The Magazine

Out of the Woods

The rise and fall of a monetary regime.

Aug 26, 2013, Vol. 18, No. 47 • By KEVIN R. KOSAR
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As a peculiar twist to the story, while Harry Dexter White was fighting to establish an American-dominated economic order, he was in cahoots with the Communists. Benn Steil provides indisputable evidence that White was one of “a surprising number of American government officials who would never have considered themselves disloyal to the United States, [yet] provided covert assistance to the Soviets.” White took gifts from the Communists and gave them sensitive information in return. To be sure, for all his brilliance, White was utterly delusional about the Soviet Union. He contended that, “contrary to popular opinion, the right of a person to worship as he please has never been abrogated in Russia.” And he saw the future just as well: “Russia is the first instance of a socialist economy in action. And it works!” White imagined that the Kremlin had no territorial ambitions and would be a good partner to America. 

White died in 1948; his Bretton Woods system staggered for a few decades, and then collapsed. Like many government regulatory regimes, it was outstripped by dynamic economic forces and self-interested behavior. Richard Nixon put the nail in the coffin in 1971, when he ceased allowing nations to trade their dollars for gold. Fixed exchange rates were no more. 

Aspects of White’s plan do remain alive, most conspicuously in the forms of the World Bank and the International Monetary Fund. So the question recurs: What are currencies worth today relative to one another? If we’re fortunate, Benn Steil will deliver a follow-up study that explains the workings of our surreal world of fiat money and floating exchange rates set by international markets. 

Kevin R. Kosar is the author, most recently, of Ronald Reagan and Education Policy