Lawrence Goodman , Contributor
Forbes, June 6, 2014
On the 70th
anniversary of the D-Day invasion, I am reminded of a trip to Normandy, France
last summer. The beaches and acres of gravestones served as stark reminders of
the magnitude of what the Allies achieved on the war front on June 6, 1944 and
its related costs.
I am also reminded of
another momentous achievement that occurred during the same summer by a
different group of courageous men and women working on the economic diplomacy
front – delegates from 44 countries who gathered in Northern New Hampshire to
sculpt the Bretton Woods Agreement.
While
the results of the Bretton Woods conference are well known, at the time we were
not privy to its inner workings. Today, however, we are able to glean a number
of new insights about what went into that iconic Bretton Woods Agreement and
begin to understand just how bold and visionary the participants in the
meetings truly were. This new perspective stems from the recent discovery
of the conference transcripts in the basement of the U.S. Treasury building by
my colleague and friend Kurt Schuler, a discovery for economic policy buffs
that is akin to finding lost Beatles tracks at the Abbey Road studios for music
aficionados.
An examination of The Bretton Woods Transcripts through the lens of what was achieved,
by who, and how it is relevant today, demonstrates just how much we can learn
from this achievement and why it should be essential reading for leaders around
the world.
WHAT WAS ACHIEVED
The results of Bretton Woods cannot be understated. The delegates
were able to come together and develop new rules for the international financial system, and give life to the
International Monetary Fund (IMF ) and the World Bank (otherwise known
as the International Bank for Reconstruction and Development, IBRD) – to this
day two of world’s most important economic institutions.
Put quite simply,
these economic policy leaders put into place an entirely new financial
foundation for a world they envisioned would be filled with freedom, growth,
and stability. Their tireless pursuit of a long-term strategic plan to secure a
better future, despite the deep uncertainty on the battlefront, is remarkable.
WHO
THESE DELEGATES WERE
The
delegates at the Bretton Woods Conference were not only leaders, they were
visionaries.
While delegates such
as John Maynard Keynes, Harry Dexter White, Marriner Eccles, Henry Morgenthau,
Dennis Robertson, and Lionel Robbins were instrumental in shaping the post-War
financial architecture, The Bretton Woods Transcripts reveals the talents and influence of
leaders outside of the US and UK. For instance, André Istel from the Free
French Republic and Lewis Rasminsky from Canada were instrumental in charting
rules for future exchange rates. Eduardo Suárez from Mexico led the third
commission with Keynes and White orchestrating the other two. Similarly,
Wilhelm Keilhau from Norway was an integral influence on how the IMF should
lend to its members (or more aptly put, limit its lending).
Despite
the obvious cultural differences and conflicting agendas of the assembled
group, the delegates shared one key attribute – an understanding that what they
were doing was bigger than every one of them and that the policies they would
put in place were for the long term. Keilhau from Norway mused that “when we
now formulate the policies and purposes of the Fund, we give a fundamental law
which may be in effect for hundreds of years.”
In a world that is
currently dominated by a slavish focus on quarterly earnings, the endless
parsing of a few words uttered by the Federal Reserve Chairman, and countless
polls by politicians attempting to channel popular opinion, the long-term
vision these delegates exercised is a lesson to us all. Today’s leaders both in
the US and abroad need to take note.
WHY BRETTON WOODS IS
IMPORTANT
Economic
fragilities after WW I set the stage for a period of profound turmoil in the
run-up to WW II. John Maynard Keynes wrote a poignant essay entitled “The
Economic Consequences of the Peace” where he chronicled how post-WW I
reparations would destabilize the German economy. Unfortunately, his prediction
was all too true.
The leaders behind the
Bretton Woods Agreement despised the atrocities of war as well as the
suppression of human rights around the world. One of their guiding principles,
as revealed through The Bretton Woods Transcripts,
is that a well-run global economy and financial system were essential
components to helping prevent future world wars.
This linkage – between
defense and economic policy – permeated the minds of the Bretton Woods
visionaries. This concept, as well as the purpose of Bretton Woods overall, was
articulated by Fred Vinson – a U.S. delegate and future Supreme Court Justice –
when he passionately noted:
“We are met here in Bretton Woods in an experimental test, probably the first time in the history of the world, that forty-four nations have convened seeking to solve difficult economic problems. We fight together on sodden battlefields. We sail together on the majestic blue. We fly together in the ethereal sky. The test of this conference is whether we can walk together, solve our economic problems, down the road to peace as we today march to victory. Sometimes certain problems seem to be most important on a particular day. Some folks think that the problems of the world were made to be solved in a day or in one conference. That can’t be. We must have cooperation, collaboration; utilize the machinery, the instrumentalities, that have been set up to provide succor to those who are hungry and ill; to set up, establish instrumentalities that will stabilize or tend toward stabilization of economies of our world.”
“We are met here in Bretton Woods in an experimental test, probably the first time in the history of the world, that forty-four nations have convened seeking to solve difficult economic problems. We fight together on sodden battlefields. We sail together on the majestic blue. We fly together in the ethereal sky. The test of this conference is whether we can walk together, solve our economic problems, down the road to peace as we today march to victory. Sometimes certain problems seem to be most important on a particular day. Some folks think that the problems of the world were made to be solved in a day or in one conference. That can’t be. We must have cooperation, collaboration; utilize the machinery, the instrumentalities, that have been set up to provide succor to those who are hungry and ill; to set up, establish instrumentalities that will stabilize or tend toward stabilization of economies of our world.”
Achievements in the
summer of 1944 – exemplified so dramatically in Normandy and Bretton Woods –
provide us with a model of leadership and vision both on the military and
economic diplomacy fronts.
Given
the unchartered waters our global economy has entered over the past several
years, the necessity for the world to come together again with the goal to
develop a new foundation that will enable the economies of the free world to
continue to flourish has never been greater. This can only be done through the
development of a long-term vision, a desire to face uncertainty with a shared
strategic plan, and the will to endure difficult circumstances in the pursuit
of a brighter future.
Today’s
leaders need to break free from conventional thinking and harken back to
the ethos of cooperation that was achieved so gracefully by the Bretton Woods
delegates in the White Mountains of New Hampshire.
Lawrence Goodman is president of the Center
for Financial Stability, an independent, nonpartisan, and nonprofit think tank
focused on financial markets.
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