Swiss Derivatives Review: Bretton Woods Transcripts

Jacques de Larosière and Steve H. Hanke’s preface to The Bretton Woods Transcripts was recently published in the Swiss Derivatives Review.

The authors attribute the success of the Bretton Woods Conference to a set of ideas that attracted a consensus; a group of prepared and capable participants; and a leader, namely the United States, who was prepared to lead.

Mr. de Larosière was Managing Director of the International Monetary Fund from 1978 to 1987.  He was also formerly Undersecretary of Monetary Affairs in the French Treasury (1974–1978), Governor of the Banque de France (1987–1993), and President of the European Bank for Reconstruction and Development (1993–1998).  He is currently Chairman of Eurofi.

Steve H. Hanke is a Professor of Applied Economics at The Johns Hopkins University in Baltimore and a Special Counselor at the Center for Financial Stability in New York.

The Bretton Woods Transcripts, edited by CFS Senior Fellow Kurt Schuler and CFS Research Associate Andrew Rosenberg, offer a front row seat at the conference that has shaped the international monetary system for nearly 70 years.

The de Larosière and Hanke preface in the Swiss Derivatives Review.

Lionel Robbins and Bretton Woods

I only recently became aware of Susan Howson’s biography Lionel Robbins, published in 2011. Robbins, perhaps best known today for his Essay on the Nature and Significance of Economic Science (1932), was a British delegate to the Bretton Woods conference. He also wrote a number of other important books and articles; was instrumental in making the London School of Economics a world leader in economics; became chairman of Britain’s National Gallery; served as a director of the Financial Times; and had many other achievements. For his contributions he was given a peerage as Lord Robbins of Clare Market (Clare Market being the area where the London School of Economics is).

Howson’s biography exceeds 1,000 pages, so I am reading only select chapters. Its treatment of Bretton Woods is brief, but elsewhere in the book I came across two interesting tidbits. One is that Robbins was asked to be the first chief economist of the IMF. Harry Dexter White, among others, was keen on having him in the job (see page 646 of Howson’s book). Robbins was, however, too attached to the London School of Economics to leave it. He continued as a teacher and administrator there until retiring, and remained associated with the school until his death.

The other tidbit is that Kenneth Boulding was a student of Robbins during the brief time Robbins taught at the University of Oxford. Boulding was later a professor of economics at the University of Colorado, where CFS Special Counselor Steve Hanke (coauthor of the preface to The Bretton Woods Transcripts) was one of his students, and later still a professor at George Mason University, where I heard him lecture.

Brett Wood, writer

Atish Rex Ghosh, who works at the IMF, also writes novels. In the calm mid 00’s, after finishing a manuscript about an international financial crisis, he had trouble finding a publisher because the central idea seemed implausible. He wound up publishing it initially in Britain under the pen name Brett Wood, a play on “Bretton Woods,” of course. After the financial crisis of 2008-09, fact no longer seemed stranger than fiction, and an American publisher issued an edition by Rex Ghosh. The book is called Nineteenth Street NW, after the street that runs past the IMF and World Bank headquarters buildings, and it was the subject of an article in the New York Times.

Transcribing The Bretton Woods Transcripts

At Bretton Woods, stenographers recorded by hand what the conference delegates said. The stenographers were U.S. government employees, apparently all women. (Even though World War II was on, opportunities for women to advance to positions of high responsibility were limited. There was apparently only one female delegate at the conference, a Mrs. L. Gouseva from the Soviet Union.) The stenographers then took their notes to a typing pool, where they or other typists, again apparently all women, typed the notes, on manual typewriters of course, and sometimes made corrections.

It is evident from the typed transcriptions that the stenographers sometimes had difficulty following the conference delegates, whether because the subjects were highly technical and unfamiliar to them, the accents of some delegates were hard to understand, or the acoustics of the room were bad. Fortunately, many of the gaps and mistakes were easy for Andrew Rosenberg and me to fix, because the missing pieces were evident from the context, and unlike the stenographers we had ample time to try to puzzle out what the delegates were saying.

To transcribe the transcriptions ourselves, and convert them from paper to an electronic format, we dictated them with voice recognition software. Andrew did most of the work dictating the transcripts. He used Dragon NaturallySpeaking version 11, a well-known program. For a few small patches, I used a “lite” version of Dragon that comes free with the iPad. Unless you are quite a good typist, dictation is faster. Even though you have to go back and correct errors (“disequilibrium” may become “this equilibrium,” for instance), Dragon makes no more errors in dictation than I normally make as a typist, and the computer, fortunately, permits making an infinite number of mistakes on the way to a clean final copy.

Bretton Woods and Brazil Interview, Part Two

This post concludes an e-mail interview I had with Cyro Franklin de Andrade, editor of the Brazilian magazine Valor econômico. The first part is in a previous post. Questions are in italics, answers are in Roman (regular) type.

8. You say that “talented delegates played important roles out of proportion of the small size of their countries”. Could you please elaborate on this?

The European countries at the conference except for the Soviet Union and the United Kingdom were all under German occupation. The delegates from those countries represented governments in exile, which had no domestic political power. In addition, many of them were from countries that, even after the war ended, could not be expected to have great importance to the world economy. Even so, because of their keen intellects, delegates from Greece (Kryiaks Varvaressos), Norway (Wilhelm Keilhau), and Czechoslovakia (Ervin Hexner) had important jobs as committee “reporters” (who summarized events in lower-level committees to the higher-level “commissions”). They also were active in debate as delegates of their countries, and they influenced the opinions of the other delegates. From Latin America, Luis Machado of Cuba was also such a delegate.

9. Another criticism is that the Americans and the British sought to avoid voting, preferring to seek decisions by consensus. It would be a way of avoiding the influence of Latin American countries, which represented more than half of the countries and could form majority with the support of only a few Europeans. Is this true? Can it be perceived in the transcripts?

The delegates understood that deciding important questions strictly by votes, rather than by first achieving consensus, would be counterproductive, and there is discussion of that point in the transcripts. Most of the capital for the IMF and World Bank would come from the largest economies, which could refuse to participate if outvoted at the conference by the smaller economies. On the other hand, the large economies understood that the small economies could equally refuse to participate if the large economies tried to dictate matters. So, it was clear that without a consensus across the large and small economies alike, the IMF and World Bank would not be the truly worldwide institutions that the countries participating wanted them to be. The conference was a first step in seeing whether consensus could be achieved. It was, and after the IMF and World Bank began operations, they operated, and to a large extent have continued to operate, on the basis of consensus.

10. The method of avoiding votes by pausing for objections has been attributed to Keynes, and sometimes very briefly indeed, avoiding the hazard of debate. Is this true? Is this apparent from the transcripts?

Keynes was eager to move quickly. The IMF was the top priority of the Bretton Woods conference. Until just before the conference, it was uncertain whether an agreement on the World Bank was even possible. The conference focused on the IMF in its first days, and did almost nothing concerning the World Bank until halfway through the conference. Ultimately, the important issues concerning the World Bank do seem to have been debated, but unfortunately no transcripts of those meetings exist.

11. Committee 3, on “Organization and Management of the Fund”, was chaired by Arthur de Souza Costa, Brazil’s Minister of Finance. Why was he chosen for this task? Is there any special detail you would like to mention on how Souza Costa has acted in this role?

The organizers of the conference wanted broad participation, not domination by a few countries. They were careful to ensure that important jobs, such as committee chairmanships, were distributed among many countries. Therefore Brazil, which was already a large economy among what we would today call the emerging markets, was almost certain to receive one of the important jobs. Arthur de Souza Costa was the leader of the Brazilian delegation, experienced in financial matters, and spoke good English, the official language of the conference.

As the chairman of Committee 3, my impression is that he had a “light touch” as chairman: he kept the committee on schedule but was content to let the more active delegates and the committee’s “reporter,” Ervin Hexner of Czechoslovakia, shape the debate.

As you may be aware, in late 1944, after returning to Brazil, de Souza Costa gave a speech that was published as a pamphlet, Bretton Woods e o Brasil. Unfortunately–from my perspective–it says very little about his personal experiences at the Bretton Woods conference; it is mainly about the rationale for the IMF and the World Bank. Perhaps there is material in Brazilian archives and personal papers from such people as him, Roberto Campos, Eugênio Gudin, or Francisco Alves dos Santo-Filho that a Brazilian researcher could use to deepen our knowledge about the conference.

Bretton Woods Talk in DC Wednesday

I will talk about The Bretton Woods Transcripts on Wednesday, January 20 to an informal group called the Prosperity Caucus. The talk will be at the Heritage Foundation, 214 Massachusetts Ave., N.E., Washington, D.C. Union Station is less than a 10 minute walk away. Doors open at 6 p.m. I will start talking at about 6:30 p.m. for 30-35 minutes, then take questions. Contrary to the announcement on the Prosperity Caucus Web site, Allan Meltzer will not be commenting. He was scheduled at the original talk, cancelled because of Hurricane Sandy, but can’t come Wednesday.