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What I’m reading: Forgotten Foundations of Bretton Woods

Eric Helleiner, Forgotten Foundations of Bretton Woods: International Development and the Making of the Postwar Order, (Ithaca: Cornell University Press, 2014)

Having passed their seventieth anniversaries, the institutions created in the New Hampshire town of Bretton Woods remain at the heart of the global economy. The slew of criticism aimed at the International Monetary Fund and the World Bank in recent years only underscores their relevance, even as many critics argue the organizations are out of touch with the world’s shifting balance of economic power. Criticisms continue that the IMF sacrifices the fate of the world’s poor on the altar of failed macroeconomic policy models.

Many have traced both these flaws—inadequate attention to development and U.S. and European dominance—back to the organizations’ founding. Crudely summarized, the most frequent account of Bretton Woods emphasizes the leading roles of the U.S. official Harry Dexter White and British economist John Maynard Keynes. While the two advanced somewhat different plans, both focused overwhelmingly on the IMF, which prioritized monetary stability among high-income countries. The World Bank—then limited to the International Bank for Reconstruction and Development  (IBRD)—was intended to address Europe’s post-war problems. Development was tacked on as an afterthought. White and Keynes hashed out the details. The United States, at the height of its power and increasingly the world’s financial capital, won most of the battles and thus drew up the plans for the post-war economic order.

Henry Dexter White and John Maynard Keynes

This rough version is pretty firmly ensconced. It is also consonant with more recent criticisms of the Fund and Bank. That makes Eric Helleiner’s carefully researched account all the more interesting. Helleiner convincingly makes two overarching points, 1) a number of developing countries—particularly in Latin America—played important roles in the creation of the Bretton Woods institutions during the Second World War; 2) Latin American officials and their counterparts in the Franklin D. Roosevelt administration were much more focused on development that is commonly thought. These negotiations, Helleiner argues, have been viewed through the lens of what came later, when the more conservative Truman and Eisenhower administrations pushed for greater orthodoxy.