White’s Mischief Lives On

November 30, 1953

In his Newsweek column of last week my colleague Raymond Moley described some of the irremediable harm that had been done to the United States and the world through the influence of Harry Dexter White. But White fathered one institution that is still with us, and still working immense harm—the International Monetary Fund.

Some of us have repeatedly called attention to the harmfulness of the fund since the day of its conception. In the Newsweek of Dec. 31, 1951, for example, I wrote: “The chief remaining obstacle to a world restoration of freedom and sound money is the International Monetary Fund, an unnecessary institution set up, under the influence of the late Lord Keynes and Harry Dexter White, on a completely unsound basis.”

But the analyses of myself and others fell on deaf ears, chiefly because of the myth that the fund was the product of the objective judgment of the world’s monetary experts. Actually, the experts from other countries were in fact government bureaucrats who approved it on the principle that it involved a huge American handout and that you don’t look a gift horse in the mouth.

The story of the part that White played in the formation of the fund is described in R.F. Harrod’s biography of John Maynard Keynes, published in 1951.^* In the light of what we now know about the real aims of White it makes fascinating reading.

In America during the second world war, writes Harrod, there was active discussion of postwar economic problems, “indeed quite an intellectual ferment. In this the central figure was undoubtedly Harry White. . . . He was a very remarkable figure, who should be accorded an honorable place in British annals. . . . When Mr. Morgenthau became Secretary of the Treasury in 1934 he asked Prof. [Jacob] Viner to undertake a study of Treasury problems. Among the economists whom Viner brought in was Harry White. . .. He won the confidence of Mr. Morgenthau. His influence in the Treasury was always more important than the post which he held. . . . During the second [world] war he became the leading figure in the Treasury.

“He . . . was an ardent admirer of Keynes’s economic work; he also had great practical energy and a forceful personality, which could readily dominate a committee. He was blunt and downright in speech, and also fervent. . . . His influence came to extend beyond the Treasury. He made enemies. In his determination to get his way, he adopted methods which might be labeled those of an intriguer. He was distrusted in the banking world, and also by some seasoned public servants. He gained the reputation of being a difficult man to deal with. But he was single-minded in the pursuit of his aims. He was a reformer of genuine conviction.” Harrod lists as among White’s supporters Frank Coe and Lauchlin Currie. “It is probably true to say that but for White’s assiduity and galvanic personality a large scheme of the kind for which Keynes was working in Britain would never have come to birth at Bretton Woods.”

And what was this scheme? It was extremely ambitious, not to say grandiose, and Harrod is lost in admiration of it. “This American group [under White] also produced a bulky volume, which, however, was not a sandwich with a thin layer of internationalism in the midst of it, but all solid internationalism.” It certainly was. It proposed to solve every other nation’s problem at the expense of the American taxpayer. It gave “rights” to other nations to exchange their currencies, at rates far above their market value, for American dollars. It adopted the shiny new White-Keynesian principle (really what debtors have always suspected) that if the debtor can not repay the creditor it must be at least partly the creditor’s fault, and the creditor should be punished for it. The creditor was expected to be, of course, the United States, and the main debtor, England.

And it was finally White who drafted the “American” proposal that “if creditor countries increase their credit beyond a [certain] level, their currencies would be declared ‘scarce’ and would be allotted under a scheme, and thus debtor nations would have a fully authorized right to discriminate against the exports of the creditor countries.”

“This,” correctly declares the British economist Harrod, “was a very remarkable concession. If the United States was really to maintain over a term of years the oppressive role of creditor, which all predicted for her, it would mean that she was by this clause authorizing other nations to discriminate against the purchase of American goods . . . and to maintain their own full employment in the presence of an American depression.”

In fact, when Harrod first read this concession he “felt an exhilaration such as only comes once or twice in a lifetime. . . . Here is the real thing, because it will save us [England] from a slump.” He wrote immediately to Keynes: This “gives us [the British] what we should never have dared to ask for or hoped to get . . . namely, that we (and other countries) should be allowed to discriminate against American goods if dollars are running short. . . . From now on our main object should be to hold the Americans up to the principles of S.F.7 [the concessions].” Keynes in reply expressed doubt that the State Department realized what was being given away by “this document of Harry White’s” and thought it would withdraw approval as soon as it did.

But, triumphantly concludes Harrod in his account: “The Americans did not run out. The scarce-currency clause was incorporated, in a much stronger form than it had in the original draft, in the Bretton Woods Act passed by Congress in July 1945.”

So that was how the IMF and its principles were put over. And in his farewell speech at the Bretton Woods conference, Keynes, speaking for England, was not ungrateful: “I am certain that no similar conference within memory has achieved such a bulk of lucid, solid construction. We owe this not least to the indomitable will and energy . . . of Harry White.”

^*The Life of John Maynard Keynes (Harcourt, Brace, 674 pages, $7.50).