BOOK REVIEW: ‘The Battle of Bretton Woods’

THE BATTLE OF BRETTON WOODS: JOHN MAYNARD KEYNES, HARRY DEXTER WHITE AND THE MAKING OF A NEW WORLD ORDER
By Benn Steil
Princeton University Press, $29.95, 449 pages

That Treasury Department official Harry Dexter White was a Soviet agent — perhaps the most important one in the Red-riddled Roosevelt administration — has been well-documented in defector reports and intercepted intelligence cables. Now startling new evidence has emerged on an attempt by White to tilt international economic policy in favor of the Soviet Union during the postwar Bretton Woods Conference in New Hampshire.

The material is contained in “an undated, unpublished essay on yellow-line paper buried in a large folder of miscellaneous scribbling in White’s archives at Princeton,” according to Benn Steil, an economist at the Council on Foreign Relations. According to Mr. Steil, who came across the essay while researching this book, “Apparently missed by his chroniclers, it provides a fascinating window into the grand schemes of this intellectually ambitious overachiever at the height of his stature towards the end of World War II.”White, the son of Lithuanian refugees, was the top deputy to aging Treasury Secretary Henry J. Morgenthau. A skilled bureaucrat, White dominated the crafting of international economics, running roughshod over his supposed superior. Morgenthau would lament at one point that White was “quick-tempered, overly ambitious, and power went to his head.”

White had also been a witting Soviet agent since the early 1930s, according to Whittaker Chambers, who was the chief courier for a wide ring of USSR agents in the FDR administration. The paper found by Mr. Steil shows the pro-Soviet mindset of White as he represented the United States at Bretton Woods, a conference tasked with establishing a stable global monetary system. In the paper, White wrote that the biggest threat to the successful establishment of a postwar alliance was U.S. “isolationism” and “its twin brother, rampant imperialism.” Such imperialism, he charged, “urges the U.S. to make [the] most of our financial domination and military strength and become the most powerful nation in the world.”As an alternative, White would have had the United States share world leadership with the USSR. Such was unlikely, White wrote, because there existed “a very powerful Catholic hierarchy who well may find an alliance with Russia repugnant, and other groups which are fearful that any alliance with a socialist economy cannot but strengthen socialism and thereby weaken capitalism.”

White then pursued the theme that the United States and its Western allies were hypocritical in their attitudes toward the USSR. For instance, he took issue with claims that religious freedom suffered under communism. In a display of unbelievable naivete, he wrote, “Contrary to popular opinion, the right of a person to worship as he pleases has never been abrogated in Russia. The constitution of the USSR guarantees the right.” What about Moscow’s promotion of socialist revolutions abroad? “The demise of the [Third International] and the policy pursued by present- day Russia of not actively supporting such movements in other countries should greatly help eliminate that source of friction.” (What happened soon thereafter in Eastern Europe refuted White’s contention.)

White ended by concluding that the main differences between the USSR and the West were not ideological but economic. “Those who believe seriously in the superiority of capitalism to socialism fear Russia as the source of socialist ideology. Russia is the first instance of a socialist economy in action. And it works!” he concluded emphatically. Mr. Steil writes that the last statement, “coming from the U.S. government’s most important economic strategist, can only be described as an astounding conclusion.”Another scheme that White touted, at the direction of his Soviet controller, dealt with the printing of currency to be used in occupied Germany. The British agreed that the currency should be printed in the United States. The Soviets demanded the right to print currency also, using a duplicate set of American plates. When Morgenthau offered mild resistance, White argued, “The United States had not been doing enough for the Soviet Union. [I]f the Soviet Union profited as a result of this transaction we should be happy to give them this token of our appreciation.”The United States and Britain printed some 10.5 billion Allied marks. “The Soviets likely issued something north of 78 billion marks,” Mr. Steil writes. “Much of this wound up being redeemed by the U. S. government at the fixed exchange rate advocated by White, resulting in the Soviets effectively raiding the American Treasury for $300-$500 million, or over 12 times that in current dollars.”Bretton Woods had a mixed outcome. Britain failed to obtain a deal relieving it from the burden of its wartime debt, and gold emerged as the standard supporting the Western financial system. It created two new agencies, the International Monetary Fund and the World Bank, which, hopefully, would stabilize the world economy.President Truman nominated White as executive secretary of the IMF, with the promise of promoting him to head the fund in due course. FBI director J. Edgar Hoover had a quiet talk with the president, however, handing him a report describing White as a “very valuable adjunct to an underground Soviet espionage organization.” White was not promoted, and he left the fund in short order.Britain’s worst fears about the consequence of its war debts and American “dollar diplomacy” became reality in a global sterling crisis in 1947. The Economist commented in an editorial, “Not many people in this country believe the Communist thesis that it is the deliberate and conscious aim of American policy to ruin Britain and everything that Britain stands for in the world. But the evidence can certainly be read that way. And if every time aid is extended conditions are attached which make it impossible for Britain ever to escape the necessity of going back for still more aid then the result will certainly be what he Communists predict.”Did Harry Dexter White offer a chortle from the grave?

Joseph C. Goulden’s most recent book is “Spy Speak: The Dictionary of Espionage” (Dover).

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