The Battle of Bretton Woods + currency + trade

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A book we have been going back to for years is The Battle of Bretton Woods. The book explores the development of today's WTO, IMF, and World Bank all established in the closing days of WWII. What was discussed then is still being discussed today.

Harry White was the leader of the US delegation and recognized "most governmental problems are economic.” White had a fascination with policy questions surrounding the relationship between the workings of the international monetary system and the performance of the real economy. White concluded any new monetary standard would have to have “promotion of trade and finance” as a key criteria, but that it would also have to allow “sovereignty in shaping domestic policies.”  

Looking to develop a global system of trade and currency that lessens the chance of another major, great power military conflict, while at the same time respecting the sovereign need for nations to make decisions that suit their domestic needs and objectives was, and still remains, a challenge.

White believed when a county confronted an adverse balance of payments with the world (more imports and bond purchases than exports and bond sales) it faced a choice “between two evils” - a fall in the exchange rate or a fall in the domestic price level. Both actions were seen as disruptive and undesirable - but a choice had to be made.

The White House has always played in role in shaping the economy - often changing tactics when an administration changes. For example, President Hoover tried to preserve the gold standard by means of trade restrictions, while President Roosevelt maneuvered in the other direction, moving away from multilateralism in money while trying to preserve it in trade.

Delegates to Bretton Woods knew a final collapse of gold exchange would poison Anglo-American relations for decades and set the Americans on a path to greater support and responsibility of the global economy. To the British way of thinking, Britain had been ignominiously forced off gold by selfish and short-sighted American and French policies. Americans with their abominable import tariffs and the French with their wretched devaluations - the Americans saw themselves as innocent victims of an odious British default.

President Roosevelt believed “the sound internal economic system of a nation is a greater factor in its well being than the price of its currency in changing  terms of the currencies of other nations.” White, on the other hand, was making his mark at the meeting by arguing that currency stability was essential to achieving domestic economic stability, contradicting the president’s message.

White stated, "given the choice, every country prefers to have its currency undervalued rather than overvalued."

White believed without efforts to restore equilibrium exchange parities by international agreement, countries would act to protect their domestic industries by erecting import barriers and would protect their export markets through bilateral trade and exchange agreements all which would act to reduce global trade and hamstring recovery.

It appears not much has changed from that meeting in the New Hampshire White Mountains 73 years ago.

Marc Ross

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