The Bretton Woods Conference: Birth of a Monetary System

PART I

One participant described it as ‘a quiet, green and soothing garden of the gods, circled by mountain ramparts’. A press reporter grew lyrical as he surveyed the scenery:

Viewed from this wicker chair on the curving porch of the Mt. Washington Hotel the Presidential range of New Hampshire etches zigzag indentations into the azure sky. A dark line against a twisting path of earthy green – that of the merging tracks of the world-famous cog railroad – climbs to the summit of New England’s highest peak, Mt. Washington. On its crest, Tip-Top House and the radio tower stand out like a village in a mirage. In the foreground the darker greens of pine and hemlock vie with the lighter shades of oaks and birch. Set in the midst of these the brilliant green of one of the golf fairways forms a grassy floor. A sand trap glistens in the morning sun. Directly below, the wild Ammonoosuc plunges unseen but noisily on its way to join the sea.

The majestic beauty of the surroundings was in striking contrast to the temporary bedlam created by the arrival of about 700 people from more than forty countries. In addition to the official delegates, there were advisers, assistants, stenographers, newsmen, observers, technicians, and so on. Many of them spoke no English at all. The trains that brought them to Bretton Woods were dubbed ‘the Tower of Babel on wheels’.

The Mount Washington Hotel, one of the most luxurious summer hotels in the world, had been closed for two years. Of Spanish Renaissance architecture, the hotel was surrounded by the White Mountain National Forest, which covers nearly 1 million acres. The management had only about a month to prepare for the onrush. Painters and cleaners were still busy applying the finishing touches. Rooms were mixed up, offices for the delegates had to be hastily improvised, and there was a general feeling of ineffective goodwill. A group of Army Military Police joined in the work, and even outworked some of the hired labour in the final cleaning of the premises.

Bretton Woods, the postal address of the hotel, was only a stop on the railway. It had no store, not even a main street. The hotel was self sufficient with its own power-plant, dress shops, beauty parlour, bowling alleys, barber shop, and stock ticker-tape. There were two cinemas, a swimming pool, tennis courts, and stables. A church was located in the hotel grounds.

The extraordinary bustle and confusion regarding the allocation of rooms, complicated by the lack of staff, hot water, beds, and so on, caused at least one casualty on the first day of the conference: the news went around that the new manager of the hotel had either drunk himself out of his job, or else had given up in despair and left.

While the foreign delegations acquainted themselves with their new surroundings, Morgenthau and White set to work. Shortly after their arrival, Morgenthau called a meeting of the American delegates to prepare them for the commission and committee meetings. While some of the delegates, such as Dean Acheson and Marriner Eccles, had been exposed to the plans before the conference, most them knew practically nothing, except what they may have read in the press or heard in Congressional committees. There was Fred Vinson, ‘the judge’; Leo Crowley, Administrator of the Foreign Economic Administration; Miss Mabel Newcomer, professor at Vassar College; Representatives Brent Spence and Jesse Wolcott; Senators Robert Wagner and Charles Tobey; and Edward Brown, president of a large Chicago bank, ‘a large, industrious, outspoken man who represented the tractable element of the banking community’. He had been at Atlantic City.

Morgenthau asked White to explain the salient points regarding the Fund and the Bank, and to give ‘a broad outline of what the American experts feel as in the interest of our country as a result of the work in Atlantic City’.

The purpose of the meetings in Atlantic City, White said, had been purely exploratory. It had been useful to ascertain the differences of opinion, the major issues troubling the various delegates, so as to provide a basis for discussion and determine the position to take on the various points. He would confine himself to the major issues and differences:

With the Fund, the first major issue is the question of quotas…. In the first place, all countries want larger quotas, but the countries that will give us the most trouble … are as follows: China insists that she shall have fourth place….France is insisting on fifth place and India is insisting on fifth place … and has sent a pretty high-powered delegation here….The smaller countries all want larger quotas. The most troublesome will be Australia who is participating to all extent far beyond the proper role of a country of her size and importance. . . . The South American countries would like a larger quota. Now, it is the South American countries who in this are going to be important to us for reasons that we will discuss later.

The American position had been that the aggregate quotas would not be more than $8000 million to $8300 million, that the American quota would not be larger than $2750 million, and that the British Empire as a whole would have a little less. ‘Russia will get third place and she will have about ten per cent of the quotas. There is no problem – I mean, there is general agreement there as long as she had third place.’

The next point of importance was the amount of gold to be subscribed. The only problem here was that Russia insisted on a reduction of 50 per cent, and argued that all other countries that had suffered war damage should have a reduction, relative to the amount of destruction suffered. All the invaded countries supported this Russian claim, and Britain, though it had not been invaded, wanted the same treatment.

Then came the question of voting power. The American had taken the position that voting power and quota should approximately be the same. Smaller countries had objected, and wanted to start every country off with 100 votes. But White did not ‘want to budge’.

One of the main points in dispute between the American the British delegations was the degree of flexibility of exchanges and the conditions under which a country could alter its exchange rate. The British, remembering the depression that followed their return to gold, were saying ‘that they are never going to be in a position like that again, in which they are tied to the gold standard and have to suffer a depression merely to suit somebody’s notions on monetary theories’. Those, like Keynes, who had warned against a return to gold, were now completely in the ascendancy, and the whole British people, with the exception of some banking groups, objected to anything that resembled the gold standard. Although the Fund provided for some flexibility, the British wanted more; ‘Our position here is quite the opposite.’ We wanted to prevent a return to the 1930s, with floating exchanges, unilateral decisions exchange depreciation. He realised that, if the British delegation made too many compromises, ‘Parliament will throw it out.’

Edward Brown wanted to know why ‘Russia doesn’t need the Fund. It has a complete system of State trading – state industry. It doesn’t make any difference to them whether the ruble is five cents or five dollars. They want to get some other things; they would like to keep a market for their newly mined gold.’ But White, for reasons which he would point out later, thought ‘the Fund needs Russia’.

Brown also thought that many of the small countries put in claims which they did not expect to get. Morgenthau agreed: the Mexicans would raise the silver question, but only for home consumption, and would not press it too hard. ‘So I mean, these fellows are good horse traders, but I think among our delegates we have a couple of pretty good horse traders, outside myself – I trade cows.’ As for Keynes, he had his hands full with the British Empire. ‘He has an incipient revolution on his hands and … we will let the British Empire fight it out without making us a cat’s paw.’

The next important point of difference, White said, was the pressure on debtor and creditor countries. The other countries had suggested that pressure should be put on creditor countries, and by that they meant mainly the United States. They expected that the United States would continue to export more than it imported, and to drain the world’s gold. So they wanted these creditor countries to adopt a policy which would put less pressure on the exchange of the debtor countries, and ‘enable them to sell more goods here. We have been perfectly adamant on that point. We have taken the position of absolutely no, on that. And that has created a good deal of discussion and will continue to create some.’ The debtor countries, on the other hand, would have to pay deterrent charges, and the more they borrowed from the Fund the higher the charges would be, so that they would be under pressure to put their balance of payments in order. To the objection of one delegate that deterrent charges might accelerate the indebtedness of a country, instead of reducing it, White answered that these charges were low, but that it was necessary to create an inducement for the country to restore equilibrium.

He also explained that there was little risk for the United States in participating in the Fund. The amount of gold would remain stable, and, if a country devalued, it would have to put up more of its currency to make up for the difference.

The British and a number of other nations, White said, had insisted that their access to the Fund’s resources were a matter of right, but the American delegation had persistently taken the attitude that the Board of Directors of the Fund had the power to refuse the Fund’s facilities, even though the quota might be available. That was the way the provision now read, ‘but it reads in a way that is not too easy to see if you read it quickly’. In drafting the provision the lawyers had taken great care, Luxford added; ‘the language gives us clearly that right, but we have tried to avoid emphasizing it more than you have to’. Although there were technical experts at Atlantic City who disputed Luxford’s interpretation. White was certain that he was right.

White also objected to the allegations of those who said that the Fund would go ‘bust’, and that the United States would loose the money it put in. ‘… we have surrounded this thing with protective devices at every point. That doesn’t mean it is without risk.’ If another war broke out, and ‘a country says, “Yes, you have balances here, but try and get them”, nothing can protect you against that kind of relationship’. But, otherwise, ‘Our lawyers have done a job’, White concluded.

If the worse came to the worst, members could always withdraw: ‘we did that for our own sake … most countries feel that it is satisfactory to them, because it enables them quite appropriately to tell their Congress they are sovereign’.

White explained some of the other matters which had not been resolved, and answered the questions of the delegates so as to prepare them to defend the American position in the commissions and committees, or wherever they were being buttonholed by foreign representatives.

Morgenthau recommended, ‘So again, if we play this as a team, if we have any differences, let’s have them here in the room and over the bar … we have gotten off to a good start. We have some very good New Hampshire sunshine and weather, and let’s play this as a team, looking over a broad horizon for future generations.”

THE CONFERENCE GOES TO WORK

On I July the delegates met in the assembly hall for the first plenary session. White had suggested that Morgenthau address the conference for the first time on some other day, so that his statements would not be lost among those of the other delegates, but Morgenthau disagreed. He wanted to get ‘all the folderol over and then you can get down to work’.’

After listening to the message President Roosevelt had sent to the conference, the chairman of the Chinese, Czechoslovakian, Mexican, Brazilian, Canadian and Russian delegations spoke in the name of their countries. After his nomination as president of the conference, Secretary Morgenthau stated that ‘what we do here will shape to a significant degree the nature of the world in which we are to live’. The delegates were not asked to make definitive agreements binding on any of them; they would refer the proposals to their respective governments for acceptance or rejection.

We can accomplish this task only if we approach it not as bargainers but as partners – not as rivals but as men who recognize that their common welfare depends, in peace as in war, upon mutual trust and joint endeavor. We are to concern ourselves here with essential steps in the creation of a dynamic world economy…. This is the indispensable cornerstone of freedom and security. All else must be built upon this. For freedom of opportunity is the foundation for all other freedoms…On battlefronts the world over, the young men of all our united countries have been dying together – dying for a common purpose. It is not beyond our powers to enable the young men of all our countries to live together – to put their energies, their skills, their aspirations into mutual enrichment and peaceful progress.

As had been planned by White, Commission I (International Monetary Fund), of which he was to be chairman, was to be subdivided into four committees. Commission II (Bank for Reconstruction and Development) was to be headed by Keynes. Commission III was to concern itself with ‘Other Means of International Financial Co-operation’.

The four committees of commission I were as follows:

  • Committee I – Purposes, Policies and Quotas of the Fund;
  • Committee 2 – Operations of the Fund;
  • Committee 3 – Organisation and Management;
  • Committee 4 – Form and Status of the Fund.

All the chairmen and reporters of these committees were non-American, They were all referred to as representatives of their respective countries, with the exception of the French, who represented the French Comité. The French resented this, but in the course of the conference some of the differences between General de Gaulle and President Roosevelt were settled in Washington, and the French gradually came to be referred to as French delegates.

As in Atlantic City, each committee was assigned a number of subjects which it had to discuss and, if possible, agree upon. The secretaries of the committees, who were the people White had trained, plus some new ones, trained by White’s pupils, wrote up the minutes of the committee meetings and reported to the commission.

It soon became evident that some of the chairmen and reporters of the committees did not speak English, or spoke it very poorly. ‘The Russian delegate … turned the meeting over to his Canadian colleague as soon as he had made his inaugural speech (in Russian). This sensible procedure has not unfortunately been imitated by other chairmen, with the result that several of the committees moved with maddening slowness.’

Dr E. A. Goldenweiser, director of research and statistics of the Board of Governors of the Federal Reserve System, and a member of the American delegation, brought back these observations:

It was very hard work. The delegates of each country usually met by themselves in the morning. There were always two or three meetings of committees and commissions and sub-committees, and later there would be the big task of having all that combined, written and distributed by the next morning. There was a large force of stenographers and multigraphers who worked day and night. They had shifts and … did an “amazingly good job in taking material that sometimes wasn’t finished until two or three in the morning. One, o f the nice features of the meeting was a little group of Boy Scouts who were acting as pages, and helped a good deal in keeping things moving and distributing things smoothly. …It was a combination of settling various conflicting interests, and at the same time hammering out specific provisions. I am not too familiar myself with all of the provisions. They are inevitably complex because of the subject, and they are written in a legal language, which I have always found it difficult to understand. …

There were a great many varieties of people and a great many varieties of unintelligible English spoken. Most everything was said in what was supposed to be English. The Russians didn’t speak English; neither did their interpreters. The French spoke English but always had trouble in being satisfied that their exact meaning was properly translated by their interpreters. …

The Russians were an interesting group. I could not help feeling that they were struggling between the firing squad on the one hand and the English language on the other. They seemed to be very much afraid of the reactions in their own country, and didn’t dare to make a step without consultation by ‘phone or cable with their Government.

(Dr Goldenweiser was born in Russia, and spent his boyhood there.) He gave this appreciation of Keynes:

the outstanding personality at Bretton Woods was Lord Keynes. He shone in two respects – in the fact that he is, of course, one of the brightest lights of mankind in both thinking and expression and in his ability to influence people, and he shone also by being the world’s worst chairman. He presided over meetings of the Bank in a way that was entirely intolerable because he had his own documents all fixed up so that he could go through in a hurry….He spoke while he was sitting down in a meeting and it was difficult to hear him. He spoke indistinctly when presiding and was impatient of any difference of opinion. His function at Bretton Woods was primarily performed in a suite of rooms on the second floor to which everybody went for inspiration and guidance and compromise.

It might be noted here that Lord and Lady Keynes had their suite just above the rooms occupied by Secretary and Mrs. Morgenthau. The penetrating rhythm of the exercises performed by the prima ballerina, unaware that her routine practising could be heard through the ceiling beneath, occasionally prevented Morgenthau, worried and tense about the outcome of the conference, from going to sleep.

During three weeks the overcrowded hotel would be filled with the extraordinary hustle and bustle of a polyglot conference. More than 700 people had to be accommodated, Since not enough room was available at the hotel itself some had to be lodged at nearby hostelries.

COMMISSION AND COMMITTEE MEETINGS

On 3 July, the second day of the conference, the plenary session was devoted to the selection of permanent Officers, the creation of committees and the election of those who were to direct the activities of the conference. The chairman of the New Zealand delegation presented the nominees for membership of the steering committee and the three main commissions. All we’re unanimously approved.

Commission I was given the task of dealing with the Fund. White told Morgenthau that he would preside over that commission: ‘The importance why we need somebody to chairman this, who knows the complete matter, is that he should prevent coming to a vote on matters which he doesn’t wish to come to a vote on, and in general arranging the discussion in such a way that we are never caught with an agreement among the Commission on something that we don’t want, because then it is too late.’

‘I don’t know anybody more competent’, said Morgenthau.

The secretaries of the committees, who were to write up the minutes of the meetings, were designated by White. They were all Americans. At the beginning of the conference, a memorandum had been distributed to the delegates, which said that the ‘Secretaries, like all other officers of the Conference, are on this occasion international officials and for all practical purposes temporarily lose not only their national identity but their allegiance to the organizations, governmental or otherwise, with which they are affiliated’. This had the ring of true internationalism. They were, in reality, the people who had been trained by White in Atlantic City (or had been trained by people who had been trained there).

Senator Tobey, in his own state of New Hampshire, made a moving speech:

It is our common aspiration, I believe, that, assembled here among these eternal hills, we shall, under a deep conviction of the needs of humanity, discard trivia and refuse to be turned away from our great purpose to give to the people of the world new hope and courage through the constructive results which we pray may come from this historic conference. . . . Every great effort in human history has had its saboteurs, men who utter critic peep and cynic bark. There are some of these around the perimeter of this Conference. … As we confer together here today, amidst the eternal hills, inspired by the sublime beauty around us, and as the shadows of passing clouds above leave their impress for a moment on the slopes of yonder mountains, may the contemplation of the tragic sufferings and sacrifices of every nation bind us together in brotherly love. … Two thousand years ago Christ was hanged on a cross, a spear thrust in his side. …There are nations represented here today who, too, have had their sides pierced and a crown of thorns pressed upon them by the sufferings of war…. Gentlemen, we must not, we cannot, we dare not fail. The hopes and aspirations of the common people of each of our countries rest in us.

With the first committee meetings due to take place on 4 July, the American delegation discussed the strategy to follow. The first and most important question that would be brought up, and in which practically every country was extremely interested, was the table of quotas. No satisfactory formula had been found, and no complete list had been published, although many nations had been told what their quota was to be. The British had been working on it in an effort to increase the quotas of the Commonwealth countries, No delegation could go back home, after a table had been published, and meet the charge that they had been bad negotiators. So it was necessary to come to some agreement with the British before announcing the list of quotas. Australia, said White, was ‘very rambunctious and almost belligerent in the attitude that she should have a much larger quota . . . . There will be a cat-and-dog fight, anyhow, because every country will want to change. Our safeguard is, however, that if the maximum is fixed, any increase that any country gets has to come out of some other country. . . . It will be a struggle between countries.’ One good idea was to hold back a kitty: ‘They will make strong arguments …and if you can give them a little something, they feel that they have negotiated … and I think they feel better.’ Dr Goldenweiser did not think it was a dignified situation for America to be bargaining ‘with all these people about little items of twenty-five or fifty million dollars’. Why not give them a figure and say ‘This is where we stand’, and if there is any change the whole American delegation will have to decide.

‘It would make them mad at us, though’, said Luxford. ‘Why should we be the scapegoat for thirty-nine countries?’

‘That is right’, said White.

The foreign delegates would be told that the total was $8000 million, but the real total would be $8400 million dollars. ‘They have got to fight around a couple of days and get nowhere.’ if you told them in advance that the total would be increased, they would ‘prolong the discussion interminably because they wouldn’t believe that is your final figure’.

The next point concerned the rules under which the committee meetings were to be held. White said he had prepared many alternatives, which usually did not change the substance, but were formulated in more appropriate language. It was not necessary for the United States delegates to take much part in the discussions, ‘but the boys that will be with you will be able to indicate whether they think something ought to be said, but I think you will find that most of the others will want to talk’.

Would the rules of the committee be some ‘catch as catch can’?, Vinson asked. No, they would be very informal, he was told.

‘Just make one general rule’, Dr Goldenweiser suggested, ‘that anybody can talk as long as he pleases provided he doesn’t say anything. Separate the business of the Committee from the talk.’ He thought his remark might be facetious, but it was rather close to what White wanted.

‘You have got to go through the motions’, someone suggested; ‘the Chairman should go through the motions, at least of asking whether there are any’ alternatives because, after all, these are the alternatives of Atlantic City and there were thirty countries not represented’.

The committees met twice every day. The meetings were staggered, to enable all national delegations to be represented adequately. The committees on the Fund devoted most of their time ironing out technical differences rather than establishing broad lines of agreement. The basis of all discussions was the joint statement and the alternatives submitted by the various countries, Keynes, after he saw’the results of the Atlantic City conference, as they had been drafted by White and his group, thought he would have to submit a separate draft, but recognised soon that this would have mixed things up considerably, and gave up the idea.

This was the first international meeting of its kind and importance in which the US Treasury had taken a leading part. It soon became evident that some method had to be devised in order to achieve what had to be achieved, within the time limit available.

‘You can argue and argue’, said Luxford, ‘and we haven’t good arguments for some of the things we have to push through.’

There is no question that you can’t vote on every provision’, White thought, ‘but pursue the same tactics on others. Speaking of legalities for a moment, supposing the chairman, after hearing the discussion, four or five for and one against, and he says that the chair rules that the sense of the meeting is as follows, can at some time subsequently the British say there was no vote and that wasn’t the sense of the meeting, and re-open the thing?’

Acheson did not have the rules for international conferences with him, but he thought that delegates could ask for a roll-call vote. Luxford did not think that would be satisfactory: ‘But the trouble is, you are going to find so many of these countries so very articulate who are in opposition, whereas the Latin Americans will just sit there until they vote.’

‘I think what you could do’, Acheson suggested, ‘is to have a yea and nay vote if you can’t tell by the noise, and ask them to raise their hands.’

But White did not like that. He preferred to ascertain the sense of the meeting by the general attitude of the delegates. ‘It is much safer … if it is legal.’

‘That is perfectly all right’, said Luxford, the lawyer, ‘if they don’t object.’

The procedure White had in mind also made it possible for, him, as chairman of the commission, to delegate to a ‘special committee’, which would hold no public debates, any question on which it seemed ‘difficult to reach agreement. This allowed the matter to be settled behind closed doors, within the group of technical advisers.”

For about two weeks the committees and the commissions met, and reviewed the provisions put before them, making suggestions, recommending changes, and putting forward new proposals. The level at which these discussions were held was, in general, very high. In addition to economists of international reputation, there were many government and central bank officials of outstanding competence in monetary affairs. There were Professor Robertson, Professor (later Lord) Robbins, Mr. Redvers Opie, Mr. Robert Brand, and several officials from Whitehall and the Bank of England. There were Mr. Louis Rasminsky from Canada, Professor Mossi from France, Mr Varvaressos, governor of the Bank of Greece, Dr. Beyen from Holland, Mr C. Gutt from Belgium, and many others who were counted among the best brains in the world on international monetary relations. They participated in the various specialist committees looking at the provisions on such matters as the following: conditions of membership, subscriptions, time and place of payment of quotas, revision of quotas, the obligatory gold contribution, the transactions of members with the Fund and with nonmember countries, the scarce-currency clause, members’ obligations, the pressure to be exerted on debtor countries, the conditions under which a change in parity would be authorised (although the term ‘fundamental disequilibrium’ was never defined), the charges to be paid to the Fund, control of capital movements, management of the Fund, publication of reports, where the Fund’s gold should be held, withdrawal from the Fund, the transitional period, and even the liquidation of the Fund. The secretary of each committee wrote the minutes of the meeting and passed them on to the commission, pointing out where agreement had been reached, and where there was disagreement. White took up the problem from there.

These discussions were of the greatest importance. Mr. Istel probably expressed the general feeling of the delegates when he said, ‘We have worked so hard in examining the detailed texts that it is difficult at the present juncture to get an over-all picture. ” ‘ Every day, the ‘Journal’ of the conference would keep the delegates advised of the main decisions and events of the previous day. It was hard work, and very useful.

Obviously, each delegation had its own special interests arid problems. The Mexican delegation kept insisting that silver be considered, next to gold, as a monetary metal: Mr. Suarez stated that ‘a large part of humanity will continue to believe in silver’, and said that the problem was ‘small in economic dimensions, but large in human implications’. The South African delegate stressed the importance of gold, but he could relax about the subject. The Indian delegation wanted the conference to take up the matter of the sterling balances India had accumulated in London, and that were frozen there; the American delegation refused to consider this matter, on the grounds that it concerned only the British and Indian governments.

But, whether the delegates were aware of it or not, the important decisions were made behind closed doors between the American delegation and the foreign delegation involved. While Harry White and his small group of ‘technical advisers’ kept absolute control over the text of the articles to be included in the agreement, the powerhouse of the conference was in Morgenthau’s office, where some of the most difficult and troublesome issues had to be settled. It is to the most important of these that we now turn. The technicalities of the subjects debated in commission and committee meetings are of interest only to specialists.

THE QUOTAS

As expected, the allocation of quotas, which involved practically every delegation, was a very difficult and dangerous subject. From the beginning, White had indicated that the aggregate quota should not exceed $8000 million, with a possible margin. Russia’s quota was to be not less than 10 per cent, and China’s was to rank fourth. The total voting power of the British Commonwealth as determined by the quotas should not exceed that of the United States.

The ranking of the major nations having been thus determined, this still left the field open for a scramble for quotas by the delegations of the smaller and less powerful countries. Britain supported the demands of India, Australia and others for an increase of their quotas. During the early days of the conference, however, the Russians threw a spanner into the works by informing the Americans that they could not accept a quota less than the British. Such a major adjustment was obviously impossible if the aggregate was to be kept to $8000 million. This piece of information was leaked to the press, adding to the annoyance of the American delegation, Keynes had a confidential discussion with White, Acheson and Vinson on the subject, it was difficult to see any solution without decreasing the United States quota or increasing the aggregate. The Americans, in addition, felt themselves under the necessity of allowing increases to Brazil, Mexico and Cuba. Keynes balanced their demands ‘by pressing vehemently for a further increase for India and ‘Saying that we hoped something could be done for Australia also’. Such a position could obviously not be supported publicly, and an agreement had to be reached behind the scenes; otherwise, the floodgates would be thrown wide open, Keynes advocated an increase of the total quotas.

Delegations from the smaller and less powerful countries, spurred by national and personal considerations – the matter of prestige in the ranking of one’s country and its economic importance relative its rivals, and the delegates’ desire to earn grateful acknowledgement of their own performance and achievements at the conference – manoeuvred with the American delegation to obtain satisfaction. On the allocation of quotas, as on practically everything else, the American delegation was the ultimate arbiter.

Although Committee I was supposed to discuss and decide about the quotas, it was obvious that such a controversial matter, which for almost every delegation was the one of principal concern, could not be handled there. On 4 July the committee ‘agreed to postpone temporarily the discussion of quotas until a paper on this subject had been distributed’. The American delegation then went on to consult separately each of the other delegations.

The question of the quotas was crucial and central. When, at one meeting, some of the delegates refused to consider one matter because they said they could not consider it intelligently unless they had their quotas, White immediately solved the problem. As he explained to the American delegation, he appointed a quota committee. ‘This is a formal Quota Committee, which presumably will report the quotas to the Commission, but we won’t call them to meet. United States is chairman, We won’t call them to meet until we have the quota settled, but at least we met the requirements of the moment.”‘

On 5 July, Morgenthau being in Washington for a few days, Vinson presided over the meeting of the American delegation to discuss the quotas, and asked White to report how things stood, White replied,

I have done a little calculation. If we give the various increases which the U.K. stated they felt were essential, and if you give the increase to the USSR that you have suggested, then we are well within the eight point five… before you grant Australia, you might consider the desirability of U.K. assuring that Australia lay off some of the difficulties she has been making for us, I mean, if we are going to give it, that is the least we can expect in return. She is very troublesome on issues.

In general, he felt that, except in a few cases, principally that of Russia, the negotiations on quotas had been less difficult than he expected. He also thought that they were underestimating the difficulty they would have with the Chinese. Part of the problem there was that India wanted to be on a par with China, and Britain decided to back her up. White stated,

France will have to have more than India, and it is a twenty-five million increase, and India, they want four hundred. So we’ll put France ahead of India, which is all I think that France would ask for. And it would satisfy India … if you give them four hundred million, she will be through. And if you give France twenty-five million more, I think, I am not sure because we have not discussed it with her, she will be satisfied there. That leaves the two major issues of China and Russia. China, we don’t know.

Members of the American delegation meeting with the other delegations, trying to reach agreement on the quotas with each country individually, met with varying degrees of reluctance and protest. Although it was felt that in some cases the foreign delegations ‘were just going through the motions’, some of them proved difficult to handle and persuade. On the other hand, it was important to reach ‘unanimous’ agreement.

On 9 July Morgenthau reviewed the position on the quotas with his delegation. Collado, who had been mainly in contact with the Latin Americans, reported that

The principal trouble lies in Cuba, Chile, and Colombia, -It is very difficult. The Cubans want to be third, and by the existing statistical and other standards, they are probably correct in being third. The Chileans would like to be equal with the Cubans, and that is probably a little excessive for Chile. But the real problem is that Colombia will be satisfied with forty, but insists on being equal with Chile. There is not too much logic in any of this … the Venezuelans don’t want to put up so much. Venezuela, Uruguay and Bolivia all requested that they be a little lower than the top figures that we suggested they might wish.

Vinson recalled that it was thought important not to reduce the Latin American quotas: ‘Brazil, a hundred million. But it was increased to one hundred and fifty million … the Mexican quota should be in proper relationship with the Brazilian quota. . . . Of course, we had in mind the voting strength of the Latin Americans.’ Congressman Spence wanted to know why some countries wanted a reduction, and White explained that it was because of their gold and exchange position. ‘It makes it too expensive for them.’ Venezuela, in fact, was not much interested and would have to be talked to.

The question of the French quota, which it had been promised be fifth, was still open. As for the Netherlands, White said, ‘We allotted [them] two hundred and fifty …. They are going to make a strong fight for three hundred. I think that from the tradition in history and the caliber of the country we ought to up that to 275.’

Dean Acheson reported about a ‘controversy which has been raging in the last thirty-six hours about elections to the Executive Committee’. The Latin Americans, not knowing their quotas, were fearful that they would only have one representative, and they wanted two. He suggested that the members of the Executive Committee be increased from eleven to twelve, with the guarantee that the Latin Americans would have two votes. ‘…we can solve this thing in a hour’, said Acheson. The following day he reported,

I spent several hours with the Chileans with Mr. White. The Chileans are quite unhappy and they make the sole point that they want to have the same quota as Cuba. They don’t care about having it raised, but they would like to have Cuba lowered. They said we ought to do that. We couldn’t raise Chile because then we would start raising everybody and we would come to the end of the money and would have a lot of trouble. We said the same thing over again for about three hours, at the end of which they said they would telegraph their Government, but I think they have accepted it.

On 14 July, Morgenthau reviewed the quota situation with Judge Vinson, Harry White and Congressman Wolcott.

Vinson: ‘Here is exactly the score. The score, if South Africa is dropped fifty and that fifty is split between Poland and Czechoslovakia, the Netherlands goes up to two hundred and seventy-five and Mexico goes up twenty, to a hundred.’

Morganthau: ‘That is ninety-five by my figuring. You are increasing them by ninety-five and reducing them by fifty. That is plus forty-five.’

Vinson: ‘That is right, but the way I was doing it -‘

Morgenthau: ‘Is that right?’

Vinson: ‘That is right.’

Morgenthau: ‘See, Jesse, that is why I am Secretary of the Treasury, I can add and subtract.’

The total, said Vinson, was well within the limits, ‘and we will have a few million that could be added to any place we wanted to’.

But Morgenthau wanted to bring up a political problem he was faced with. The Administration was asking China and France to pay for all supplies to their own civilian population, ‘and they are kicking like hell. So if we can do a little something here that doesn’t come out of the taxpayers, for France and China, why -‘

Vinson: ‘Well, you can up China twenty-five, to fifty-five; fifty-five wouldn’t affect this at all.’

White: ‘We had fifty-five.’

Morgenthau: ‘You couldn’t give them five seventy-five?’

Vinson: ‘Not if you give Poland and Czechoslovakia twenty-five apiece.’

Morgenthau: ‘Why do that?’

White: ‘Give them fifteen each. Particularly Czechoslovakia deserves a hundred and you have to give Poland the same thing.’

There were those devastated countries, and they too deserved a little more, Vinson thought; ‘it has a heart appeal for me and for you, too.’

White: ‘You don’t think we could squeeze a hundred more off the total and settle all our problems? What the hell – go to eight hundred and fifty.’

Vinson did not think that would be practical, because, as it stood, there was only $1250 million left for the neutrals.

‘Have one hundred million less for them’, White suggested.

The group agreed that they had to make a final decision, and announce the results to the other delegations. So they had to do some more reckoning.

Morgenthau: ‘Let’s just say tentatively twenty-five for Poland and twenty-five for Czechoslovakia.

But this was conditional upon getting fifty off South Africa, and they would have to be talked to, Vinson thought.

Morgenthau: ‘I think Mexico is important. I would leave that.’

Vinson: ‘Now, the Netherlands – you told them two hundred and fifty.’

Morgenthau: ‘I would stick to it.’

Wolcott: ‘Two hundred and twenty-five for the Netherlands was predicated upon a decrease of the total to eighty-five.’

Vinson: ‘The Netherlands is two hundred and seventy-five, so we pick up twenty five, and that twenty-five can be used with France or China.’

White: ‘And give France what you can pick up – what is left.’

Morgenthau: ‘If you are going to do something for Poland and Czechoslovakia, you have got to do something for France, because those countries talk together and they work together.’

White: ‘We cut France’s formula more than any other country.’

Morgenthau: ‘If you are going to give twenty-five to Poland and twenty-five to Czechoslovakia, then I recommend twenty-five for France.’ Vinson: ‘If the Netherlands stands at two hundred and fifty, we can give that to France.’

Morgenthau: ‘After all, today is Bastille Day.’

White: ‘That is a good time to tell them.’

That evening the table of quotas was put together. The commission was unanimous in adopting the quotas reported by the special quota committee, except that reservations were expressed by the delegations for China, Egypt, France, India, New Zealand and Iran, all of which felt that they should have larger quotas. None of the delegations indicated that they would not support the plan when submitting it to their governments.

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