of the Bretton Woods debates, and to do so with such skill, is the book’s greatest asset and probably the reason it has reached such a wide non-academic audience.

Unfortunately, personification also has a cost in The Battle of Bretton Woods. Steil’s main characters do not map perfectly on the story of Bretton Woods he wants to tell. Keynes is absent much of the conference recovering from a heart attack. He then dies fifty pages before the book ends, dramatically shifting the book from Anglo-American economics to American domestic politics (305). White spends much of the time operating in the shadow of his superior Henry Morganthau, who Steil portrays as an empty suit with little understanding of theoretical economics. The final chapter, on the investigation into White’s relationship with the Soviet Union, is tangential to the larger story of Bretton Woods and at times seems to be a way to explain White’s failure to recognize the superiority of free market economics despite his intelligence. It also doesn’t engage with much of the academic literature on the Hiss Trial or the postwar Red Scare.

Since neither Keynes nor White is seen as a hero by Steil, at times it appears that the reason Bretton Woods failed was because of Keynes’ egotism and White’s admiration (and possible spying) for the Soviet Union. Part of Steil’s criticism of Keynes and White is bound up with his rejection of market regulation in favor of free market principles – in the epilogue the reader is treated to a roll-call of Steil’s heroes who opposed the Bretton Woods system including Milton Friedman, Jacques Rueff, Paul Volcker, and Robert Triffin. I think this problem is rooted it the books dual nature of having an argument about contemporary politics – in this case rejecting calls for a new Bretton Woods between the PRC and the United States – and a historical setting.

The Battle of Bretton Woods’ dual nature leads to other problems with historical context. In several chapters, Steil has trouble integrating the economic and political parts of his argument with the historical context. He fights to strike a balance between historical, political, and economic aspects of his argument, but too often – as the lengthy chapter “Whitewash” demonstrates – he keeps the three domains separate. Ultimately, Steil’s problems with contextualizing his argument are because Bretton Woods uses history only as a means to illuminate economic and political questions. Steil is not a trained historian and most of his previous work has focused on economics. Whether it’s discussing fixed bilateral exchange rates or the particular economic philosophies of Keynes and White, Steil never seems committed to writing history. As his lengthy epilogue suggests, The Battle of Bretton Woods has more value as a cautionary tale than as a historical episode.

Steil’s book has and will continue to find an audience among subscribers to The Economistand Foreign Affairs. His easy style and political message will assure The Battle of Bretton Woods a wide readership, particularly among intelligent, non-academic readers. The book has already been embraced by the financial community, its dust jacket adorned by glowing blurbs from Alan Greenspan and Paul Volcker. While Steil’s book has its merits and may be viewed as a groundbreaking work in other disciplines, it is unlikely to find advocates among professional historians because of both its methodological shortcomings as a work of history and the efflorescence of brilliant economic histories by the likes of Angus Burgin, Jonathan Levy, and Daniel Stedman Jones in recent years.

[Originally written for the Society for U.S. Intellectual History Blog, July 16, 2013]

Dedicated followers of William F. Buckley’s Firing Line were treated to discussions of topical political and cultural controversies by leading intellectuals, cultural figures, and politicians for over thirty years. Many must have been struck by the unusual choice of debate when in 1983, Buckley was joined by Commentary columnist Richard Grenier and University of Chicago professor Lloyd Irving Rudolph to debate “Was Gandhi for Real?” The proximate cause of the debate was Grenier’s scathing review of Richard Attenborough’s critically acclaimed 1982 film “Gandhi” – as well as attacks on the historical Gandhi – in the March 1983 issue of Commentary. While Grenier’s criticisms of the film can be seen as the heretical views of a solitary reviewer, debates over the historical Gandhi are best understood as a battle in the Culture Wars defending the superiority – and efficacy – of Western values against a perceived, non-Western threat. The struggle over Gandhi also demonstrates how intertwined the Culture Wars were with the ongoing Cold War. Gandhism was not only dangerous because it undermined Western values, but because it preached a romantic pacifism that could imperil American readiness to oppose communism.

Grenier’s review of “Gandhi” is a puzzling document. He begins by highlighting the shortcomings of Attenborough’s idealized depiction of Gandhi as well as the ways it may have been influenced by the partial funding of the project by the Indian government.[1]Attenborough’s Gandhi is “cleansed of anything too embarrassingly Hindu” and avoided far too many of Gandhi’s misdeeds like his sleeping with “pretty teenage followers” to test his vow of chastity and his patriarchal relationship with his wife and children.[2] From this sparse foundation of film criticism (totaling barely two pages), Grenier aims to set the record straight by exposing Gandhi’s many flaws and uncovering the “Gandhi nobody knows.” The rest of the article is a parade of calumnies against Gandhi’s character, his movement, and his nonviolent philosophy. Grenier highlights Gandhi’s indifference to racism against South African blacks while campaigning for Indian rights there at the turn of the 20th century and also toward non-Hindus in India, he depicts Gandhi as friendly with Hitler and unconcerned with Nazism even as he decried British crimes against India, and he dwells at length on Gandhi’s scatological concerns and prohibitions against sex.[3] What is peculiar about Grenier’s criticisms – aside from their overstatement – is that they were hardly unknown in 1983. In fact, most of Grenier’s information about the historical Gandhi seems to have been culled from the writings of three of Gandhi’s most trenchant critics Salman Rushdie, V.S. Naipaul, and Robert Payne.[4] Furthermore, most of these appraisals, like Payne’s The Life and Death of Mahatma Gandhi, had been widely read and debated for decades.[5]

So, why was it so important to Grenier to tear down the Gandhi myth in 1983 and, furthermore, why did Buckley deem it a topic of sufficient concern to devote an entire episode of his popular show to the controversy? The impression given both by the review of the film “Gandhi” and by the Firing Line episode on the controversy is that Gandhi’s persona and philosophy were deemed credible threats to Western geopolitical and moral supremacy in a time of continued ideological struggle against the USSR abroad and a resurgent pacifist left at home. Grenier and Buckley both argue that Gandhi’s success was largely due not to his methods, but the high mindedness of his British adversaries.[6]Ignoring the successes of Danish nonviolent resistance to Nazism as well as the burgeoning Polish Solidarity movement, neither conservative saw nonviolence – in any form – as an efficacious mode to oppose totalitarian regimes. To Grenier and Buckley, Gandhi was successful in opposing British colonialism largely because they allowed him to win. Americans who embraced ahimsa (nonviolence) or satyagraha (truth-force or principled nonviolent resistance) as a credible means to oppose the Soviet Union or as an instrument of American foreign policy could imperil the West in the Cold War. Just as Gandhi urged the British and the Jews to lay down their arms against Nazism, so would American Gandhians surrender themselves to the communist menace.

The urgency and violence Grenier brings to tearing down the Gandhi myth was also due in no small part to the success of Attenborough’s film and its reception by both Hollywood and lay audiences. Grenier and Buckley both speak ominously of a “pacifist trend” in Hollywood.[7] Grenier, though he readily admits to not reading all of Gandhi’s writings on nonviolence, goes one step further in reducing Gandhi’s ahimsa to “our old European friend: pacifism.”[8] Like pacifism in Europe, ahimsa could not articulate a positive philosophy once the immediate threat of British colonization was removed. The lack of a coherent vision of an independent India – owing in large part to Gandhi’s incompetence as a politician – in Grenier’s estimation precipitated a bloody civil war between Muslims and Hindus resulting in up to a million deaths and the eventual partition of India.[9]

One can also view Grenier’s assessment of Gandhi’s life and philosophy as a proxy through which to criticize Gandhi’s most famous American adherent, Martin Luther King Jr., and the nonviolent dimensions of the Civil Rights Movement. On the Firing Line, it is from a discussion of King’s adoption of Gandhian nonviolence that Grenier segues to the importance of high-minded adversaries to successful nonviolent resistance.[10] American Southerners despite their brutality toward civil rights activists were ultimately closer to their civilized British brethren than the “totalitarian” insanity of Nazism or communism. For Buckley and Grenier, though Western values could oppress, they were flexible enough to accommodate outside challenges without undue bloodshed. After all, as Buckley says in response to Lloyd Rudolph’s challenge that Gandhi was a figure around which both Hindus and Muslims’ rallied, if John F. Kennedy had gone to Birmingham the violence against Civil Rights activists would have stopped.[11]

Debates over Gandhi during the 1980s shed little light on his life or thought, but they do show an anxious conservatism warding off a perceived pacifist threat to Cold War goals while trying to reshape the historical narrative of nonviolent protest by discrediting one of its most formidable practitioners. The battles over Gandhi show how intimately Cold War aims of democratic victory were intertwined with Culture Wars attempts to build a hegemonic historical narrative of 20th century domestic and international politics. To win the Cold War, conservatives needed to win the domestic war over American values. A loss of Western values could imperil the international war against communism. Similarly, a political victory against communism abroad with a loss of Western democratic values at home – be it to Gandhism or Jesse Jackson’s Rainbow Coalition – would render international victories meaningless.