Narrowed Vision

The Economic Government of the World, Martin Daunton, 2023.

Mid-Ocean, Lyonel Feininger, 1937.

Bretton Woods. A shorthand for a conference which ultimately became a synecdoche for the post-war economic order, few proper nouns carry such historical weight. The Bretton Woods Agreement of 1944 was, however, fairly narrow—an agreement on a new monetary system of fixed exchange rates and the establishment of two key institutions, the World Bank and the IMF, to support it. It left many of the most important economic issues—trade, labour, and, perhaps most of all, development—largely off the table. The most emblematic agreement of the immediate post-war era is as remarkable for what it excludes as what it includes.

Martin Daunton’s 2023 The Economic Government of the World is another one of those monster tomes which I have such a penchant for, weighing in at over 800 very dense pages. I’ve reviewed one of Daunton’s books before, his history of taxation in Britain, Just Taxes, a fine-grained look into the debates both within and around the British civil service over taxes in the twentieth century. The Economic Government of the World is methodologically similar, as it too takes a careful look into the “heart of government” to explain why decisions were made as they were. But here, Daunton takes on a much grander subject: the full ambit of international economic negotiations from the ill-fated 1933 World Economic Conference up until 2008. As a result, I am again compelled to split this review into two. This part will cover the period from the World Economic Conference to the failure of the Havana Charter, which sought to establish an International Trade Organisation (ITO), in 1950: the period in which the bases and boundaries of the Bretton Woods era were fought out.

Daunton’s book speaks to many themes shared by the monograph I discussed last time, Robert Yee’s The City’s Defence; most of all the focus on how the challenges and failures of the interwar era not only reshaped the global economy, but also how the global economy was governed. As Daunton writes, his aim “is to show why the international institutions took the form they did because of the circumstances of the 1930s and 1940s”. The Economic Government of the World is also an unashamedly contemporary book (a little too contemporary, perhaps—the book’s epilogue is a breathless summary of recent events that borders on glib). But Daunton is keen to stress the relevance of his narrative—about how the global economy was remade, again and again, during the twentieth century— to the attempts at remaking the structures of global economic government of our own time.

The 1933 World Monetary and Economic Conference is fundamental for Daunton. Its failure, he argues, was a formative influence on international economic policymaking for decades. Convened in London at the height of the Depression, the conference sought to generate agreement amongst a broad group of nations on all the core economic issues of the time, especially monetary and trade policy. According to Daunton, it was “a model of what not to do”, and “a low point of international collaboration”. With all issues linked together, agreement was almost impossible, as disagreements on trade blocked agreement on monetary issues and vice versa. The only substantive deal to come out of the conference was a currency stabilisation agreement between the American, British, and French central banks. But it was blown apart by Roosevelt’s ‘bombshell’ message of 3 July 1933 which, much to the delight of Keynes, saw the US president repudiate any commitment to currency stabilisation that might impede domestic economic recovery.

With the expansive, multilateral model of the World Economic Conference discredited, a different approach to finding (or imposing) agreement had to be found. An alternative would come from a perhaps unlikely place: the ‘Lend-Lease’ negotiations between Britain and the United States in the first years of the Second World War. Lend-Lease—the 1941 arrangement by which the United States supplied Britain (and later the other Allies) with war materiel without immediate payment—is part of Second World War myth, and not generally remembered as particularly controversial. But behind closed doors there was much disagreement; in particular, over ‘Article VII’, which asked Britain to commit to “the elimination of all forms of discriminatory treatment in international commerce"—a direct affront to the system of tariffs, ‘imperial preference’, which held the British Empire together. Rather than derailing Lend-Lease, however, the issue was debated privately, largely between Keynes on the British side and Harry Dexter White on the American side: the same two figures who would dominate Bretton Woods. Agreement would be found when Roosevelt more or less told the British they wouldn’t have to take their Article VII commitment too seriously.

The ‘lessons’ of the World Economic Conference and Lend-Lease are evident in Bretton Woods—in what goals were set, how negotiations were structured, and what was shunted to the side. For starters, Bretton Woods was, almost from the outset, mainly about the monetary question: a fixed exchange rate system, anchored to the dollar, and the institutions to support it. The agenda was narrow, the participants other than Britain and the US largely peripheral, and the meat of the bargain was settled bilaterally, like Lend-Lease, well before the conference itself.

But the consequence of this strategy for reaching agreement on the monetary issue—which, for policymakers scarred by the Great Depression, was existential—was the sidelining of all those questions which could not be first agreed by Britain and the US behind closed doors. The most obvious of these questions is trade, but as Daunton points out, labour and development faced a similar situation. Trade was too entangled with imperial preference and the conflicting interests of agricultural importers and exporters to be settled at Bretton Woods, and was punted to the conference eventually convened in Havana in 1947. The resulting Havana Charter was ambitious, but unable to secure ratification in a hostile US Congress, the Truman administration quietly abandoned it in 1950, leaving the narrower General Agreement on Tariffs and Trade (GATT), originally conceived as a stopgap, as the de facto trade regime for the next four decades.

Many countries represented at Bretton Woods lobbied for a more serious effort on the issue of development—in particular, India, China (who actually had the largest delegation after the US) and the Latin American nations. The object of their interest was the International Bank for Reconstruction and Development, and, perhaps unsurprisingly, the extent to which the remit of the Bank would be ‘reconstruction’ or ‘development’. They also pressed to amend the IMF’s articles, and for international commodity agreements. In the end, however, little would come of this. The IMF revisions were mostly lip service, the Bank’s ability to lend to developing countries remained severely restricted, and commodity agreements never got off the ground. The voices of countries grappling with poverty were not allowed to interfere with agreement amongst wealthier countries facing balance-of-payments issues.

Other than Britain and the United States, in fact, it is Australia which features most prominently in Daunton’s telling of the pre-war and wartime economic negotiations, especially when it comes to labour and trade. Even speaking as something of a specialist on Australian economic history of this era, that was not something I expected. But in retrospect it makes perfect sense. Australia was a rich, white, Anglophone Dominion, but also a commodity-exporting economy whose vulnerabilities looked rather more like those of a developing country than those of its metropolitan partners. The trauma of the 1930s, when collapsing wool and wheat prices had forced a brutal deflationary adjustment, was fresh in the minds of its wartime Labor government. At the 1944 International Labour Organisation (ILO) conference in Philadelphia, Australia pushed hard for the explicit inclusion of full employment as a foundation of the post-war order, arguing that small open economies dependent on commodity exports could not easily insure themselves against demand shocks originating in the metropole, and so the metropole had to be bound to maintain demand. In this mission, Australian negotiators frequently clashed with their American counterparts. In a strange way, Australia became a spokesperson, of a sort, for the nations who were put to the side as Britain and America remade the world—if a particularly racist one.¹

The Economic Government of the World illustrates well why we speak of the Bretton Woods era, and not the Havana era. Daunton identifies how the legacy of failure left by the inability of states to govern the world economy during and after the Great Depression, combined with the uniqueness of a historical moment in which the United States and Britain were able to, so to speak, bilaterally impose a multilateral order, produced the conditions which enabled the remarkable successes (and equally remarkable failures) of what we might call the ‘Bretton Woods moment’. A historian to a fault, it is the historical contingency of what was achieved, squandered, and neglected in the mid-twentieth century which Daunton stresses most.

I am left wondering, however, what we are supposed to do with such a precise understanding of the context surrounding Bretton Woods. If Daunton’s book was an unapologetic historical monograph, this would not be an issue—great history is great history. But this book is much more ambitious (it is titled The Economic Government of the World, after all). As I’ve mentioned, Daunton has a keen eye to the present and the geopolitics of our moment, which he clearly means to ‘explain’ in a substantial way. But it is largely his illustration of the myriad ways in which the situation of 1933, 1941, 1944, and 1947 is radically different to our own which sticks with me. Daunton is too much the historian to fully commit to playing the role of theorist. His description overshadows his explanation, and The Economic Government of the World is, to an extent, one damn negotiation after another. That suits me, as I much prefer my history under- versus over-theorised. But it means Daunton’s book cuts a more modest figure in reality than its title suggests.

1. Daunton shows how, apart from than their radical Keynesianism, a key factor in the outspoken views of Australian politicians and negotiators was a concern that the world would force them to abandon the White Australia policy.