Engineering of global monetary orders: gold’s role within the Bretton Woods system

How do we explain the role designated for gold within the Bretton Woods system? At the time of the negotiations, economic scholarly opinion was already turning away from gold. It is a puzzle, therefore, that gold was designated a key role in the Bretton Woods system. The Bretton Woods regime could have unfolded in many ways: the system could have been less gold-centric while still complying with US interests. A different approach could have prevented the calamities of the gold standard. Among the proposals, the key currency could even have been bancor, yet fashioned in a way that maintains US ascendancy. Why did we have a gold-centric standard in 1944? This project focuses on the creation of the Bretton Woods system with a focus on gold. It looks at the economic ideas and strategies of two key negotiators, Harry Dexter White and John Maynard Keynes, to emphasize a unipolar monetary world order (White’s plan) versus a multipolar one (Keynes’s plan). It also studies on-the-ground negotiations at the Atlantic City Conference directly preceding the Bretton Woods, and the Bretton Woods Conference itself. I trace the role of gold, bearing in mind agency versus structure – that is, the role played by pivotal individuals and their ideas versus structural disparities and powers between the countries they represent (G. John Ikenberry versus Richard Gardner). I also consider the singular versus multilateral origins of the Bretton Woods (Benn Steil versus Eric Helleiner). This study aims to reconsider the intellectual underpinnings of the Bretton Woods system; it also draws generalizable insights into how monetary systems get designed, and if and how critical agents at these key moments exert agency. Two key questions emerge here. First, why White? Second, why focus on gold? White’s role before and during the negotiations warrants scrutiny. As the Director of Monetary Research, Assistant to the Secretary, and the person in charge of the Bretton Woods drafting and international economic policymaking, White was the most significant individual working at the US Treasury at the time. He was also a member of Secretary of the Treasury Morgenthau’s “9:30 staff”, which consisted of senior officials at the Treasury who briefed Morgenthau daily. While the world was in flux and the opportunity for a change arose, White’s ideas became consequential. Morgenthau stated, “He will be in charge of all foreign affairs for me… I want it in one brain and I want it in Harry Dexter White’s brain” (Skidelsky, 2000). White agreed with Keynes on a number of issues, but the differences in their ideas proved consequential during the construction of the Bretton Woods regime. The Bretton Woods system’s focus on gold is puzzling given the existence of alternatives. For one, the challenges of gold in international economic systems were already understood at the time (Lamoreaux & Shapiro, 2019). Further, some economists suggested breaking the link between gold and the reserve currencies (Lamoreaux & Shapiro, 2019). Successful experiments had already shown that an external standard wasn’t needed to stabilize currencies (Lamoreaux & Shapiro, 2019). For instance, the Tripartite Agreement of 1936 stabilized currencies in relation to one another, while in the sterling area, currencies were stabilized in relation to the pound, meaning that they were “pro-gold-free” arrangements (Eichengreen, 2019). This thesis hence aims to answer why gold was designated such a role in the Bretton Woods system.