Review: [Untitled]

Reviewed Work(s):
The Bretton-Woods-GATT System: Retrospect and Prospect After Fifty Years. by Orin
Kirschner
Barry Eichengreen

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

Stable URL:
http://links.jstor.org/sici?sici=0022-0507%28199612%2956%3A4%3C968%3ATBSRAP%3E2.0.CO%3B2-1

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 Reuiezus of Books

far lower, but also the French attempts at systemic disruption of the system might not have
occurred.
Kirshner studies other intriguing experiences, including the U.S. monetary war on
Panama in the late 1980s. Although a military invasion followed, the Noriega regime very
nearly toppled from the monetary blows. Also he provides a most thorough and original
analysis of the 1956 Suez Crisis, arguing that it was U.S. monetary warfare against the
United Kingdom-the sale of British pounds by the Federal Reserve Bank of New York,
the threat to block U.K. access to the financial resources of the International Monetary
Fund, and the promise of financial assistance should withdrawal occur-that induced the
United Kingdom and France to accept a cease-fire and withdraw from Egypt. A
counterfactual history is in order. What if the United States had remained neutral (the
British and French woefully miscalculated worst-case scenario)? With the Nasser regime
brought down, a Western-oriented government would have avoided Soviet economic and
military aid. Subsequent Mideast wars, or at least Egyptian involvement, might not have
occurred, and Mideast peace might have been achieved at an early stage.
Impressive to the economic historian is the author's analysis of examples of missed
opportunities to practice monetary warfare: by the League of Nations against Italy in 1935
and 1936, by the United States in favor of Italy from 1946 to 1948, by South Africa against
Britain from 1920 to 1950, and by the Soviet Union against the West during the Cold War.
All in all, this book provides economists, historians, and political scientists with fascinating
case studies of both the utilization and nonutilization of monetary power.
H. OFFICER,University of Illinois at Chicago
LAWRENCE

The Bretton-Woods-GATT System: Retrospect and Prospect Afier Fi& Years. Edited by Orin
Kirschner. Armounk, NY: M. E. Sharpe for the Institute for Agriculture and Trade
Policy, 1996. Pp. xiii, 321.

All too often, outstanding conferences end up producing mediocre books. Here we have
a more unusual phenomenon: a dismal conference that produced a splendid book.
The volume brings together contributions by more than 20 founding fathers of the three
so-called Bretton Woods institutions: the International Monetary Fund, the World Bank,
and the General Agreement on Tariffs and Trade. Their papers were commissioned to
mark the fiftieth anniversary of the Bretton Woods Conference. Contributors include
Edward Bernstein, chief technical adviser, enfant tem'ble and executive secretary of the U.S.
delegation; Victor Urquidi, member of the Mexican delegation; Roberto Campos, member
of the Brazilian delegation; Simon Reisman, member of the Canadian delegation to the
founding sessions of the GAlT; Harlan Cleveland, who served with the U.S. Board of
Economic Warfare and Foreign Economic Administration; Alec Cairncross of the U.K.
Board of Trade; and Isaiah Frank, Jacob Kaplan, and Raymond Vernon, all of whom were
with the U.S. State Department at the time of the conference. Their illustrious subsequent
careers will be familiar to readers of this J o u R ~ ~ ~ - B e r n s t e ias
n first director of research
at the IMF, Urquidi as president of El Colegio de Mexico, Campos as ambassador to the
United 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,
Minnesota, and Harvard. One could go on. The point is that it is difficult to think of another
collection of authors so illustrious and well qualified to speak to the history and future
prospects of the Bretton Woods institutions. The conference organizers should be
commended for bringing them together.
The picture the contributors paint is one of a remarkable intellectual and practical
achievement. The Bretton Woods Agreement, they remind us, was concluded despite
serious disagreement between members of the U.S. and European delegations. It was
 Reviews of Books

ratified despite serious reservations about its gold-standard-like provisions in the British
House of Lords and about its departure from gold-standard rules in the U.S. Congress. As
authors like Mikesell emphasize, the structure it bequeathed was successfully adapted to
circumstances never anticipated at Bretton Woods: the Marshall Plan, which usurped the
World Bank's responsibility for European reconstruction and whose provisions barred the
IMF from making loans to recipients of U.S. aid; the European Payments Union creating
a regional mechanism for balance-of-payments adjustment and finance; the failure of the
United States to ratify the charter of the International Trade Organization; and the
collapse 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 the
postwar world and hint that they were consciously attempting to create a structure capable
of adapting to unanticipated contingencies. They provide much food for thought for those
seeking to extend the recent academic literature on the subject by John Odell, John
Ikenberry, and others.
In addition, they convey a vivid sense of what it must have been like to be present at the
creation. The British were continually frustrated by the all but total autonomy with which
competing U.S. government agencies were permitted to develop their own plans for
postwar stabilization and reconstruction. The British were led to couch their own proposals
in multilateral terms for fear that bilateral negotiations would give vent to the United
States' protectionist inclinations. Once the Bretton Woods Conference convened, the
delegates worked incessantly, on fewer than five hours of sleep a night. The British and
American delegations dominated the proceedings to a remarkable extent; the developing
countries were forced to defer to their opposition to the stabilization of commodity prices
and to a monetary role for silver as well as gold. Similarly, the British were able to rebuff
India's attempts to give the Fund authority to restore the convertibility of the sterling
balances. 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 as
the book. Understandably, no one who was invited could resist visiting the Mount
Washington Hotel in Bretton Woods, New Hampshire, at the height of the leaf-turning
season. 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 was
attended by a younger generation of granola liberals, mostly in their twenties, associated
with the sponsoring Institute for Agriculture and Trade Policy. (In addition there was a
handful of commentators from academia; by the end of the weekend we were referring to
ourself as the "middle-aged generation.") Although the motivation for the conference was
to encourage a dialogue between the older and younger generations, sessions were marked
by the complete inability of the two groups to communicate. The founders described the
limits of wartime planning and the efficiency advantages of markets but also the need for
institutions to structure their successful operation. The younger generation characterized
markets and international institutions as the problem rather than the solution. They called
for abolishing the IMF and the World Bank and substituting a new regime in which
economic development was halted in order to maximize environmental quality and in which
first-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 latter
is a remarkable historical document containing much thought-provoking analysis. It is well
worth its modest purchase price.
University of California, Berkeley
BARRYEICHENGREEN,