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Review: [Untitled]

Reviewed Work(s):

The Bretton-Woods-GATT System: Retrospect and Prospect After Fifty Years. by OrinKirschner

Barry Eichengreen

The Journal of Economic History, Vol. 56, No. 4. (Dec., 1996), pp. 968-969.

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Reuiezus of Booksfar lower, but also the French attempts at systemic disruption of the system might not haveoccurred.Kirshner studies other intriguing experiences, including the U.S. monetary war onPanama in the late 1980s. Although a military invasion followed, the Noriega regime verynearly toppled from the monetary blows. Also he provides a most thorough and originalanalysis of the 1956 Suez Crisis, arguing that it was U.S. monetary warfare against theUn ited Kingdom-the sale of British pou nds by the Fede ral Reserve Bank of New York,the threat to block U.K. access to the financial resources of the International MonetaryFund , and the promise of financial assistance should withdrawal occur-that induced theUnited Kingdom and France to accept a cease-fire and withdraw from Egypt. Acounterfactual history is in order. What if the United States had remained neutral (theBritish and French woefully miscalculated worst-case scenario)? With the Nasser regimebrought down, a Western-oriented government would have avoided Soviet economic andmilitary aid. Su bseque nt Mideast wars, or at least Egyptian involvement, might not haveoccurred, and Mideast peace might have been achieved at an early stage.Impressive to the econom ic historian is the auth or's analysis of examp les of missedopportunities to practice monetary warfare: by the League of Nations against Italy in 1935and 1936, by the U nited State s in favor of Italy from 1946 to 1948, by South Africa againstBritain from 1920 to 1950, and by the Soviet Un ion against the W est during th e C old Wa r.All in all, this book p rovides economists, historians, and political scientists with fascinatingcase studies of both the utilization and nonutilization of monetary power.

LAWRENCEH. OFFICER,University of Illinois at ChicagoThe Bretton-Woods-G ATT System: Retrospect and Prospect Afier Fi& Years. Ed ited by O rinKirschner. Armounk, NY: M . E. Sharpe for the Institute for Agriculture and TradePolicy, 1996. Pp. xiii, 321.

All too o ften, outstanding conferences en d up producing mediocre books. He re we havea more unusual phenomenon: a dismal conference that produced a splendid book.T h e volume brings together co ntributions by m ore tha n 20 founding fathers of th e th reeso-called Bretton Woods institutions: the International Monetary Fund, the World Bank,and the General Agreement on Tariffs and Trade. Their papers were commissioned tomark the fiftieth anniversary of the Bretton Woods Conference. Contributors includeEdward Bernstein, chief technical adviser, enfant tem'ble and executive secretary of the U .S.delegation; Victor Urquidi, me mb er of the M exican delegation; Rob erto C ampos, mem berof the Brazilian delegation; Simon Reisman, member of the Canadian delegation to thefounding sessions of the G A l T ; Harlan Cleveland, who served with th e U.S. Board ofEconom ic Warfare and Foreign Eco nom ic Adm inistration; Alec Cairncross of the U .K.Boa rd of Trad e; and Isaiah Frank, Jacob K aplan, and Raym ond Ve rnon, all of whom werewith the U.S. State Dep artm ent at th e time of the conferen ce. Their illustrious subsequentcareers will be familiar to readers of this J o u R ~ ~ ~ - B e r n s t e i ns first director of researchat the IM F, Urquidi as president of El Colegio de Mexico, Cam pos as ambassador to theUnited States and United Kingdom, Reisman as deputy Canadian minister of finance,Kaplan as official historian of the European Payments Union, and Frank, Mikesell,Cairncross, Cleveland, and Vernon as professors at John Hopkins, Oregon, Oxford,Minn esota, and H arvard. O ne could go on . The point is that it is difficult to think of a noth ercollection of authors so illustrious and well qualified to speak to the history and futureprospects of the Bretton Woods institutions. The conference organizers should becomm ended for bringing them together.The picture the contributors paint is one of a remarkable intellectual and practicalachievement. The Bretton Woods Agreement, they remind us, was concluded despiteserious disagreement between members of the U.S. and European delegations. It was

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Reviews of Books

ratified despite serious reservations about its gold-standard-like provisions in the BritishHouse of Lords and about its departure from gold-standard rules in the U.S. Congress. Asauthors like Mikesell emphasize, the structure it bequeathed was successfully adapted tocircumstances never anticipated at Bretton Woods: the Marshall Plan, which usurped theWorld Bank's responsibility for European reconstruction and whose provisions barred theIMF from making loans to recipients of U.S. aid; the European Payments Union creatinga regional mechanism for balance-of-payments adjustment and finance; the failure of theUnited States to ratify the charter of the International Trade Organization; and thecollapse of the postwar system of pegged-but-adjustable exchange rates. In a sense,resiliency and adaptability were key to the Bretton Woods System's success. The contrib-utors remind us of the profound uncertainty that existed in 1944 about the nature of thepostwar world and hint that they were consciously attempting to create a structure capableof adapting to unanticipated contingencies. They provide much food for thought for thoseseeking to extend the recent academic literature on the subject by John Odell, JohnIkenberry, and others.

In addition, they convey a vivid sense of what it must have been like to be present at thecreation. The British were continually frustrated by the all but total autonomy with whichcompeting U.S. government agencies were permitted to develop their own plans forpostwar stabilization and reconstruction. The British were led to couch their own proposalsin multilateral terms for fear that bilateral negotiations would give vent to the UnitedStates' protectionist inclinations. Once the Bretton Woods Conference convened, thedelegates worked incessantly, on fewer than five hours of sleep a night. The British andAmerican delegations dominated the proceedings to a remarkable extent; the developingcountries were forced to defer to their opposition to the stabilization of commodity pricesand to a monetary role for silver as well as gold. Similarly, the British were able to rebuffIndia's attempts to give the Fund authority to restore the convertibility of the sterlingbalances. These are but a sampling of the fascinating details that emerge from the authors'first-hand accounts.

The conference from which these papers were taken was by no means as satisfactory asthe book. Understandably, no one who was invited could resist visiting the MountWashington Hotel in Bretton Woods, New Hampshire, at the height of the leaf-turningseason. But what they found was something of a surprise. Along with the founding fathers(or "older-generation leaders" as they were called by the organizers), the conference wasattended by a younger generation of granola liberals, mostly in their twenties, associatedwith the sponsoring Institute for Agriculture and Trade Policy. (In addition there was ahandful of commentators from academia; by the end of the weekend we were referring toourself as the "middle-aged generation.") Although the motivation for the conference wasto encourage a dialogue between the older and younger generations, sessions were markedby the complete inability of the two groups to communicate. The founders described thelimits of wartime planning and the efficiency advantages of markets but also the need forinstitutions to structure their successful operation. The younger generation characterizedmarkets and international institutions as the problem rather than the solution. They calledfor abolishing the IMF and the World Bank and substituting a new regime in whicheconomic development was halted in order to maximize environmental quality and in whichfirst-world values were foisted on third-world populations by beneficent social planners,namely themselves. It is possible to detect echoes of this view in the editor's introduction,which cites economic integration, international financial markets and multinational corpo-rations as creating problems whose solution has eluded the Bretton Woods institutions.

In the end, this slightly jarring note does not diminish the impact of the book. The latteris a remarkable historical document containing much thought-provoking analysis. It is wellworth its modest purchase price.

University of California, BerkeleyARRY ICHENGREEN,