Parrini, Carl P.||Moody, J. Carroll, 1934-
M.A. (Master of Arts)
Department of History
World Bank||International Monetary Fund
During World War II the United States government developed elaborate and extensive plans for the postwar world. Its plans were primarily economic in nature because Roosevelt's administration believed that American security and prosperity required peace and prosperity throughout the world. It also believed that peace and prosperity were interdependent, for war disrupts commerce and poverty breeds violent revolution, which poses a threat to all private property. Before the United States entered the war Roosevelt and his New Deal advisors had decided to create prosperity through American management of the international economy. They also planned to use this economic power to establish the United States as the world's political leader. This paper purposes to analyze the creation and adoption of one aspect—monetary and financial—of America's postwar plans. Roosevelt's economic planners considered the enormous and complex monetary and financial problems that arose from the Great Depression to be a fundamental threat to world prosperity. Their solution to these problems centered around Assistant Secretary of the Treasury Harry Dexter White's drafts of an International Bank for Reconstruction and Development and an International Monetary Fund. White designed the Bank to stimulate private loans by guaranteeing all sound foreign investments. The Bank would thus provide an ample supply of American dollars—through private loans and investments—to the world and eradicate the dollar shortage which had thrown the world into depression in the early 1930's. In the Fund White sought to provide machinery through which nations could acquire foreign currencies to meet short-term balance of payments deficits. The Fund also would regulate and stabilize the currency exchange rates of its members. White and the rest of the administration believed that the elimination of these barriers to commerce was a necessary prerequisite for the expansion of international trade after the war. If trade did sink back to its pre-war level, world production would proportionately decline and depression would resume. After the Administration published its plans for the Fund and Bank, a small, but extremely wise collection of economists, businessmen, and political leaders— led by Professor John H. Williams of Harvard, the American Bankers Association, and Senator Robert Taft— soundly criticized the Fund’s ability to achieve its goals. While they applauded the conservative construction of the Bank (similar to American private banking) they argued that foreign nations would misuse the Fund and it would fail to provide currency stability and convertability. The Fund might even create instability by providing prosperous foreign nations with "easy money* and thus create inflation. More importantly, the critics repeatedly asserted that certain nations in the world would need vast sums of money— more than they could receive through the Fund and Bank— to reconstruct their economies after the war. Only strong economies would he able to stabilize their currencies. They argued that only large scale, lend-lease type loans or gifts, made directly by the American government to nations desperately in need of reconstruction capital, could rebuild war-devastated Europe and create economic stability. Harry White apparently recognized the merits of the critics' recommendations, for he revised the Fund plan to correct weaknesses they had noted. Despite these changes, White did not alter the basic structure or nature of the Fund. The critics' arguments on the need for national loans proved to be prophetic. In 1947 Truman's administration acknowledged the failure of the Bank and Fund and initiated a program of national aid to European governments through the Marshall Plan. Harry White had designed the Fund and Bank to solve the economic problems of the 1920's and 1930's; his organizations proved grossly inadequate to meet the needs of the world in 1945.
Feipel, William G., "The United States and the creation of the International Monetary Fund and the International Bank for Reconstruction and Development, 1942-1945" (1971). Graduate Research Theses & Dissertations. 6357.
Northern Illinois University
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