Both the American and British chief delegates to the Bretton Woods conference were tall bald men, but there the similarity between them came to an end, and even in respect of their height they stood differently. Henry Morgenthau, Jr., hung on his own frame like a picture crookedly strung on a hook, while John Maynard Keynes wore his stature as comfortably as his tailored suits. Although Keynes was the older man, his powerful new ideas made Morgenthau look ever more like a relic. As Secretary of the Treasury since 1934, Morgenthau had helped engineer the New Deal. But as Keynesianism swept the policymaking landscape, Morgenthau became more old-fashioned, insisting that whatever Keynes might claim about deficit spending, the government ought to try a balanced budget—though between the Depression and the Second World War Morgenthau never presided over one. A cruelly witty Cambridge first who indulged his refined tastes in champagne, men, and women, Keynes enjoyed the comforts of the English upper class. Morgenthau was a relative outsider in America: a Jew who attended a state university but failed to graduate and instead became a farmer. It was only because he really took his farm seriously that he enjoyed a rapport with his Dutchess County neighbor, Franklin Roosevelt.
It is little wonder then that although Morgenthau was the nominal president of the United Nations Monetary and Financial Conference, it was Keynes who dominated the meetings, both formal and informal. In the official photograph of the delegates, Morgenthau looks warily toward Keynes, while Keynes looks arrogantly at the camera. The qualities of authority, brilliance, and suavity, which Keynes had in personal abundance, were if not lacking then widely distributed among the American delegation: on substantive matters Morgenthau deferred to his assistant Harry Dexter White, who had a better grasp of economics than Morgenthau, and on matters requiring tact White deferred to his assistant Edward Bernstein, who was less likely to say “shit” in public than White. Keynes meanwhile was everywhere, radiating influence from his room at the center of the Mount Washington Hotel, chairing the committee to charter the World Bank but also frequently leading the discussions on the International Monetary Fund; starting informal seminars on economic theory with the delegates he respected and making racist jokes at the expense of those he did not; lining up the best of the hotel wine cellar to host a dinner marking the five hundredth anniversary of an understanding between New College Oxford and King’s College Cambridge. Although suffering from a cardiac ailment that would at length kill him, under the ministrations of his wife and amid the stimulus of the discussions he exhibited extraordinary energy. Keynes disliked going to America, explaining himself, and Jews: yet one night after dinner at the New Hampshire conference he got so excited about the prospect of illustrating a concept to Morgenthau that he charged precipitously up the hotel stairs, giving himself a heart attack that was erroneously reported as fatal in some of the international papers, including ones in Germany that were also, as it happened, erroneously reporting the death of Adolf Hitler.
This coincidence of false news in wartime provides a fortuitous historical perspective on the plans for the postwar world, and a good reason not to let the tale of Keynes’s greatness carry us away. Suppose either premature report had been true; which would have mattered? It was July, 1944: the Allies had landed in Normandy and were fighting across France. Had Hitler actually fallen prey to the Valkyrie assassination attempt plotted by his own lieutenants, Nazism would certainly have failed and the European war would have come sooner to an end. But had Keynes fallen prey to his own heart and perished on the hotel stairs, Keynesianism would have survived him and Bretton Woods would have been established as a system anyway.
In part, Bretton Woods would have survived Keynes because Keynes had already won the war of ideas that would govern the world’s business after the Second World War: whereas in 1919 he had been an outsider railing against the deficiencies of the Versailles settlement, by 1944 his complaints had become the common foundation for a functional peace, and other ideas he had developed over the subsequent quarter century—about monetary policy, about regulating exchange rates, about the important role an international fund could play in permitting national governments to respond effectively to economic crisis—had adherents throughout the world.
But in part Bretton Woods would have survived Keynes because despite Keynes’s actual prominence at the conference and within the world of ideas around it, there was nothing necessarily Keynesian about the system as it emerged: which is to say that its underlying assumptions could have been, and indeed were, derived from other intellectual and political traditions. One story commonly told for decades among Americans had it that one week after Pearl Harbor, the idea for an international currency came to Henry Morgenthau in a dream. The following morning he gave Harry Dexter White the portfolio of Treasury’s international matters and set him the task of drafting a plan for an international monetary system. White’s resulting memorandum explained the need of a world’s bank and an international fund to keep the world’s currencies in balance, as an aid to reviving global trade.
Setting aside the nocturnal revelation—if there was one thing Morgenthau had consistently evaded, it was a reputation as a visionary—it is entirely plausible that Morgenthau should wholeheartedly have backed these ideas, even if his sometime antagonist Keynes also liked them. For Morgenthau came from an American tradition—a farm tradition, a free-trading tradition, a Democratic party tradition—to which these ideas about the management of money came readily. And given the need to get an eventual Bretton Woods agreement through the United States Congress, the compatibility of the international system with the Democratic party tradition mattered at least as much as the persuasive powers of a British sybarite—or so Dean Acheson found as he piloted the legislation through the Capitol.
Thus if we want to understand how Bretton Woods happened and why it worked, we need to understand not only the intellectual revolution of Keynesianism and its effects on the policymaking world, but also the American political tradition to which mid-century Democrats were heir, a tradition older than the New Deal and in fact often at odds with it.
The multiple claims to paternity of the peace agreement got from the war amount to more than the cliché that victory has many fathers: Bretton Woods was truly heir to both the intellectual ferment of the declining British empire and the long-held beliefs of American agrarians, and indeed the system had a third source of strength. Within four years of the New Hampshire conference, the World Bank was lending money for the production and distribution of hydroelectric power in rural Chile. The role of the Bretton Woods system went beyond recovery from the war and restoration of the old world; it aimed at a new one, in which poor nations became rich by degrees with assistance from the international community, despite the tensions of the early Cold War. Whatever glimmerings there might have been of such a possibility in the minds of British or American policymakers, they would not have been adopted and implemented were it not for the important role played by other nations in drafting the agreements.
The question of where the Bretton Woods system came from thus depends on the question of what we think it was: an agreement to keep exchange rates stable, a set of institutions to do that job, or a broad commitment to a sustainable international economic community. It was, of course, all these things, and to understand it and its success we need to tell all three of these stories of its origins.