The Bretton Woods Conference: Birth of a Monetary System PART III

THE BANK FOR RECONSTRUCTION AND DEVELOPMENT

From the beginning White had fully identified himself with the Fund. It was his idea and was to be his contribution to a better world. Keynes, while not losing interest in the Fund, had recently come to believe that the Bank was more urgent and important, and the European governments in residence in London tended to agree. While White was the driving force for the Fund, Keynes moved swiftly in Commission II to complete an agreement on the Bank.

Before his departure from London, and on the boat sailing to New York, he had prepared a proposal which had been received with enthusiasm by the Europeans. He had discussed it with White at Atlantic City, and White had approved of it. But Keynes had to move fast, and some of the other delegates attending the Commission II meetings had complained about the fact that he was running what was practically a one-man show.

On 8 July Keynes had cabled London that it had been reported to him that the British press was expressing pessimism about the outcome of the Bretton Woods Conference.

I believe this is a misreading of the position though a natural one. In fact great progress on most contentious and difficult issues is being made behind the scenes. In open Committee 44 nations are of course capable of wasting as much time as is at their disposal. But in the course of coming week I believe we shall be in a position to crystallize quite suddenly on concrete and agreed conclusions.We are only now beginning to work seriously on the Bank. But that appears surprisingly free from controversial issues. There are several improvements needed to make set-up really workable from a practical point of view; but nothing so far as I am aware controversial between Delegations.

On 13 July, however, Morgenthau opened the meeting of the American steering committee by stating, ‘Theunis was so mad he shook. Souza Costa was just furious. The head delegate from India was just as furious as he could be.’

Acheson, who was the chief American delegate to the commission on the Bank refused to continue the role in which he was cast. One of the problems was that Keynes, having started working on the Bank much later than White on the Fund, was in a great hurry. ‘Keynes’ performances … are completely understandable, and although tactless … all he could do.’

White said that there was no comparison between the two projects, and, while Acheson did not want to ‘waste time by arguing’, Morgenthau asked him to explain what he was concerned about. ‘Let’s be very frank for a minute. If I may be frank, when Dean gets irritated, it is so rare; I realize the cause must be grave.’

‘The first problem about the Bank’, Acheson said, ‘is that the commission meetings on the Bank, which are conducted by Keynes, are being rushed in a perfectly impossible and outrageous way. Now, that comes from the fact that Keynes is under great pressure, He knows this thing inside out so that when anybody says Section 15-C he knows what it is. Nobody else in the room- knows. So before you have an opportunity to turn to Section 15-C and see what he is talking about, he says, “I hear no objection to that”, and it is passed. Well, everybody is trying to find Section 15-C. He then says, we are now talking about Section 26-D. Then they begin fiddling around with their papers, and before you find that, it is passed.’

Morgenthau, as president of the conference, was perfectly willing ‘to go and call on him and in a very nice way tell him that at least half a dozen people have come to me perfectly livid and I think he is making a mistake, and I am going to ask him very respectfully if he wouldn’t do the thing at half speed’.

Acheson, of course, understood Keynes’s problem, and suggested that when you are asking him to slow up this thing you are still making it possible for him to finish by Wednesday when the train leaves’.

White thought that Acheson should not let things go on like that: ‘Just because Keynes is an autocrat doesn’t mean that you have to take it. You stand up and you say you don’t like the way things are running.’ He would attend the next meeting and get up on his feet. ‘Nobody talks to him. They are either too scared to talk to him or too nice to talk to him, but I am sure that if he is called to task strongly, and you have the crowd behind you, he will modify his procedure.’

‘Could you do it privately rather than publicly?’, Morgenthau asked.

‘Maybe’, said White.

There was another and more serious problem, said Acheson, and that was the problem of the American delegation. When they went to a meeting of the commission, they did not know what their view was, so they could not present it forcefully and clearly. They simply had no Organisation to do it. There had been a committee meeting where the American delegate had agreed to something which was the direct opposite of what everybody had said was the policy of the United States. ‘Up comes Angell and says, “He is a liar, we never agreed.” So I got up and said this was all a mistake, we never agreed to this, whereupon somebody else came rushing up and handed me a report. Another committee had agreed to the opposite. I was going almost nuts.’

In Commission I, White had a tremendous Organisation, and all the experts were working on the Fund. But in Commission II, ‘as far as I can see, all the decisions to make judgements on the merits and which I am wholly incompetent to make judgments on is thrown on me. The whole business of negotiating and talking with people is thrown on me. The whole burden of being Chairman of the Drafting Commission is thrown on me. The whole burden of presiding at these Commissions is thrown at me, and this afternoon when Commission Two met, there was not one single person in the room from five o’clock, when the Commission met, until a quarter of seven, when you came in who had ever been in a single meeting or knew what the dickens was going on. Now, I will go on and do anything that I am asked to do, but the responsibility which is in somebody’s mind is one which I am not discharging and cannot discharge.’ Acheson went on to say that in fact he knew nothing about the Bank; ‘I am playing this by ear.’

What Acheson wanted he was going to get, said White. He had every intention of giving him all the expert help he would need, once he was through with the Fund. Most of the people Acheson was using were very helpful in specific tasks, but they had not been involved long enough, and it was impossible to build an Organisation in a few days.

There was another problem, however. Acheson thought that the procedure adopted by White had got the commission and committees on the Bank ‘in the most chaotic mess in the world. The only way I believe you can iron it out is to get the Steering Committee together and find out what we are doing. The thing is buzzing around in a perfectly nonsensical manner. We appointed ad hoc committees, section committees, drafting committees and all kinds of committees, A draft comes in from somewhere and nobody reads it, so it gets referred to somebody else; the delegates are going crazy.’

White did not think it was that bad. ‘To some extent it is, Harry’, Acheson insisted. Most of the people who were there knew only one-tenth or one-hundredth of what he knew himself, Vinson seemed to agree with White that the procedure was really very simple. The Russians had come down at noon, and they were very much concerned about the exchange rates, but they did not want to bring it up in an open meeting; so the matter was settled between the American and the Russian delegations. When there was disagreement on some point, ‘instead of referring it back to the committees or instead of discussing it at any length in the committees, we let a few people discuss it, and immediately referred it to the ad hoc committees, created especially for that purpose, to refer back to the Fund Commission, and not to the committees’, White explained. ‘The procedure is very simple, Dean.’

‘GOLD AND THE US DOLLAR’

Putting the dollar next to gold at the centre of the postwar monetary system had been uppermost in Harry White’s mind ever since he started thinking about the subject. Early in 1943, before any plan was published, he had told a group of economists, ‘The dollar is the one great currency in whose strength there is universal confidence. It will probably become the cornerstone of the postwar structure of stable currencies. In the early drafts of his plan, however, he stated that any attempt to make an existing currency the international unit of account ‘would be opposed on the grounds that it would seem to give the country possessing that, currency some slight advantage either in international publicity or in trade’.

As we have seen, in September 1943 Keynes told White that the United Kingdom did not contemplate going on to a gold or a dollar standard, but might be prepared to accept a unitas standard. Whenever the matter was brought up, he categorically rejected the idea that the dollar should be given a special status, and he continued to take the same line at Atlantic City, when the subject briefly cropped up there. There seems to be no evidence that the Americans discussed the subject with any other delegates. However, though the Statement of Principles, as it was submitted to the Bretton Woods Conference, clearly stated that ‘The par value of a member’s currency … shall be expressed in terms of gold’, White knew that the international bankers were extremely anxious to see the dollar become the international currency of the future.

A few days before leaving for Atlantic City, he made, in the face of persistent opposition by a few large banks, a statement to the press. ‘He said that he had just spent a day in discussion with bankers, and that this showed ‘differences of points of view on some matters.’ ‘A great part of the bankers’ fears’, Dr White said, ‘arose from their lack of understanding of the plan, and not knowing all the other things we have in mind. The statement of principles is a mere skeleton, but there will be a lot of flesh on those bones before we are through.”‘

To put the flesh on the bones took three simple operations, of which only White and his closest assistants at the Bretton Woods Conference were aware. It is doubtful that even Morgenthau was involved. While it made White a little nervous, until the process was completed, it was in fact the easiest hurdle to overcome during the conference, and the one that had the most far-reaching consequences for the future. Since only a small group of ‘technicians’ were informed, it did not become a point of general debate.

The first move was made on 6 July, at the 2.30 p.m. meeting of Committee 2. Many provisions and their alternatives were discussed that day. Professor Robertson was the British delegate. Also present were Professor Mosse from France, Mr. de Iongh from Holland, and several other monetary experts. The consideration of a Mexican proposal about silver was postponed. The Dutch delegate proposed that the wording ‘offer to’ appearing in one provision be replaced by ‘buy the currency’. There was a discussion about scarce currencies. The Greek delegate, Mr. Varvaressos, suggested that the reports made by the Fund should be communicated, since they were confidential, to a ‘member government’, and not to the country, as it was stated. This was referred to the language committee.

Then came Alternative A, p. 16. This alternative, submitted, by the American delegate, provided that ‘The par value of the currency of each member shall be expressed in terms of gold, as a common denominator, or in terms of a gold-convertible currency unit of the weight and fineness in effect on July 1, 1944‘. This alternative was later presented in the official record of the conference (p.1651) as an American and British proposal, which is not accurate. It was, in fact, one of the numerous alternatives worked out by White and his group. Keynes obviously would never have agreed to the proposal, and he was not aware of it.

The American delegate explained that the purpose of this alternative was ‘insignificant’, and that it dealt with several problems. It was ‘so worded to show no obligation to sell gold was implied’. He assumed ‘there will exist a gold-convertible currency by definition within the terms of this agreement’. There was no further discussion, and the alternative was approved. it became part of the mass of material the committees and commissions were piling up day after day, and it does not seem that any of the delegates had noticed its implications. On 12 July the British delegation cabled London, ‘Norwegian resolution proposed that books of Fund and Bank should be kept in Figures for international monetary unit equivalent to 10 dollars in present gold value of United States currency. This revives the proposal that accounts should be kept in Unitas and we regard it as already dead.’ Having been approved by the committee, the provision then went to the commission,

The second move was made a week later, during the 2.30 p.m. meeting of Commission I on 13 July. Harry White was chairman. Just before the meeting he had told Morgenthau, ‘The commission meeting this afternoon is extremely important. This is where we either fish or cut bait on most of these things.

The agenda again was heavy. One of the points to be discussed was the date on which countries joining the Fund should make their initial contribution of gold and gold-convertible exchange. This was a minor point, and, since the ‘delegations did not have time to consider the matter, the Committee agreed to refer this question directly to your Commission’.

The Indian delegate asked for a definition of gold-convertible currency, which had been discussed, and of which Keynes had said it did not exist. The question as put related to the gold-convertible contributions only, and not to the par value of currencies.

Robertson, against Keynes’s instructions, but as the responsible British delegate, suggested that the words ‘gold and gold-convertible currency’ be replaced by ‘net official holdings of gold and U.S. dollars’, and remarked that this would involve several changes elsewhere. This was White’s opportunity. Using his authority as chairman, he referred the matter to a special committee, which took it out of any further discussion.

That evening he was satisfied. He told Morgenthau that the commission on the Fund ‘covered quite a little material. A good deal of it was passed, and some of it was referred back to a special committee which is to consider it tonight.

The special committee was the group of technicians headed by White. It prepared for inclusion in the Final Act a number of provisions that were never discussed, nor even, brought up. The argument (referred to earlier) between Acheson and White over procedure took place after White had expressed his satisfaction.

‘You have a very complicated procedure’, Acheson said. ‘First of all, you get a report of the Drafting Committees, Committee One, and Committee so and so. Those things are all brought up. People think they are about ready to vote on something. Then they discover that it isn’t true because it has to be referred to an ad hoc Committee or a Special Committee, and then it has to go to the Drafting Committee . . . .’

As far as the Fund was concerned, all Acheson’s confusion was in his own mind, said White. The commission on the Fund was ‘running as smooth as silk, and I don’t know where you get your idea. There is no confusion as far as the Fund is concerned. All the important problems have been settled. They have either gone then – ‘

I am sure they have been settled,’ snapped Acheson, ‘but I don’t think the delegates know that.’

They didn’t; but, except for Keynes, what difference would it have made? After the meeting, White joined his group of technicians, and worked with them until three o’clock in the morning, He reported to Morgenthau the next day that the draft on the Fund was in excellent shape.

The change from ‘gold’ to ‘gold and US dollars’ was lost in the ninety-six page document the chairmen of the delegations would sign a few days later. Whether or not any of them noticed it, or understood its implications, it seems that none of them expressed any reservations about it. Keynes would not find out until later, when he studied the Final Act.

Henry Ford, who celebrated his eighty-first birthday shortly after the end of the Bretton Woods Conference, told press reporters that he had not followed what had happened at the conference, but that he had always favored a universal currency. ‘That currency’, he added, ‘should be our own dollar.’

LIQUIDATION OF THE BANK FOR INTERNATIONAL SETTLEMENTS

On 10 July, Commission III examined a proposal submitted by the Norwegian delegation:

BE IT RESOLVED that the United Nations Monetary and ‘Financial Conference recommends the liquidation of the Bank for International Settlements at Basel. It is suggested that the liquidation shall begin at the earliest possible date, and that the Governments of the United Nations now at war with Germany, appoint a Commission of Investigation, in order to examine the management and transactions of the bank during the present war.

White had been informed about this proposal immediately, and was obviously in favour. He said that Norway, France and Belgium supported it, and I think they could line up a majority. But England has been very busily at work, trying to get them to withdraw, and they tell me that the State Department here is also supporting the English’.

But Acheson thought it would be undesirable to discuss the Bank for International Settlements (BIS) at the conference.

‘McKittrick would be forced to resign’, said White. ‘I would support the motion of the Norwegian delegate, I think it would be a salutary thing for the world.’ Morgenthau agreed: following the invasion of Czechoslovakia, the BIS had turned over to the Germans the Czechoslovak gold. Luxford felt that the dissolution itself would not be too important, but it would be a symbol, since the bank was ‘by virtue of the Nazi occupation of the countries of Europe, now … in the hand of the Nazis’.

Edward Brown, the banker, was embarrassed. At the request of the Hoover Administration, his bank and three New York banks had participated in the foundation of the BIS, and shares had been distributed to the public. The Norwegian delegate, Keilhau, had just made an attack on the president of the bank, McKittrick; the BIS ought to be dissolved, said Brown, but this was not the place to discuss it.

Acheson was of the same opinion: this concerned foreign relations, he said, and it was up to the Secretary of State to express his opinion, ‘I would be delighted to talk with Cordell Hull about this’, said Morgenthau. ‘I am fairly confident what his answer would be.’

The Norwegian proposal was strenuously opposed particularly by the Dutch delegation, whose chairman, Beyen, had been president of the BIS when the Czech gold was turned over to Germany. On 19 July the Norwegian and Dutch delegation communicated to the press a new proposal that they were submitting, recommending ‘the liquidation of the Bank for International Settlements at the earliest possible moment’. It would be considered in commission the following day.

When he learned about this new resolution, which was milder than the first, Keynes wrote to Morgenthau, ‘We are entirely in accord with the general purpose … What we cannot manage is a recommendation from Commission III to Commission I to write some specific agreement into the International Monetary Fund. For technical reasons this … would inevitably prevent us from participating either in the Fund or in the Bank until after the expiry of an indefinite period.’

Keynes delivered the message personally, Morgenthau told his staff,

Lord Keynes came in here at about seven-forty, and the man was livid over this BIS thing, and said that if this thing went through at nine o’clock he was going to get up and leave the Conference. He didn’t use the language that he had been double-crossed, but he said that this was the first time this has happened, but the inference was that he had been double-crossed and this thing had been given out in advance of the meeting … to the press, which he thought most unfair…. He said that he thought the people responsible should be rapped over the knuckles. What he said is just amongst the people here in the room and I don’t want it to go any further. So I told him please to quiet down, that I would see my people and we decided that we would let the thing go over until tomorrow morning … he really was very much disturbed, and I don’t think he was putting on an act. He said the BIS, politically, is just as unpopular, if not more so, in England than in America.

This may have been so, but Keynes was aware of the fact that Britain was bound by the obligations to which it had subscribed in joining the BIS, and could not simply repudiate them. He had suggested that, at the date of the constitution of the Fund, ‘the necessary steps will be taken to liquidate the Bank for International Settlements’. But White and his staff had seen to it that the proposal put forward was stronger. They wanted the Bank liquidated as quickly as possible, In addition, lining up the Fund with the BIS, ‘in the way Keynes suggested, I think, would be most unfortunate’, said White. ‘It would make it appear that that is a direct competitor.’

Morgenthau was puzzled that Beyen should have associated himself with this proposal: ‘I am not sure that fellow Beyen didn’t pull a fast one on us too’, he said. ‘Getting us to do something which he knew that Keynes would object to.’

Luxford gave the explanation: ‘No, he didn’t get us to do it. He fought it tooth and nail. We forced him to give us the right technical language against his will.’

White was very much disturbed that it had not been possible to pass the first Norwegian resolution. ‘They will try very much to get this to look just the opposite of what we want. They will try to give the BIS status and a clean bill of health by saying it should continue in operation until the Fund comes and then it ought to pass out because it is doing approximately the same work. In the first place, it makes it more difficult for us in the Fund, because they can say, “Why don’t you give the BIS more powers?” In the second place, it would look as though they were a perfectly good institution, it is just that the Fund has a little broader powers. And in the third place, it would be a public recognition of the fact, by forty-four nations, that the BIS is a good institution and should continue until the Fund….

Well, I am confident’, Morgenthau interrupted, ‘that if we can get Keynes down here face to face and make him agree to something on the spot, that I can be successful….’

Shortly afterwards, Keynes walked in with several members of the British delegation. Morgenthau handed him the proposal about the liquidation ‘at the earliest possible moment’.

‘I don’t quite know what the earliest possible moment is’, said Mr. Bolton, who accompanied Keynes.

‘Not very early!’ was Keynes’s reply. He then came back to his own proposal, which recommended the liquidation after the establishment of the Fund. ‘The only difference’, he said, ‘is that that says it is contingent upon the establishment of the Fund. This says it shall be liquidated whether there is a Fund or not. I don’t think we want to keep the damned thing alive, do we?’

‘Amen, brother!’, said Vinson.

From the conversation that followed, in which Keynes said it was ‘very wrong’ that the proposal had been revealed to the press though it had not been passed by the committee, it became clear that White and his staff had in fact engineered the whole manoeuvre, using the Dutch and Norwegian delegates as a front.

The recommendation for the liquidation of the Bank for International Settlements ‘at the earliest possible moment’ was agreed upon by the conference and included in the Final Act. Once more, Keynes established himself as a prophet. The liquidation would not come ‘very early’.

LOCATION OF FUND AND BANK

During the meeting in Atlantic City, White had indicated that he wanted he head offices of the Fund and Bank to be located in the United States. Keynes had advised London, and the answer had been that this would not be acceptable. White had prepared for submission to the conference a proposal to the effect chat ‘The principal office of the Fund shall be located in the member having the largest quota.’ Keynes had submitted a proposal suggesting that the decision about the location be made at the first meeting of the board of governors.

London had not quite understood Keynes’s motives; after all the emphasis that the Fund would be a technical and not a political organisation, it would be a pity if the first task of the board of governors were to be to settle a highly political and controversial matter such as the location of the Fund. The question would have to be settled behind the scenes.

Keynes wrote White a ‘personal and private’ letter, dated 9 July, advising that he had tabled a proposal about the location of the Bank’s headquarters, and that this was similar to his Proposal about the location of the Fund’s. This was a most difficult matter to settle, and he had just received a telegram from the Chancellor of the Exchequer stating that no agreement was to be made without his express authority.

‘The only comment I would like to make on this’, White told the American delegates, ‘is if you don’t get this settled in the Conference, it certainly is reduced, and that is why they want to postpone. Maybe they hope to get some arrangement whereby they will get some and we will get others. I think it is important enough for us to push the issue here in the Conference where I am sure we will get a favorable vote.’

Morgenthau asked the Congressional delegates how they felt about it. It would have a material effect, said Wolcott; ‘there has always been a certain jealousy that the financial center of the world is London, England’. If the United States were going to participate, it should have the head offices. The other Congressmen agreed. Senator Wagner thought that if the United States did not have the head offices it would be almost impossible to obtain Congressional approval of the Fund.

‘Then the answer is that we have got to fight it out here and now’, Morgenthau concluded.

Several delegations were on Keynes’s side. ‘Canadians, Dutch and Belgians all tell us that if London wants to remain in business even our present proposal goes dangerously far’, he cabled. There was no hope of securing agreement on any location outside the United States during the time at their disposal. He asked that the Chancellor give him clear instructions. The Americans were emphatic that the matter should be settled at the conference. ‘But if we are to be defeated on this perhaps we should retire with dignity by withdrawing our amendment.’

The Chancellor asked Keynes to make it clear to the American delegation that the considerable opposition the government would have to face would be gravely augmented by any decision that the Fund be located in the United States. He asked Keynes to hold the proposal, irrespective of the result, for the time being. If it were not possible to obtain a decision in favour of London or Amsterdam or some other appropriate European centre, opinion would be able to express itself. If it were possible to have the Fund in London or in some European capital, ‘then we should raise no objection to the location of the Bank being in the United States’.

On 13 July Morgenthau discussed with the American delegation a letter he had just received from Keynes. The decision about the location of the Fund was a highly political matter to be decided by governments, and not by a monetary conference. The question could not be considered without reference to the location of other international bodies with which the Fund would have to co-operate. He hoped that the participating governments could reach a decision on the matter before the first meeting of the board of governors. “But I must particularly emphasise in this letter that in the opinion of my government it would not be a proper course to settle a political matter, such as this, by equal voting of the financial or technical Delegates from the wide variety of nations here assembled.

White thought that the British wanted the headquarters of either the Fund or the Bank to be in Britain. ‘They don’t care, as long as they have one, because they feel otherwise there are important things to follow. I think we are strategically in an invulnerable position to get it now, if you wait, I don’t know what you will get, because they can’t back out on the basis that they don’t like where the head office is. Their public won’t stand for it and the world won’t stand for it, So the thing to do is to put it through on a vote here. If they don’t like it, it is too bad.’

The Congressional delegates again confirmed their position. Also, many South American and smaller countries would feel more comfortable if the gold of the Fund were stored in the United States.

‘New York has become the financial center of the world. These British are just fighting uphill. There is no question about that’, said White. He did not even think that Morgenthau should answer Keynes’s letter: ‘he isn’t saying anything he didn’t say before…. Moreover, we are putting in twice as much money as anybody else, three times as much. On the face of it, it is preposterous that the head office should be any place else. We can vote it any place we want, by members, by votes, and we will win. They know it, and that is why they don’t want to come to a vote. I don’t see why we should put ourselves in a position to be subject to political manipulation.

‘And if Churchill called Roosevelt, requesting a postponement of the decision?, Luxford wondered.

The President would not answer such a question without first contacting the American delegation at the conference, said Morgenthau.

‘The vote will take place tomorrow’, White decided. ‘If the President should call up, we will say we are very sorry, but the Delegates have all voted on it. That will give him a good answer to Churchill. We can’t hold up everything.’

‘That is no answer,’ Morgenthau concluded, ‘but anyway, we have taken care of the meeting for tonight.

During a previous meeting White had suggested: ‘Rather than bring that on with the British, why not postpone it until the last meeting of the Fund – just dodge it…. They are almost licked. What do they do? Publicly say, “We object because of some other reason?” ‘ But Morgenthau did not want to postpone it, and Luxford thought that ‘if we are willing to take this thing to a vote basis, we can clean up the whole works.

The following morning Morgenthau went up to Keynes’s suite, and told him that the American delegation was emphatic that Congress would not accept the Fund unless it were located in the United States; that a proposal for postponement would not be understood; and that in any event the ultimate decision must be regarded as a foregone conclusion. This problem arose out of the peculiar relationship between the Administration and Congress. He had regarded it as essential to associate Congress closely with the drafting of the agreement. So far, he had had an extraordinary and almost miraculous success. All Congressmen present at the conference, including not only Republicans but also old-time isolationists and hostile critics had been brought round to enthusiastic support for the Fund and the Bank. The Republican senators were even telling Senator Taft, who had issued a critical statement, that he was not speaking for the party. Morgenthau begged Keynes to ask London not to upset the present mood of his team and pleaded that Whitehall should appreciate the special nature of his problem, which arose wholly from the relationship of Congress to the Administration, irrespective of politics. In passing on this message to the British government Keynes commented, ‘I believe that we are on a losing wicket here.’ He hoped that the Chancellor would instruct him either to withdraw the amendment or to argue, but not to press the matter. ‘Eady, Brand and Ronald reluctantly concur.

In the light of Keynes’s advice, the Chancellor agreed not to press the proposal, but to withdraw it. He wanted, however, to make it clear that British public and Parliamentary opinion were very sensitive on the point, and that the government was not debarred from making it a condition of acceptance of the plan that the head office of the Fund be located in Europe.

Morgenthau once more submitted the issue to the American delegation: ‘I know you have expressed your opinion once before and I would like some sort of direction from the Committee. It is a question of New York versus London.’

‘I stand pat’, said Senator Tobey.

‘I haven’t changed’, added Senator Wagner.

Congressman Spence was ‘unalterably opposed to it and I am not going to change. I think you ought to talk to him as plainly as diplomacy will allow. I don’t know how plain that is.’

‘Well,’ I am not a diplomat’, said Morgenthau; ‘I can talk pretty plain : I think this is the time to wave the flag. . . . It is the unanimous opinion … that we should not accede to Lord Keynes’s request that this matter of location be postponed.”‘

The next day White reported that Professor Robbins of the British delegation had strongly urged him that the question of the location of the Fund should not immediately be raised at a public meeting, but should be left a few days, until the British had had an opportunity to obtain a reply from London. Vinson added that Robbins had said, ‘We know we will be beaten and we hope to avoid being humiliated.’

‘We can wait’, said White.

In order to keep the American embassy in London informed, Morgenthau and Acheson sent a telegram stating that ‘The most controversial point which we have had with the British during the course of the’ Bretton Woods Conference has been the location of the head office of the Fund. We have taken the position all along that the head office must be located in the country which has the largest quota. In a conversation yesterday with Mr. Morgenthau the President instructed our Delegation to insist on this point.’ Keynes was ready to give up his objections and would make a purely formal statement for the record. The decision on the matter had been postponed until 17 July.

On 17 July Keynes wrote to Morgenthau that the Chancellor had authorised him to withdraw the British amendment, ‘but in doing so to place on record that in the view of His Majesty’s Government the question where the headquarters of the Bank should be situated ought not to be considered without reference to the location of other international bodies’. He also mentioned the public and parliamentary opposition to the Fund that the decision about its headquarters was likely to create in Britain, and gave a reminder that the whole plan would eventually have to be put before the British government for its approval. Keynes said that, in order to avoid incomplete or inaccurate press reports, he would issue a statement announcing the withdrawal of his alternative, but making it clear at the same time that the location of the headquarters of the Fund was a matter for governments themselves, and not just a rather technical conference to decide.

The following day, the United States proposal that the headquarters of the Fund be located in the country having the largest quota – in other words, the United States was adopted that evening, Morgenthau discussed Keynes’s press release.

The reservation by the United Kingdom was no different from any other reservation, said Luxford, ‘It simply means that they object to it, but in the final analysis there is no choice as to whether they accept the Fund or not accept it, and they can’t be rewriting the document. We can be very gracious. We are getting what we went after. We ought to let them do as much as they can do.’

At an earlier meeting Acheson, who had always been concerned about keeping strictly to the correct international procedure, had asked Morgenthau whether he could see Keynes s letter, because ‘It ought to have some powerful consideration.’ No one shared his view. It had been discussed and the American delegation was unanimous, ‘more completely unanimous than it has ever been’. White did not think it necessary to bring the matter up again, ‘Who is to determine where the head office is in an international conference? I should think it would be the conference. The governments are represented by the delegates. After they decide it, like any other point, any government can accept it or reject it.’

Acheson did not want to argue about it, he just wanted to ask a question.

‘The question has to be argued about in order to come to a decision’, said White.

Acheson was not scared of an argument; he was ‘just too tired to make an argument, but I do want somebody to understand the question’.

‘I see. Well, you restate it’, said White.

The question that Keynes had raised, said Acheson, was whether a major policy decision that would normally be made among governments could be left to the groups meeting at Bretton Woods or postponed for a vote by the board of governors of the Fund after it had come into operation.

Morgenthau had sensed the intention of Acheson’s question: ‘What he is saying is that this, is a matter between governments, or foreign offices.’

Keynes had brought up the same question in Atlantic City, said White, saying that he hoped it would not be put in the draft on which the conference would vote, because the most appropriate time to determine where the Fund would be located would be after it got started.

‘Are you through?’ asked Morgenthau. ‘May I simply say this, Dean, that whether it is done between governments or whether it is done here, this thing is a matter of postponing the day of reckoning…. Now, to me it boils down to this -and I will be willing to face this thing -these groups – once and for all – that the financial center of the world is going to be New York and we don’t want to postpone this thing until another day where we may not be in as advantageous a position and maybe have them to get in a horse-trading position and maybe end up by having it in London. Now the advantage is ours here, and I personally think we should take it.’

‘If the advantage was theirs, they would take it’, said White.

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