*** DRAFT ***
THE INTERNATIONAL DEVELOPMENT OF BRETTON WOODS:
NORTH-SOUTH DIALOGUE IN THE MAKING OF THE POSTWAR ORDER
Eric Helleiner
Faculty of Arts Chair in International Political Economy
Department of Political Science
University of Waterloo
ehellein@uwaterloo.ca
Comments welcome – do not quote without permission of author.
[please note: this paper is a draft introductory chapter to a book manuscript of the
same title. It provides an overview of arguments that draw on extensive archival
research. The detailed evidence to support the arguments summarized below is
included in the subsequent chapters.]
CHAPTER 1: INTRODUCTION
The 1944 Bretton Woods conference is justly famous for creating the foundation of
the postwar international financial system. The Bretton Woods negotiators
established a new multilateral legal framework for financial relations as well as two
institutions - the International Monetary Fund (IMF) and International Bank for
Reconstruction and Development (IBRD) – that remain, albeit in altered forms, at
the centre of global financial governance today. These arrangements were
underpinned by an innovative “embedded liberal” vision that sought to reconcile a
commitment to liberal multilateralism with new interventionist economic practices
that had become influential across the world during the 1930s.1
The Bretton Woods conference has also attracted many critics over the years. One of
the most consistent criticisms concerns its treatment of international development
issues. The Bretton Woods agreements are commonly portrayed as a product of
Anglo-American negotiations between 1942 and 1944 in which little attention was
paid to the concerns of poorer - or “Southern” – countries.2 This historical narrative
has reinforced arguments that the Bretton Woods system has long privileged the
narrow interests and perspectives of Northern countries over those of the Southern
countries.
This book offers a very different interpretation of the origins and content of the
agreements reached at the 1944 conference held at the Mount Washington Hotel in
Bretton Woods, New Hamsphire. It shows how international development goals –
that is, those aiming to provide official international support for the economic
development of Southern countries3 - were in fact quite central to the birth of the
For embedded liberalism, see Ruggie 1982. The Bretton Woods conference itself was focused on
primarily on international financial issues, and that is the main focus of this book. But Ruggie
describes how this ideology also infused international trade discussions at the time. Although trade
issues do arise in some parts of this book’s analysis of the creation of the Bretton Woods agreements,
the negotiation of the General Agreement on Tariffs and Trade and the stillborn International Trade
Organization are not analyzed.
2 In this book, the term “Southern countries” is used interchangeably with “poorer countries”. The
term came into vogue during the 1970s when it was used to refer to the coalition of poorer countries
that carved out a distinctive perspective on global economic issues from those of wealthier
“Northern” countries. The terms “developing countries” and “less developed countries” have been
avoided in this book (outside of the context of direct quotations from speeches and texts of the time)
because the emergence of the use of the term “development” is one of the subjects of the analysis. In
the historical discussions examined in this book, a number of terms were used to describe poorer
countries such as: “less developed”, “undeveloped”, “underdeveloped”, “depressed”, “nonindustrialized”, “industrializing”, “poor”, “capital poor” and “backward” (the latter was sometimes
used in quotations marks e.g. Berle 1941).
3 This definition uses the word “official” to exclude a much longer tradition of international nongovernmental development initiatives. This definition also deliberately sidesteps the issue of what
the economic “development” of Southern countries might mean since this issue has long been
contested.
1
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original embedded liberal vision and were widely discussed during the negotiations
that led up to the 1944 Bretton Woods agreements. These discussions generated
many innovative proposals to create a more “development-friendly” international
financial order than had existed in the past. Not all of these proposals found their
way into the final Bretton Woods agreements, but some important ones did. Far
from neglecting international development goals, the Bretton Woods negotiations
should be recognized for their pioneering role in successfully incorporating these
goals into the multilateral political landscape for the first time.
Furthermore, this book highlights how officials from Southern countries played a
much more significant role in shaping and supporting the Bretton Woods outcomes
than conventional wisdom suggests. Particularly important were Latin American
policymakers who worked closely with US officials from the late 1930s onwards –
well before the Anglo-American negotiations of 1942-44 began – to build a new
pattern of international financial relations that was supportive of their development
aspirations. The policy innovations that arose from this US-Latin American financial
partnership served as a key foundation for the Bretton Woods negotiations. In
addition to the Latin American role, officials and thinkers from other poorer parts of
the world – especially China, India, and Eastern Europe – also strongly backed the
development content of Bretton Woods. The Bretton Woods negotiations were thus
much more than just an Anglo-American affair. They included a rather extensive
“North-South dialogue” which was in fact the first of its kind to shape the global
financial order.
This book thus offers a major reinterpretation of the genesis of the Bretton Woods
system. Its unconventional history resurrects both the neglected development
content and the overlooked North-South dimensions of the Bretton Woods
negotiations. In so doing, it shows how the content of Bretton Woods was informed
by a much wider political context than the Anglo-American world as well as a longer
history than the much-studied 1942-44 negotiations. The analysis also highlights
how the ideology of “embedded liberalism” had a much wider meaning from the
start - one that was fully inclusive of international development goals - than has
been recognized in existing literature.
Why has this history been neglected? Perhaps because key aspects of the
development content of the Bretton Woods negotiations were quickly set aside by
Northern powers after the war for a number of political reasons that are analyzed at
the end of this book. This turn of events set the stage for Southern countries to see
the Bretton Woods order as a Northern-dominated arrangement that was ill-suited
to their development needs. By the 1970s, their dissatisfaction had escalated into
widespread calls for a New International Economic Order (NIEO) to reform the
Bretton Woods system in a more development-oriented direction. These demands
were largely resisted at the time by Northern powers whose policymakers saw them
as too radical a challenge to the Bretton Woods vision. In the charged political
context of the 1970s, both supporters and critics of the NIEO overlooked the fact
that much of the NIEO package simply resurrected objectives, and even some
2
specific proposals, that had found widespread international support at the time that
the Bretton Woods order was negotiated.
If the excavation of this history might have been useful to participants in the NIEO
debates, it is also relevant to the current moment. We are living in an era when the
North-South dimensions of the global financial system are once again very
politically contentious. Policymakers and analysts from increasingly powerful
“emerging economies” are demanding better representation in global financial
governance as well as specific reforms to the global financial system to better
support their development goals. This book provides a reminder that efforts to
create a more development-friendly global financial system reinforce the original
Bretton Woods vision rather than challenge it. Indeed, policymakers from countries
such as Brazil, China, India and Mexico today are following in the footsteps of their
predecessors who participated actively in shaping and supporting the original
development content of Bretton Woods.
In addition to contributing to debates about the history and trajectory of the Bretton
Woods system, the book’s historical findings also new light on current scholarly
debates about the history and meaning of international development. Since the end
of the Cold War, scholars have becoming increasingly interested in historicizing
international development. Within the literature on this topic, it has become
commonplace to read – particularly in analyses from a “post-development” school that international development was born out of US President Truman’s 1949
inauguration speech and the early Cold War priorities of Western policymakers.4
This historical narrative is used to support a broader critique that international
development has been, from its very origins, a top-down neo-imperialist political
project designed primarily to serve the economic and strategic interests of powerful
capitalist states.
While scepticism of the post-1949 international development experience may be
justified, this critique rests on a deeply flawed history of the origins of international
development. International development was not invented by the Truman
administration. It emerged as a prominent feature of international politics well
before the Cold War in the context of the US-Latin American financial partnership in
the late 1930s/early 1940s and the subsequent Bretton Woods negotiations.5
Moreover, much of the push for international development in this period came from
See for example Escobar 1995, Rist 1997, Sachs 1990, 1992. Some of this literature claims that the
concept of ”development” itself originated in the Truman era, but this view has been effectively
critiqued by Cowen and Shenton 1996. Cowen and Shenton (1996; 8, 367) themselves do write,
however, about the novelty of the “international agency of development” after 1945 (see also pp.8,
366).
5 Before the 1944 Bretton Woods conference, international development issues were also discussed
at the 1943 Hot Springs conference addressing food and agricultural issues, but the immediate
results of that conference were limited. It took another two years before the constitution of the UN
Food and Agricultural Organization was agreed upon. The League of Nations also experimented with
some limited international development activities in the 1930s as noted in chapters 8 and 10.
4
3
Southern officials and analysts, and many of the pioneers of international
development in this period (including those from the US) saw its content differently
than Truman and his advisors. The politics of the birth of international
development, in other words, is much more complicated than some “postdevelopment” scholarship suggests. From its very outset, international development
has had a much more pluralist meaning than that scholarship suggests.
Common Views of Bretton Woods
Before outlining the details of the book’s arguments, it is worth reviewing some of
the common views about the role of international development and Southern
countries in the Bretton Woods negotiations.6 Typical of the conventional wisdom
are the comments of Richard Gardner, one of the leading scholars of the origins of
the 1944 agreements. He argues the Bretton Woods negotiations were dominated
by a “sterling-dollar diplomacy” between US and British officials in which the
question of how to assist the development of poorer countries “was not recognized
as a major issue in the postwar planning”.7 His more specific discussion of the
creation of the IMF reinforces this point: “the delegates at Bretton Woods gave little
thought to the Fund’s potential impact on the less-developed countries”.8 Gardner
even downplays the significance of the creation of the International Bank for
Reconstruction and Development at the conference:
“There was simply no conception of the vast needs of the less developed
countries and of the role the Bank should play in meeting them. Indeed, the
Bank was conceived mainly as an institution for reconstruction. Incredible as it
seems today, the word 'development' did not even appear in Harry White's
first draft circulated within the US Treasury Department.”9
Gardner’s view of the Bank’s original purpose is shared by others. For example, in a
prominent book analyzing the Bretton Woods institutions, geographer Richard Peet
argues:
“The IBRD was a mere afterthought. What little exchange there was
concerning the IBRD centred on its possible role in the post-war
reconstruction of Europe. On the few occasions that poor countries were –
briefly – mentioned, issues such as poverty never came up. Indeed, such were
the preoccupations of the Europeans and Americans at the time that labels
such as ‘poor countries’, or the more critical term ‘underdeveloped countries’,
did not exist as functional geographical categories - countries outside Europe
and North America were referred to as ‘the colonies’.”10
Given the following criticisms of existing literature, I hasten to add that my own early work on
Bretton Woods also neglected the development content of Bretton Woods and the role of Southern
countries in the negotiations; Helleiner 1994: ch.2. Mea culpa.
7 Gardner 1985: 30.
8 Gardner 1980: xxi.
9 Gardner 1985: 30.
10 Peet 2009: 127.
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4
The most recent official history of the Bank comes to a similar conclusion about the
Bank’s intended role. Echoing Gardner, the authors of this history argue that the
first US draft of the Bank written in early 1942 by Harry Dexter White “made no
mention of development”.11 They argue that, in the subsequent international
negotiations leading up to the Bretton Woods conference, the Bank also received
much less attention than the Fund and that as late as May 1944 the British “had
expressed no interest in what thus far was an entirely American idea”.12 When
Britain’s lead negotiator, John Maynard Keynes, finally became more interested in
the Bank, these authors argue it was only because he saw it as a potential source of
funding for the UK and that he downplayed its development role. They conclude that
“development arrived almost by accident and played a bit role at Bretton Woods”.13
Like many others, they argue that it was not until the late 1940s that a serious
interest in international development emerged.14
Existing scholarship has also often downplayed the role of poorer countries in the
creation of the Bretton Woods system. For example, here is how economist Gerald
Meier, a leading authority in the history of development thinking, describes the
Bretton Woods conference: “Most of the developing countries were still colonies,
and only a relatively few, mainly independent nations of Latin America, were
invited. The political power lay with the United States and Britain, and from the
outset it was apparent that issues of development were not to be on the Bretton
Woods agenda”.15 Like many other scholars, he also cites a comment from Keynes
before the conference in which he dismissed the potential significance of many
poorer countries invited to the conference, arguing that they “clearly have nothing
to contribute and will merely encumber the ground… The most monstrous monkeyhouse assembled for years.”16
Kapur, Lewis and Webb 1997: 57.
Ibid, 58.
13 Ibid, 68. See also Benjamin 2007: 12-14.
14 Better than many other analysts, however, Kapur, Lewis and Webb do mention briefly the push by
India and some Latin American countries for more focus on development issues at Bretton Woods
(Ibid, 60). They also cite US President Roosevelt’s interest in addressing poverty abroad (Ibid,
61fn.16, 65-66), although they argue (incorrectly in light of the evidence in this book) that he “was
ahead of his audience and of the political mood in 1944” and that his message “was glossed over at
Bretton Woods” (Ibid, 66, 69). They also quote US Treasury Secretary Henry Morgenthau’s comment
that “poverty, wherever it exists, is menacing to us all” but argue that no one at the time stated that
“development assistance was in the self-interest of the giver.” They continue: “There were allusions
to the importance of developing the resources available in undeveloped areas, by which the delegates
meant, principally, raw materials” (Ibid, 69). This book provides evidence of many arguments about
how development assistance would benefit the giver as well as of broader conceptions of
development than simply a focus on raw materials.
15 Meier 1984b: 9.
16 Ibid, 9. Meier (1984a: 11-12) also echoes the arguments that the early drafts of the IBRD’s gave
little attention to development issues and that the Bank received little attention in the negotiations.
For other citations to Keynes’ quote, see Meier 1984a: 11; Kapur, Lewis and Webb 1997: 62; Toye
and Toye 2004: 23; Benjamin 2007: 15-16; Peet 2009: 49. The significance of Keynes’ passage is
discussed in chapter 8 of this book.
11
12
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Meier also argues that poorer countries themselves did not press for development
issues to be included on the Bretton Woods plans: “At Bretton Woods, the
developing countries tended to view themselves more as new, raw-materialproducing nations and less as countries with general development problems.
Comprehensive strategies of development and policies to accelerate national
development were yet to be identified”.17 In Meier’s view, it was thus not only
American and British officials who “were not directly interested” in development
during the negotiations. As he puts it, “even most of the representatives of LDCs
seemed unconcerned”.18
The role and significance of poorer countries is also minimized by John and Richard
Toye in their important contribution to the UN Intellectual History project. They
argue that “close cooperation between the British and American delegations” at the
conference “helped ensure that the voices of developing countries were drowned
out”.19 When discussing the US and British plans, Toye and Toye also argue that
“there was no apparent recognition that the interests of countries participating in
the proposed multilateral regime might differ – there were no special concessions to
countries with less-developed economies”.20 This latter argument is echoed by
Edward Mason and Robert Asher in their detailed history of the World Bank:
“insofar as the Bretton Woods delegates considered the question specifically,
they saw no reason to distinguish between those policies relating to trade,
payments, and capital flows that were considered to be favourable to the
growth and prosperity of the developed countries of the world from those
favourable to less developed countries. In fact, the distinction between
developed and less developed and between North and South – the special
problems of the ‘third world’ – had scarcely swum into the ken of postwar
planners.”21
Historians who have written the most detailed descriptive accounts of the overall
Bretton Woods negotiations have identified some of the specific ways in which
Southern countries contributed to the discussions. In these accounts, however, the
main focus of analysis is still on the industrial countries and especially the Anglo-
Meier 1984b: 9
Meier 1984a: 13. Meier does acknowledge, however, that India and some Latin American countries
lobbied for some development provisions (1984a: 13-14, 20). He also cites Roosevelt’s desire to see
“freedom from want” as well as the UN Charter’s commitment to promote “higher standards of living”
and “development”, but argues (incorrectly, in light of the evidence in this book) that the Bretton
Woods conference “remained largely immune from these aspirations” (Meier 1984b: 9). In addition,
he notes that “elements of what would now be called a “New International Economic Order” were
proposed by some economists who were examining the structure of the postwar world” but he
argues that they were “not yet differentiating between North and South” (Meier 1984a: 17). This
book also highlights the NIEO-like content of discussions at this time, but it disputes his claim that
this content was not linked to an understanding of the distinct needs of Southern countries.
19 Toye and Toye 2004: 23.
20 Ibid, 23.
21 Mason and Asher 1973: 4. See also Bird 1982: 1.
17
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American relationship.22 This orientation is also apparent in John K. Horsefield’s
important documentary volume that reproduces the original Bretton Woods plans
of the US, British, Canadian and French governments while neglecting to include
that developed by the Chinese government.23 A widely-read 1993 historical volume
titled A Retrospective on the Bretton Woods System also says little about the role of
Southern countries in the creation of Bretton Woods. As one of its editors, Michael
Bordo, puts it in his introductory chapter, one of the important remaining questions
to be addressed by historians is “how did the nonindustrialized world relate to the
Bretton Woods system?”24
From political science, John Ruggie’s seminal analysis of the significance of the
ideology of “embedded liberalism” – a term he first coined - also devotes little
attention to the development content of the Bretton Woods negotiations. Ruggie
highlights how American and British negotiators set out to build a multilateral
financial order that, unlike the gold standard, “would be predicated upon domestic
interventionism”.25 Under this “compromise” of embedded liberalism, countries
would commit to stable exchange rates and current account convertibility at the
same time that their domestic economies would be cushioned “against the strictures
of the balance of payments” by multilateral rules allowing adjustable exchange rates
and capital controls as well as by the IMF’s provision of short-term balance of
payments support.26 But the “domestic interventionism” Ruggie has in mind was a
kind developed by industrialized countries. As he puts it, the ideology of embedded
liberalism was informed by a “shared legitimacy of a set of social objectives to which
the industrial world had moved”, objectives that were focused on full employment
and the provision of social security.27 No mention is made of the new interventionist
practices emerging in poorer countries at this time that were aimed at promoting
economic development. Indeed, Ruggie argues that “the compromise of embedded
liberalism has never been fully extended to the developing countries.”28
Much recent scholarship exploring the origins of international development has also
overlooked the importance of development issues in the Bretton Woods
In addition to Gardner’s book cited above, the most detailed histories of the Bretton Woods
negotiations include Van Dormael 1977, Eckes 1975, Horsefield 1969a, Mikesell 1994. Of these,
Eckes’s and Horsefield’s book devote the most focus to the role of Southern countries.
23 Horsefield 1969b.
24 Bordo 1993: 85.
25 Ruggie 1982: 393.
26 Ibid, 395
27 Ibid, 398.
28
Ruggie 1982: 413. See also Steffek 2006. In a book published just after his widely-cited 1982 article,
Ruggie did note that the creation of the IBRD was potentially significant for poorer countries: “insofar as
the mandate of the International Bank for Reconstruction and Development included concessional lending
of investment capital to developing countries, the concept of an international role in the development
process was instituted” (Ruggie 1983a: 8). But he downplays the interest of American and British
policymakers in this role and argues that specific references to the objective of promoting the development
of poorer countries “were systematically excluded from the Final Acts”. (Ruggie 1983b: 430). This book
presents evidence that questions those lines of argument.
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negotiations. As noted above, this analysis often focuses on the importance of
Truman’s January 1949 inauguration speech in which he declared that “we must
embark on a bold new program for making the benefits of our scientific advances
and industrial progress available for the improvement and growth of
underdeveloped areas”.29 For many post-development scholars inspired by
discourse analysis, this speech changed world history by inventing, or at least
popularizing, the term “underdeveloped”. The term is said to have justified postcolonial Western intervention into, and domination over, poorer countries by
suggesting that these countries needed external help to promote “development”.30
As Gustavo Esteva puts it, “Underdevelopment began, then, on January 20, 1949. On
that day, two billion people became underdeveloped”.31
Arturo Escobar argues that the US promoted this concept at the time as a response
to anti-colonial struggles and Latin American nationalism, as well as the need for
new markets and strategic priorities in the new Cold War. Inspired by the promise
of science and technology and recent experience with public intervention in their
own economies, US and other Northern officials backed a new commitment to
international development involving “a top-down, ethnocentric, and technocratic
approach” in which development professionals “sought to devise mechanisms and
procedures to make societies fit a preexisting model that embodied the structures
and functions of modernity”.32 The result, argues Escobar, was a “nightmare” in
which “the discourse and strategy of development produced its opposite: massive
underdevelopment and impoverishment, untold exploitation and oppression”.33
Some scholars who stress the importance of the Truman speech in inventing
international development acknowledge that there were precursors. For example,
Esteva argues that the term “underdevelopment” was probably “invented” in 1942
by a former ILO official Wilfred Benson. But he suggests that “the expression found
no further echo, neither with the public nor with the experts” until Truman’s
speech.34 Another important scholar working in this tradition, Gilbert Rist, also
notes briefly how the League of Nations showed some limited interest in
international development, but his historical narrative jumps from this episode to
Truman’s speech which he states truly “inaugurated the ‘development age’”.35
Escobar (who argues that the term underdevelopment “did not exist before 1945”36)
Quoted in Rist 1997: 71.
See especially Escobar 1995, Rist 1997, Sachs 1990, 1992.
31 Esteva 1992: 7.
32 Escobar 1995: 44, 52.
33 Ibid, 4.
34 Esteva 1992: 7. Benson’s role is also mentioned by Sachs (1990) and Rist (1997: 73 fn5) .
35 Rist 1997: 71. In addition to discussing the reference to “development” in the League’s charter, Rist
(1997: 65-6) mentions the League’s technical assistance to China in the 1930s. That assistance was
requested by China – a request that undermines Rist’s overall view of the top-down nature of the
origins of international development. The League’s charter is discussed in this book at the start of
chapter 3, and the League’s role in China is discussed in Chapter 10 (see also Zanasi 2007). Other
discussion of League thinking in the 1930s comes in chapter 8.
36 Escobar 1995: 31.
29
30
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also shows some awareness of two phenomena that are at the core of this book’s
analysis: the Roosevelt Administration’s Good Neighbor policy and Latin American
development aspirations during the 1930s and 1940s.37 But he overlooks their
significance to the origins of international development by neglecting their role in
the US-Latin American financial partnership of the late 1930s/early 1940s and the
Bretton Woods negotiations.
A Different Perspective
This book provides a rather different perspective on the origins and content of the
Bretton Woods system. Its findings diverge from the conventional wisdom on three
issues: the degree of US and other Northern support for international development,
the role of Southern countries, and the origins of international development.
American and Other Northern Support for International Development
To begin with, this book shows that US negotiators saw international development
as a priority issue on the agenda of postwar international financial planning
throughout the Bretton Woods negotiations. Despite claims to the contrary, archival
evidence shows that White’s earliest drafts of the IBRD did assign it a mandate to
promote “development” (he uses the term). The Bank was in fact never seen by US
officials as an institution exclusively, or even mainly, focused on postwar
reconstruction of Europe. American policymakers also did not view the IBRD as an
afterthought. While it is true that more time was devoted to the Fund during the
Bretton Woods negotiations, the Bank’s creation was always seen by American
officials as a crucial complement to the Fund in postwar international financial
planning.
More generally, far from ignoring international development, White’s early postwar
plans were in fact particularly ambitious in this area. Anticipating some of the NIEO
agenda in the 1970s, White outlined innovative provisions for international
development finance, debt restructuring, commodity price stabilization, the control
of capital flight, and support for infant-industry trade protection in developing
countries. 38 Although not all of White’s proposals found their way into the final
Ibid, 28-32.
For this and other reasons, it is difficult to accept Steffek’s (2006) argument that the ideology of the
“redistributive multilateralism” of the NIEO was very different from, and represented a challenge to,
the ideology of embedded liberalism. Steffek’s argument rests entirely on an analysis of the GATT
trade regime. Oddly, he devotes almost no attention to the Bretton Woods negotiations and their
financial content. This book highlights how redistributive multilateralism was part of the ideology of
embedded liberalism from the start. Steffek also argues that Southern countries remained outside of
the embedded liberal system because their governments did not have the same capacity to cushion
their citizens against the disruptive domestic effects of international markets that Northern
government did. As noted below, however, this book highlights how US officials worked actively at
the time of Bretton Woods to strengthen this domestic cushioning capacity of Southern governments.
In other words, they recognized this point and explicitly sought to remedy it as part of the
construction of the new embedded liberal order.
37
38
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Bretton Woods agreements, his commitment to international development was
widely shared in the US government throughout the 1942-44 period. So too was his
commitment to what Toye and Toye call “procedural multilateralism” which
provided many poorer countries with a formal role in the negotiation of the Bretton
Woods order and in its subsequent administration.39
The origins of White’s initial plans have sometimes puzzled scholars.40 Drawing on
extensive archival research, this book demonstrates that these proposals built
directly on a number of initiatives that he and other US officials had launched in the
late 1930s to support Latin American development ambitions. These initiatives
were part of Roosevelt’s broader Good Neighbor policy towards the region and they
even included in 1939-40 the negotiation of a multilateral lending institution – the
Inter-American Bank (IAB) – whose core mandate was to promote “development”
(again, the term was used) in the region and whose features anticipated many of
those of the IMF and IBRD. The content of White’s initial plans is much more
understandable when seen in the light of these inter-American initiatives. They
pioneered not just the development provisions of White’s initial proposals but also
the broader embedded liberal vision of Bretton Woods.
Keynes is often seen as the pioneer of that vision because he developed his first
postwar plan before White in 1941 and because of his broader intellectual stature at
the time. Rather than “catching up” to Keynes, however, White and other US officials
were far ahead of him in mapping out an international financial order based on
embedded liberal principles.41 They had been developing, and even implementing,
this vision in the inter-American context for several years before the postwar
planning process began. US-Latin American financial relations in the late
1930s/early 1940s, in other words, served as a crucial incubator for the Bretton
Woods proposals - and international development issues were at the core of those
relations.
It is also important to recognize that US policymakers saw the ideology of embedded
liberalism as having both a Northern and Southern side. As noted above, this
ideology sought to reconcile liberal multilateralism with new kinds of
interventionist economic practices that had become increasingly popular at the
domestic level during the 1930s. But the kinds of interventionism emerging from
the experience of the Great Depression differed in Northern and Southern countries.
In the North, supporters of embedded liberalism sought to reconcile liberal
multilateralism with new commitments to social security and Keynesian full
employment policies. But US officials also were determined to marry liberal
multilateralism with the new interventionist development policies that had become
influential across Latin America and many other poorer regions of the world during
Toye and Toye 1994: 18.
For example, Ikenberry (1992: 300) describes their origins as “unclear”.
41 For another analysis that highlights how White came to his ideas independently of Keynes, see
Boughton 2002. The image of White catching up to Keynes can be found in Van Dormael 1977.
39
40
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the 1930s. As noted below, these policies were more focused on promoting rising
living standards, rapid economic growth and latecomer industrialization than the
welfare state and full employment. For the Southern advocates of those policies,
nineteenth century economic nationalists such as Frederich List were more of an
inspiration than William Beveridge and Keynes.
US officials worked actively to accommodate these distinctive interests of Southern
countries in the postwar planning process. The embedded liberal vision was thus
aimed at pioneering a new model for both North–North and North–South financial
relations. US support for the IBRD’s provision of international development loans
was one way in which the distinctive needs of Southern countries was recognized.
But US officials also saw the design of the IMF through a “development” lens. The
Fund’s provision of short-term balance of payments finance was seen as particularly
useful for commodity exporting countries that were vulnerable to commodity price
swings. The Fund’s endorsement of adjustable exchange rates and capital controls
was also viewed as particularly useful for Southern governments seeking to bolster
their capacity to promote their country’s rapid economic development.
Indeed, at the same time that they were negotiating the Fund’s creation, US officials
pioneered a new kind of financial advisory mission that was explicitly designed to
strengthen this capacity by supporting wide-ranging domestic monetary and
financial reforms in Southern countries. The first two missions of this kind were led
by White to Cuba in 1941-42 (during which he wrote his first draft of the IBRD) and
by Robert Triffin (of the Federal Reserve Board) to Paraguay in 1943-44. During and
in the immediate wake of the Bretton Woods negotiations, White, Triffin and other
US financial advisors backed development-oriented domestic monetary and
financial reforms in a number of other Southern countries – primarily in Latin
America, but also in other countries that had attended Bretton Woods such as the
Philippines and Ethiopia. The activities of this new breed of US “money doctor”
complemented the establishment of the Fund perfectly. While the latter created a
new multilateral framework that was permissive of national development policies,
the former helped build domestic institutional capacity to enable those policies to
be pursued.
What explains the US interest in promoting international development from the late
1930s through the Bretton Woods negotiations? Economic, strategic and ideational
factors all played a role. Economically, US officials argued that this policy served the
country’s interests by providing new opportunities for investment, by reducing
import costs as the productivity of Southern countries increased, and especially by
fostering new export markets. Regarding the latter, many US policymakers
anticipated an international division of labour under which US firms would benefit
from Southern countries’ industrialization by supplying the machinery and other
capital goods needed to produce consumer products for the local market. US
manufacturing firms were often very supportive of this vision.42
42
See especially Maxfield and Nolt 1990.
11
US officials were also driven by the strategic goal of offsetting the Nazi threat, first in
Latin America during the late 1930s/early 1940s and then worldwide once the US
joined World War Two in late 1941. Offering to support the development
aspirations of Southern governments helped secure alliances and provide a wider
moral purpose to the Allied cause in the war, particularly at a time when fascist (and
communist) ideals provided alternative routes to development from the preferred
US model. As John Ikenberry argues in his analysis of the Bretton Woods
negotiations, many US officials sought to legitimate US power in the postwar world
by promulgating “a postwar system that would have normative appeal to elites in
other nations”.43 For reasons described below, the promotion of international
development held much appeal for many Southern elites at this time.
American support for international development also grew out of some values of
Roosevelt’s New Deal. A core tenet of New Deal philosophy was that individuals’
economic security was a key foundation of political stability. By the late 1930s,
Roosevelt was projecting this idea into the international arena, arguing that the
reduction of poverty abroad was a key pillar for international peace. Support for this
goal was only reinforced by the broad concern of many New Dealers for the poor
and for social justice. The antipathy of New Dealers towards New York financial
elites and past US imperialist practices also encouraged their support for Latin
American development goals as well as their interest in learning from Latin
American experience. The willingness of New Dealers to challenge neoclassical
economics and accept a greater role for government in economic life also led them
to be more open to exploring the distinctive problems of Southern economies and to
experimenting with new public initiatives at the international level to address those
problems.44
The US was not alone among wealthy countries in backing international
development at this time. Despite claims to the contrary, British officials also
expressed support for international development lending throughout the Bretton
Woods negotiations, from Keynes’ initial 1941 drafts onwards. Their support
reflected similar economic and strategic interests as in the US context as well as
some ideational motivations that paralleled New Deal values, particularly among
those on the left of the political spectrum. Keynes and many other British officials
did not, however, take up the cause of international development with the same
enthusiasm as many of the US counterparts for reasons outlined in chapter 8.
Officials from other countries such as Canada, the Netherlands, and Australia, were
also supportive of the idea of incorporating development goals within postwar
international plans. Two Australian officials, Stanley Bruce and Frank McDougall,
who had been involved with the League of Nations during the 1930s, were
Ikenberry 1992: 320.
For the broader case that the New Deal’s endorsement of greater state intervention in the domestic
economy led to interest in international economic activism, see Burley 1993, Ikenberry 2011: ch.5,
Patrick 2009.
43
44
12
particularly active in lobbying US and British policymakers on this topic and within
the League of Nations.
The Role of Southern Countries
Conventional wisdom has also unfairly downplayed the role of Southern countries
in the creation of the Bretton Woods system. To begin with, although Meier suggests
that “”developing countries” invited to Bretton Woods were only “a relatively few”,
the actual number was quite large. The attendees included representatives from
nineteen Latin American countries (all but Argentina45), five Asian jurisdictions
(China, India, Iran, Iraq, and the Philippines), and four from the African continent
(Egypt, Ethiopia, Liberia and South Africa). Also represented were four countries
from Eastern Europe (Czechoslovakia, Greece, Poland and Yugoslavia), a region that
many (including those from the region) saw at the time as facing similar economic
problems as other poor regions. If these countries are added together, they made up
a large majority – 32 of the total 44 – those formally represented at the
conference.46 Even if one might question whether all these delegations were truly
representative of Meier’s category of “developing countries”,47 few would dispute
that a substantial majority of the countries represented at Bretton Woods fell in this
group.
It is true that the delegations from some of these countries included only one or two
people.48 But many others were a respectable size, and some were quite large, such
as the delegations from China (32 people), Brazil (13), Cuba (10), India (8), Peru (8),
Chile (7), Poland (7), and Mexico (7). Indeed, the size of the Chinese delegation was
second only to that of the US (45), while Brazil’s was tied with Canada for the fourth
largest behind Britain (15). Moreover, if all the individuals involved in the
delegations from the 32 countries noted above are added up, the total comes to 170
people which is considerably more than the 132 involved in the delegations from
the other 12 countries represented.49 It is also worth noting that the head of the
Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador,
Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay, Venezuela.
46 In addition to the 44 countries formally represented at the conference, the Danish Minister to the
US also attended in a personal capacity (Horsefield 1969a: 79). Although some histories of Bretton
Woods state that 45 countries were thus represented at the conference, this book uses the formal
number of 44. The other countries represented at Bretton Woods were the United States, the Soviet
Union, the United Kingdom, three other British Dominions (Australia, Canada, New Zealand), and six
other West European countries (Belgium, France, Iceland, Luxembourg, Netherlands, Norway).
47
For example, Kapur, Lewis and Webb (1997: 66) note that, within Latin America, Argentina (which
was not at the conference), Uruguay and Venezuela had per capita incomes higher than much of
Europe.
48 One person delegations included those from Bolivia, Guatemala, Honduras, and Yugoslavia. Two
person delegations came from Ecuador, Haiti, Panama, Paraguay, and Uruguay.
49
I have drawn these numbers from a booklet distributed to conference attendees: United Nations Monetary
and Financial Conference, Officers of the Conference, Members of the Delegations, Officers of the
Secretariat, Bretton Woods, New Hampshire, July 1944 (found in Record Group 19 v.3597, E3(k)1,
National Archives of Canada). These numbers include not just the official delegates but also all the
secretaries, advisors, experts, consultants, and assistants associated with the various country delegations.
45
13
Mexican delegation was invited to chair one of the three “commissions” around
which the Bretton Woods conference discussion was organized (the other two were
chaired by White and Keynes).
The contribution of Southern countries to the Bretton Woods agreements was not
restricted to their participation in the 1944 conference. Through their involvement
in the inter-American financial initiatives of the late 1930s/early 1940s, Latin
American governments helped lay the groundwork for the early US Bretton Woods
plans. China, Brazil and Mexico were then part of an inner core of countries
consulted by American and British officials on postwar international financial plans
from 1942 onwards (along with the Soviet Union50). American and British
policymakers also consulted with many other Southern countries bilaterally and in
smaller groupings throughout the negotiation process. In these consultations and at
the Bretton Woods conference itself, Southern countries were much more than
simply passive observers. They offered detailed commentary on, and contributions
to, the content of postwar international financial plans.
In their inputs to the postwar planning discussions, a number of Southern officials
and analysts highlighted that they were centrally concerned with how postwar
international financial plans could support their general “development” aspirations
(and once again, they used this term). At this time (and contrary to some of the
arguments noted in the previous section), many Southern policymakers were
strongly committed to the goal of raising their countries’ living standards through
comprehensive state-led economic development and industrialization strategies.
This goal has arisen partly from the traumatic experience of Great Depression that
had revealed the vulnerability of commodity exporters to volatile (and declining)
commodity prices as well as to agricultural protectionism in Northern markets. The
Great Depression also undermined the legitimacy of liberal ideology and policies,
opening the door to more statist economic policies – a phenomenon only reinforced
by the examples abroad of the centrally-planned industrialization of the Soviet
Union, the economic growth of fascist powers such as Germany and Italy, and the
growing support for economic planning in countries at the core of the world
economy.
The push for industrialization also reflected strategic concerns, particularly given
the uncertain international security environment of the time. Industrialization was
There were also many others at the conference who were not associated with specific country delegations,
such as members of the conference secretariat, individuals representing international organizations, as well
as media and other observers. According to Horsefield (1969a: 89), 730 people attended the conference in
total.
50 This book does not discuss Soviet Union’s role in the Bretton Woods negotiations. Although Toye
and Toye (2004: 17) note how the Soviet Minister, Vyacheslav Molotov, expressed an interest in
international development in mid-1942 in discussions with US vice-president Henry Wallace, US
official Edward Bernstein noted that Soviet representatives mostly just observed, rather than
contributed to, the pre-conference negotiations (Black 1991: 43; Bernstein 1993). At the 1944
conference, they were also not much involved in the international development discussions.
14
associated with power – just as it had been in the nineteenth century for “late
industrializers” such as the United States, Germany and Japan that had feared
British power. Many countries saw “late, late” industrialization strategies as a way
to avoid subordination in the increasingly unequal world generated by the second
industrial revolution underway in the leading economies. Industrialization and
broader national economic development also promised to help reduce economic
dependence on the foreign countries more generally.
The growing interest in active development policies also emerged out of heightened
awareness of widening international inequality between industrialized countries
and the rest. Observers at the time commented on how intensifying communication
links across the world were contributing to this growing awareness51. The
production of new international statistics also played a role. For example, a widelynoticed 1935 League of Nations survey of nutrition and public health concluded that
two-thirds of the world’s population had inadequate diets.52 Colin Clark’s 1939 book
Conditions of Economic Progress also drew on national income statistics to compare
living standards across the world for the first time. As Heinz Arndt notes, “for the
first time, the gulf between living standards in the rich and poor countries of the
world was brought home in stark statistical terms.”53 Arndt also calls attention to
International Labour Organization’s work in the 1930s comparing levels of
consumption across countries in areas such as food, clothing, housing, medical care
and education in countries around the world.54
In the nineteenth century, poorer countries seeking to catch up economically had
focused on national economic strategies, often ones inspired by List’s advocacy of
state-led industrialization. Now, many Southern officials and analysts began to
consider how the international community could play a role in assisting their
national development initiatives. Encouraged by broader questioning of liberal
orthodoxy at the time, they gave particular attention to roles that involved
replacing, supplementing and/or regulating international market actors. This
thinking was also prompted by the fact that international organizations had become
a much more prominent part of the landscape of world politics.
Also significant was the recognition of the large mountain Southern countries would
need to climb if they sought to catch up economically to the leading powers. While
late industrialization could be accomplished through national initiative, successful
late, late industrialization might require international support. Modern day Listians,
in other words, might need to combine nationalism with internationalism.55 Figures
In addition to passages quoted in the book on this point, see also Bonné 1945: 1.
Lee 2010: 112.
53 Arndt 1987: 35.
54 Ibid, 35-6.
55 The contrast should not be overstated since List himself saw his policies as a first step towards a
long-term goal of a “union of nations” and a “universal society”. That long-term goal, he argued, could
not be successful unless countries were of more equal power – his protectionist policies for weaker
countries were aimed at generating greater inter-national equality. (Helleiner 2002: 313-4).
51
52
15
such as China’s Sun Yat-sen and Argentina’s Raúl Prebisch, whose ideas play an
important role in this book, represented this combination well.
The attraction of seeking international support for national development initiatives
would, of course, be enhanced if there existed willing international partners for this
project. Roosevelt’s New Deal presented just such a partner. Latin American
governments were the first to take up this opportunity in the late 1930s/early
1940s period. Despite some scepticism arising from the history of US intervention in
their region, many Latin American officials appreciated Roosevelt’s Good Neighbor
policy and recognized the potential value of developing coalitions with American
New Dealers who shared some of their values. Out of this recognition emerged some
key transnational expert coalitions between reform-minded economists from both
Latin America and the US who were interested in development issues.56 These
coalitions helped to drive the content of some of the key initiatives in the late
1930s/early 1940s and Bretton Woods negotiations that pioneered international
development practices.
Their role parallels that of transnational expert coalitions – led by Keynes and White
- that Ikenberry has identified as facilitating the Anglo-American dimensions of the
Bretton Woods negotiations. 57 While the Keynes-White axis shared a commitment
to Keynesian full employment policies and social welfare goals, US and Latin
American economists came together around a common belief in new development
thinking. As we shall see, Triffin and Prebisch emerged as particularly central
figures within this axis in the context of pioneering a new model of financial
advising for Southern countries.
While the US-Latin American financial partnership began in the late 1930s, officials
from other poorer regions of the world also came to recognize the potential of an
international development partnership with the US (and other Northern countries)
once the Bretton Woods negotiations began. Their backing of the negotiations was
strongly linked to an understanding that the Bretton Woods agreements would be
supportive of their development goals. For example, the IBRD’s development
lending role was strongly supported not just by Latin American officials but also
policymakers from China, India, and East Europe. Many Southern officials – like
their US counterparts – also saw various aspects of the IMF’s Articles of Agreement
as supportive of their “development” objectives, such as its provision of balance of
payments support and its support for exchange rate adjustments and capital
controls. For the same reason, many Southern countries welcomed the kinds of
domestic financial and monetary reforms recommended by White, Triffin and US
officials during, and in the immediate wake of, the Bretton Woods negotiations.
For other analyses that highlight the role of coalitions between US and Latin American reformers in
driving the Good Neighbor initiatives more generally in this period, see for example Cobbs 1992.
57 Ikenberry 1992.
56
16
It is also important to recognize that the voices of Southern countries were not
“drowned out” during the negotiations that created the Bretton Woods order.
Particularly important was the contribution of Latin American policymakers who
worked closely with US officials as far back as the late 1930s to pioneer key ideas
and practices that helped generate the Bretton Woods outcomes. Analysts and
officials from other Southern countries – particularly India and China – also
contributed to the Bretton Woods negotiations in a number ways. It is not always
easy to prove that their input steered the content of those negotiations in
dramatically new directions. But this is simply because many of their developmentoriented suggestions dovetailed with Anglo-American ideas.
One final point deserves mention about the role of Southern countries in the
creation of Bretton Woods. In contrast to the politics of the NIEO period, Southern
governments did not present much of a unified front during the Bretton Woods
negotiations, with the exception of Latin American countries (whose collective
regional voice was often quite cohesive). While there was some general recognition
of the common structural problems facing poorer countries, there is little evidence
of coalition-building between Latin American governments and representatives of
other poor regions of the world. Indeed, when India called at Bretton Woods for the
IMF to be given a more formal development mandate, the first opponent of the idea
was a conservative Brazilian delegate. Despite some differences of this kind and
lack of a sense of Southern solidarity, it is striking how many Southern officials
viewed the Bretton Woods proposals through a development lens. These officials
were acutely aware that the development problems their countries faced were
distinctively different from economic issues facing industrialized countries and they
sought to have their countries’ unique needs recognized in the postwar plans.
The Origins of International Development
In light of this analysis, it is clear that international development was not invented
by Truman’s inauguration speech. This book argues that international development
practices emerged earlier in the context of the US-Latin American financial
partnership of the late 1930s/early 1940s and the Bretton Woods negotiations.58 If
an American was to be chosen for the title of pioneer of international development
policy, Harry Dexter White would be more deserving than Truman because of his
leading role in drafting the “development” content of the Good Neighbor financial
policies and the Bretton Woods process.59 The pioneers also included a number of
Southern officials and analysts; indeed, Sun Yat-sen’s 1918 book International
Development of China – which helped inform not just the Chinese position at Bretton
As noted above, some of the League’s activities during the 1930s and the 1943 Hot Springs
conference were also important.
59 White is hardly mentioned in classic histories of economic development thinking such as Arndt
(1987) and Meier and Seers (1984). More generally, Boughton (2002: 4) notes that ‘White may be the
least understood major economist in history. For the most part, his legacy is in institutional practice
rather than publications”.
58
17
Woods but also some American thinkers at the time – stands out as a particularly
early advocate.60
Truman was not even the first to popularize the term “underdeveloped” countries.
As this book makes clear, that term was used widely in American and British policy
debates during the early 1940s (with some uses also predating Benson’s alleged
“invention” of the term).61 Further complicating the claims of post-development
scholarship is the fact that some Southern officials also used the term before
Truman’s speech. At the Bretton Woods conference itself, Indian delegates even
attempted to insert it in the Fund’s Articles of Agreement. To support their
development goals, the Indian delegation proposed that the Fund’s mandate should
include the following phrase “to assist in the fuller utilisation of the resources of
economically underdeveloped countries”.62 In this context, the politics were the
opposite of those suggested by post-development scholars. Rather than being
invoked by US officials to justify intervention in Southern countries, Southern
officials used the term “underdeveloped” as part of an effort to request international
support. Moreover, the initiative to insert this wording in the Fund’s mandate was
blocked by US officials (who feared that the Fund’s lending mandate might then
overlap with the Bank).
The importance of recognizing this deeper history of international development is
that the content of the international development project in this period was quite
different than that described by post-development scholars. The initiatives of the
US-Latin American financial partnership of the late 1930s/early 1940s and the
Bretton Woods negotiations were much more ambitious than those outlined by
Truman. As noted above, they embodied many of the proposals that later resurfaced
during the NIEO discussions of the 1970s. The international development project
thus had a wider set of meanings in its early years than the Truman-centered vision
presented by post-development scholarship.63
The politics generating the birth of international development was also not quite the
same as that identified in post-development literature. To be sure, international
development was a project supported by dominant capitalist states, particularly the
US. This support also partly reflected US economic interests as well as strategic
motivations - although the key strategic threat that drove much US policy
innovation in this era was the Nazi threat in Latin America in the late 1930s/early
60
Sun 1922[1918].
The use of the term by Paul Rosenstein-Rodan in 1944 (described in chapter 9) is particularly
noteworthy because Esteva (1992: 7) explicitly mentions him as someone who did not use the term.
Later in his life, Rosenstein-Rodan (1984: 207) claimed that the term “underdeveloped countries”
appeared “for the first time” in the seminar he led at the Royal Institute for International Affairs (this
seminar is discussed in chapter 9). This claim is incorrect since there are prominent uses of the term
before his seminar was created in 1943.
62 US Government 1948: 23.
63
This argument reinforces Stuart Corbridge’s (2007) broader argument about the need to recognize the
plurality of development ideologies.
61
18
1940s rather than the Cold War of Truman’s era. A key difference, however, was
that the values of Roosevelt’s New Deal played a much more important role in
generating Northern support for international development at this time.
Equally important, the Southern role in this earlier birth of international
development contrasts with that portrayed in post-development scholarship. In the
latter, Southern countries are seen to have little agency; they appear largely as
passive recipients of the international development project foisted upon them by
Northern powers driven by economic and Cold War and imperatives. During the USLatin American initiatives of the late 1930s/early 1940s and the Bretton Woods
negotiations, however, Southern officials and analysts played a significant role in
shaping and actively supporting the birth of the project of international
development. Indeed, they were a major source of the demand for this innovation in
world politics.
There is a certain irony in the neglect by post-development scholars of the agency of
these Southern figures. At the centre of their critique of much development
literature is that it portrays poor countries as “lacking in historical agency”.64 But
their history suffers from the same weakness. Indeed, important pioneers of
international development from poorer regions of the world described in this book
receive little or no attention in post-development analyses of the origins of
international development, including not just Sun Yat-sen and Raul Prebisch but
also others such as Leon Baranski, Chintaman Deshmukh, Paul Rosenstein-Rodan,
Victor Urquidi, and Eduardo Villasenor, to name a few.65
Post-development scholars might respond by questioning the content of the ideas
put forward by these individuals. For example, Escobar dismisses the significance of
the ideas of Latin American economists such as Prebisch who were associated with
the Economic Commission for Latin America (ECLA) in the late 1940s and 1950s, on
the grounds that their basic conception of international development was little
different from that promoted by the North. As he puts it, their proposals “were
easily assimilated into the established views, to the extent that they lent themselves
to a modernization process that international experts and national elites were eager
to undertake”.66 The same criticism would likely be levelled against the proposals of
Southern analysts described in this book since they were very similar to those of
ECLA economists. These proposals fully embraced the goal of catching up
economically to the leading industrial powers through “a modernization process”.
But were these goals simply derivative of Northern thinking? To be sure, European
thinkers such as List inspired some of the thinking. But the direction of the
Escobar 1995: 8.
Escobar (1995: 72, 90-1) briefly mentions Prebisch, but the focus is on his later role of which
Escobar is also critical, as noted below. Rosenstein-Rodan is also mentioned briefly on pp.75-6.
66 Ibid, 81. Escobar (1995: 63, 74, 76-78) is also critical of the ideas of the Caribbean economist,
Arthur Lewis, who was an Southern advocate of development policies along similar lines as Prebisch
and others in the early 1940s, as noted in chapter 8.
64
65
19
international flow of ideas was not just North to South. A number of Southern
officials and analysts influenced Northern thinking about international development
in this period and ideas also flowed among South to South (as in the case of East
European influences on Latin American thinking67).
Even more important, however, is the fact that the development goals described in
this book responded directly to new material circumstances facing Southern
countries, notably the traumatic Depression experience, the international strategic
uncertainties of the time, and widening international inequalities (as well as
growing international communications and statistics that called attention to those
inequalities). In these circumstances, officials and thinkers in different poorer parts
of the world arrived independently – and almost simultaneously - at the view that
industrialization and economic modernization was needed to reduce their
countries’ economic and strategic vulnerability. Given the scale of the task they
faced and the growing density of the international institutional landscape, they were
also prompted to consider whether international support for their goals could help
boost living standards and their countries’ economic development more quickly.
Far from being a tool of oppression, international development thus appeared to
these Southern officials and analysts as a potential source of national empowerment
and liberation. Some post-development scholarship does seem aware of this
possible basis of support for international development. Rist, for example,
acknowledges that the global spread of development was partly due to “reasons
having to do with military, economic and technological domination”.68 Escobar also
notes: “To be sure, there is a situation of economic exploitation that must be
recognized and dealt with….There is also a certain materiality of life conditions that
is extremely preoccupying and that requires great effort and attention”.69 But both
authors say little more about this crucial point, so focused are they on highlighting
the power of discourse rather than the influence of structural material conditions.
Building on Previous Scholarship
The arguments of this book thus challenge much conventional wisdom. But the book
does not break entirely new ground. My own interest in this history began when, in
the course of researching another project, I stumbled across some US archives from
early 1940s that were discussing international development issues. After exploring
further archival evidence, I then read wider secondary literature on this period and
found a number of existing analyses that picked up, and contributed to, important
parts of the story I was reading in the archives. The relevant scholarship is
referenced and discussed in the chapters that follow, but four particularly useful
bodies of scholarship are worth noting at the outset.
67
Love 1996.
Rist 1997: 238.
69 Escobar 1995: 52.
68
20
To begin with, this book builds on the work of some historians of the Bretton Woods
negotiations who have touched on various themes developed here. For example,
important insights have been drawn from analyses of specific Southern country
experiences during the negotiations, such as those of China, India, Mexico, and
Brazil.70 The significance of the US-Latin American partnership of the late
1930s/early 1940s to the Bretton Woods experience has also been recognized by
Robert Oliver as well as by Michael Bordo and Anna Schwartz.71 Drawing on
extensive archival research, this book extends their analyses and also explores in
more detail the broader politics that generated the development dimensions of
partnership and its link to Bretton Woods.
Second, this book is also not the first to locate the birth of international
development earlier than Truman’s speech. In his 1987 study of the history of the
idea of economic development, H.W.Arndt argued that “economic development in
the Third World as a major interest of Western governments, of economists, and of
public opinion generally, was born during World War II”.72 His argument has been
reinforced by Amy Staples’ 2006 book The Birth of Development which is explicitly
critical of the focus on Truman’s speech and which identifies US and British wartime
planning as “the beginning of the idea that development was an international
obligation”.73 Elizabeth Borgwardt’s 2005 book A New Deal for the World echoes this
theme, highlighting the novel nature of the 1941 Atlantic Charter’s commitment of
“freedom from want” for “all the men in all the lands” and its impact on the
construction of postwar international institutions.74 David Ekbladh’s 2010 The Great
American Mission is also critical of the Truman-centred view of the origins of
international development, locating the source of US interest in international
development in the 1930s in the context of the twin challenge of fascism and
communism.75
While drawing important insights from these works, this book explores the
importance of the development content of the Bretton Woods negotiations in much
more detail than these works do.76 It also seeks to widen the geographical focus of
the analysis beyond the US and British policy contexts which are the main subject of
these previous works by exploring the views of policymakers and analysts from
These various country-specific analyses are cited in chapters 7, 9, and 10.
Oliver 1975, Bordo and Schwartz 2001. A number of the histories of Bretton Woods also note in
passing that the views of US policymakers may have been influenced by their previous experience
negotiating the IAB, and with the Latin American lending of the Export-Import Bank and the
Exchange Stabilization Fund (van Dormael, 1977: 42; Gardner, 1980: 73; Gold, 1988: 1127;
Horsefield, 1969a: 11). See also references in chapter 3.
72 Arndt’s 1987: 43.
73 Staples 2006: 2.
74 Borgwardt 2005.
75 Ekbladh 2010.
76 Both Staples and Borgwart devote a chapter to the Bretton Woods planning process. A discussion
of Bretton Woods (and US-Latin American initiatives of the late 1930s/early 1940s) is absent from
Ekbladh’s book which accepts at face value the conventional wisdom that the IBRD’s development
mandate arrived “almost by accident” (Ekbladh 2010: 90).
70
71
21
poorer countries. In addition, the book calls more attention to an issue that is quite
overlooked on these other analyses: the significance of US-Latin American financial
relations in the late 1930s/early 1940s for the origins of international development.
For the latter task, the book draws considerably on a third body of literature:
historical analyses of the United States’ Good Neighbor policy towards Latin
America in the late 1930s and early 1940s. Some historians of this period have
identified this policy’s significance in pioneering international development
practices, but the link between the Good Neighbor policy and the Bretton Woods
negotiations has been overlooked.77 In filling this gap, this book also provides new
detail about two key aspects of the Good Neighbor policy that were critical to this
link but which have received less attention in historical literature: the 1939-40
effort to establish the IAB and the US financial advisory missions to Latin America
that began in 1941. The book’s analysis of the relationship between the Good
Neighbor policy and Bretton Woods also devotes considerable attention on the Latin
American activities of some US policymakers, such as Harry Dexter White and
Robert Triffin, who have been quite neglected in general histories of the Good
Neighbor policy.78
Finally, in broadening the focus beyond the US and British policy contexts, the book
draws inspiration from the work of several scholars who have analyzed the growing
development focus of Southern officials and analysts in the 1930s and early 1940s.
One such scholar is Joseph Love whose 1996 intellectual history, Crafting the Third
World, highlights how development aspirations in this period emerged not just from
Northern sources but also East European and Latin American economists.79 For the
Latin American context, other indispensable sources for this line of argument are
Edgar Dosman’s recent biography of Prebisch as well as Sarah Babb’s analysis of the
origins of developmentalist economic thought in Mexico.80 Margherita Zanasi’s
important work on China’s interwar development thought and policy also usefully
critiques post-development scholars who assume that Southern governments were
simply passive spectators of early international development initiatives.81 Similar
arguments have been made by scholars who have studied the agency of Latin
American officials in the context of the US Good Neighbor initiatives.82 While these
analyses highlight well the need to explore the Southern origins of international
development, they are not focused on the importance of the Bretton Woods process
itself – a hole in the literature that this book attempts to full.
For recognition of the policy’s significance in pioneering international development, see Cobbs
1992: 2-3; Grow 1981: 36. For the wider literature, see references in Part 1 of the book.
78 For example, neither White nor Triffin is even cited in the index of important books on the Good
Neighbor policy such as Gellman 1979 or Pike 1995.
79 Love 1996.
80 Dosman 2008, Babb 2001.
81 See especially Zanasi 2007: 146. See also Zanasi 2008.
82 See for example Rivas 2002: 8.
77
22
Outline of the Book
The book is organized into three main sections. The first three chapters making up
Part 1 examine the unusually creative financial partnership that emerged during the
late 1930s and early 1940s between US and Latin American policymakers and that
served as an incubator for the embedded liberal vision and development content of
the Bretton Woods negotiations. Chapter 2 explores the motivations on both the US
and Latin American side that generated this financial partnership. It also provides
an overview of a number of the initiatives that emerged from this partnership
before the entry of the US into the Second World War, beginning with the new US
lending for short-term currency stabilization and long-term development purposes
in 1938-39 and carrying through to the more ambitious initiatives of 1940 to
stabilize the prices of major Latin American commodity exports, renegotiate Latin
American external debts, and promote regional economic cooperation.
Chapters 3 and 4 provide a more detailed analysis of two initiatives in this period
that were particularly important in setting the scene for Bretton Woods. The first
was the negotiation of the IAB in the fall of 1939 and spring of 1940 by the US and
Latin American governments. Drafted largely by White, the Bank’s charter had an
explicit mandate to promote development across the inter-American region and
many of its provisions acted as important precedents for White’s first drafts of the
IMF and World Bank. The other was the US financial advisory mission sent to Cuba
under White’s leadership in 1941-42. The mission supported the Cuban
government’s goal of overhauling the Cuban monetary system to support the
government’s development goals through de-dollarization and the creation of a new
governmentally-controlled central bank that could pursue a more activist monetary
policy aimed at domestic needs.
Both of the IAB proposal and the Cuban mission were, however, slightly ahead of
their time. Despite support from the Roosevelt administration and many Latin
American governments, the IAB floundered when opposition from financial
interests and conservatives in the US blocked its approval by the US Congress. The
Cuban mission encountered opposition from the same quarters, as well as from
some Cuban financial interests, which delayed the adoption of its recommendations
by the Cuban Congress. Despite these failures, both the IAB initiative and the Cuban
mission served as key precursors for the Bretton Woods negotiations. The IAB
pioneered a new kind of multilateral public financial institution, while the Cuban
mission’s advice signaled the new embedded liberal values. Many of the key figures
involved in these initiatives also went on to play leading roles in Bretton Woods
planning.
The three chapters that make up Part 2 of the book highlight how the US- Latin
American financial partnership helped shape the international development content
of 1942-44 Bretton Woods negotiations. Chapter 5 explores the US support for the
inclusion of development goals within the plans for postwar international financial
23
system. It analyses how some key provisions in White’s initial drafts of early 1942
built directly on the experience of the US-Latin American initiatives of the late
1930s/early 1940s and how he and other US policymakers had a Latin American
audience clearly in mind when developing the early drafts. While some of the
ambition of White’s original development proposals was watered down by internal
US government discussions in 1942-43, the core commitment to support
international development remained and was pervasive across many branches of
the Roosevelt administration at the time. Latin America also remained a key focus of
US development plans for the postwar world.
Chapter 6 describes how the US support for development goals abroad manifested
itself in one other way during the Bretton Woods negotiations. In 1943-44, the US
Federal Reserve responded to a request from Paraguay for a financial advisory
mission to reform its monetary system by creating a new national currency and
central bank. Under Robert Triffin’s leadership, the mission reiterated the kind of
advice that White’s Cuban mission had offered, but now argued explicitly that this
would help reinforce, at the domestic level, the goals of the new Bretton Woods
system. Triffin was also more successful than White had been in Cuba: his advice
was immediately adopted by the Paraguayan government which saw its monetary
reforms as foundational for its developmental ambitions.
Chapter 7 explores the Latin American contribution to the Bretton Woods
negotiations. It highlights how Latin American governments were important and
active partners for the US in the negotiations, showing particular interest in how
postwar plans could support their development aspirations. They played an
important role in protecting and strengthening the IBRD’s development mandate
which they saw as a direct follow-on from the IAB proposal. For development
reasons, they were also strong supporters of the IMF’s balance of payments lending
and its provisions for exchange rate adjustments and capital controls. Latin
American support for the Bretton Woods vision was also apparent in the
widespread praise that Triffin’s 1943-44 Paraguayan mission received across the
region. Indeed, after returning from Paraguay, Triffin was kept busy in 1944-46
responding to a number of Latin American governments’ requests for him to
emulate his work for Paraguay in their own country. In this work as well as that of
Paraguay, he worked closely with, and cited his intellectual debt to, Prebisch and
other Latin American thinkers.
Part 3 of the book is comprised of four chapters that explore how the development
provisions of Bretton Woods found wider support beyond the US-Latin American
axis. Chapter 8 examines the British position, demonstrating how Keynes and many
other British officials supported the inclusion of international development goals in
the postwar plans. At the same time, it highlights how British policymakers did not
take a leadership role in this area and how there were important limits of the British
support for international development both within the Bretton Woods negotiations
as well as vis-à-vis the new US approach to financial advisory activities that White
and Triffin had pioneered.
24
Chapter 9 describes how enthusiasm for the incorporation of international
development goals in postwar plans was much stronger among officials and analysts
from two regions with close links to Britain at this time: Eastern Europe and India.
The first half of the chapter describes how a number of individuals from Eastern
Europe living in Britain at the time of the war (some representing East European
governments-in-exile in London) put together ambitious international development
plans to support industrialization and rising living standards in their region. These
proposals found their way into British (and US) postwar planning discussions as
well as the Bretton Woods negotiations themselves through the participation of East
European government. As the second half of the chapter outlines, the demand for
international development also came from India which was represented at the
Bretton Woods conference despite its status as a British colony. Like East European
and Latin American officials, many Indians had ambitious development goals at this
time and they saw the Bretton Woods negotiations as an opportunity to generate
international backing for these goals. Both the East European and Indian demands
reinforced the support for the incorporation of international development within
Bretton Woods.
That support was further reinforced by the Chinese government. Its involvement in
the Bretton Woods negotiations is analysed in Chapter 10. At this time, US officials
saw China as one of the four key powers that would help govern the postwar world
and Chinese officials were thus included among the inner circle of countries they
consulted on details of the Bretton Woods negotiations. The Chinese government
took the opportunity to lobby for a postwar international financial order that would
be supportive of their ambitious development plans. In so doing, they drew
inspiration explicit inspiration from a deeper legacy than any other country: Sun
Yat-sen’s 1918 proposals. The latter helped establish the intellectual foundation for
international development, and anticipated many of the arguments advanced in the
US and elsewhere in its favour during the Bretton Woods negotiations.
Chapter 11 demonstrates how the support for the development content of Bretton
Woods extended even to those Southern governments beyond Latin America which
said very little during Bretton Woods discussions themselves. This support was
evident from the way they linked their participation in the Bretton Woods system to
the undertaking of the kinds of domestic monetary reforms that White and Triffin
had promoted in Latin America. This phenomenon is explored in the cases of two
countries that were represented at Bretton Woods: the Philippines and Ethiopia.
These cases are also interesting because they demonstrate how White (in the case of
Ethiopia) and Triffin’s Federal Reserve officials (in the case of the Philippines)
supported development-oriented monetary reforms beyond Latin America (and
how the British in Ethiopia actively attempted to thwart them).
The book’s concluding chapter explores briefly the fate of the Bretton Woods
development plans. While an extended analysis of this issue is beyond the scope of
the book, the chapter describes a combination of developments that led to an
25
unravelling of much of the plans soon after the end of the war. In the US, New
Dealers rapidly lost influence after Roosevelt’s death in 1945 and were replaced by
more conservative policymakers, including some who had actively opposed the
Good Neighbor and Bretton Woods financial initiatives. With the onset of the Cold
War and the Chinese communist revolution, the attention of US policymakers also
shifted to Europe and Japan, while Latin America was no longer a US strategic
priority. From the South, two of the major supporters of Bretton Woods’
development content – (mainland) China and Eastern Europe – were either
removed or withdrew from the Bretton Woods system in the early Cold War years.
Those that remained – particularly India and Latin American countries – expressed
their growing frustrations in the 1950s about lack of international support for their
development aspirations.
When the decolonization of Africa and Asia accelerated during the 1950s and 1960s,
newly independent Southern countries added their voices to the discontent about
the development side of the operation of the Bretton Woods system. Under the
leadership of Prebisch and others, a broad-based Southern coalition soon emerged
calling for development-oriented reforms to the Bretton Woods system, calls that
led by the early 1970s into the demands for a New International Economic Order. In
the fierce political debates surrounding the subsequent North-South dialogue of the
1970s, the memory of the content and politics of the first North-South dialogue of
Bretton Woods was increasingly lost. 83 As North-South debates about reforming the
Bretton Woods system re-emerge today, it is time to refresh the memory – a task
that this book is designed to carry out.
For a description of the debates surrounding the new NIEO “ideology”, see Murphy 1984. Murphy
describes how proponents of the NIEO saw themselves as countering the ideology of Bretton Woods
which they viewed as endorsing free trade and the promotion of free market economic policies.
83
26
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