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HARRY DEXTER WHITE
The contrast between Keynes and White was quite stark. Keynes was the embodiment of privilege, educated at Eton and Cambridge where he was one of the elite group of the 'Apostles', part of the inner circle of the Bloomsbury Group, married to an exotic Russian ballerina. White was the son of Jewish immigrants from Lithuania. (6) He worked in his father's hardware store and only started his university career at the age of 29. Keynes was famous throughout the world after publishing numerous controversial articles aimed both at specialists and at the general public. Most of White's important writings prior to 1940 took the form of internal memoranda for the US Treasury.
(6) Skidelsky (p.240) says that they had fled 'the Tsarist pogroms' in Lithuania in 1885. So far as I know there weren't any pogroms, let alone 'Tsarist' pogroms, in Lithuania in the 1880s. The pogroms of 1881-2 took place at the far end of the Pale of Jewish settlement in Novorussia, South East of present day Ukraine.
James Boughton, historian of the International Monetary Fund, has written an account of White's Treasury writings which may give us some idea of why Morgenthau was so keen that he should be charged with the work of devising a post war settlement. In a Memorandum written in August 1935 - 'Why and how exports should be increased' - he argued that:
'Only two proposals for stimulating exports had any merit: an international agreement to stabilize exchange rates and an expansion of official loans to foreign governments ... A few months later [in a paper entitled The United Kingdom of Great Britain - PB] ... he noted the importance of creating a dollar zone to compete with the sterling area and weaken the influence of sterling as a constraint on US policy. Currency stability, not the relative size of the foreign exchange market, was to be the cornerstone of his strategy for developing the international role of the dollar: "Though it doesn't matter very much whether New York or London does the most foreign exchange business, it is important to have as many currencies as possible linked to the dollar rather than to sterling, if the rate between dollars and sterling is not fixed. The more currencies tied to the dollar (ie exchange rates fixed to the dollar) the less power will British authorities have to influence American monetary policy. The more international business a country does, the more likely will it be to attract other currencies in its orbit of influence, and the more currencies it attracts the greater will be its international business."' (7)
(7) James M.Boughton: Why White, not Keynes? Inventing the postwar International Monetary System, International Monetary Fund, IMF Working Paper, March 2002, pp.7-8.
However he didn't believe that the dollar by itself was sufficient to exercise this attractive power. In 1940 he began work on an ambitious project, in the event uncompleted, under the title 'The Future of Gold':
'"The Future of Gold" argued that the only way any country could induce investors to hold liquid claims on it for extended periods was to create complete confidence that its currency would not be devalued in the foreseeable future. Since no major country would be willing to surrender its sovereignty over the valuation of its currency, the ability to create such confidence was limited. Investors therefore had and would continue to have a preference for gold over currencies or other liquid assets ... "Many decades at least will have to pass before many countries will elect to keep their reserves in the form of some foreign paper currency never redeemable in gold rather than in the form of gold or currency redeemable in gold." Moreover, he rejected on time-inconsistency grounds the idea that countries could credibly effect a co-operative agreement to fix exchange rates without an anchor to gold. Confronted with the possibility of devaluing (or imposing exchange restrictions) as the "lesser evil" rather than contracting the economy, "the sovereign power will usually elect to pursue the lesser evil."' (p.8)
The problem as seen from White's point of view was to ensure that the post-war world would be a safe place for American exports. To this end it was necessary to ensure that the world - much of it wrecked by the war - should be able to pay for American exports; and secondly that it could be relied on to pay in a currency that could be trusted, meaning, essentially, a currency tied to gold.
The problem from Keynes's point of view was different. Since the 1920s he had been concerned with unemployment, and his solution - the idea that is regarded as typically 'Keynesian' - was to ensure that there was sufficient demand in the economy to absorb a level of production that would keep people in employment. But this implied a closed economy. If the money put in peoples pockets was spent on imports, it would not contribute to maintaining employment in the domestic economy.