I am keeping my reading pledge of completing a book a week. This week, I completed Benn Steils The Battle of Bretton Woods, a fascinating saga of the emergence of the Bretton Woods system, with all the key actors, politics, achievements and disappointments. Not an easy read, it was monetary economics side by side with personal drama and high politics of International relations, it was nevertheless worthwhile the effort.
Aptly titled, the Battle captures the competition between Britain, embroiled in war, and the United States, for global dominance in the post-war world. The story, at the same time, is also of the competition between the old and the new world, that of waspish brilliance of Lord Keynes pitted against the bureaucratic single-mindedness of Harry Dexter White, the clash between imperial hangovers and commercial brutality. Lurking behind the scenes, adequately represented in the story, is the Soviet mechanisation, manipulating the world affairs through plain bribery and ideological appeals, fascinating in the details such as leading the Japanese to Pearl Harbour.
Indeed, we still live in the shadows of the Bretton Woods system. Its founding assumptions have been discredited and the world has changed beyond recognition, but the institutions are still alive and the underlying tension between multilateralism and nationalism, and the idea of United States as the sole keeper of a world system, are still valid. In the closing chapter of the book, there is an insightful commentary about how the current world system reflect some of the realities that the makers of Bretton Woods grappled with, and it makes compelling reading.
Couple of final points. Last week, as I completed The Shifts and The Shocks, I was commenting on the role of Creditor Nations in creating an economic crisis. This story of Bretton Woods reads like the backstory in that regard, with Keynes worrying about the role of excessive surplus and the Americans effectively blocking his efforts, because they were, then, the biggest creditor nation in the world.
And, finally, given my background, I could not help but think about how all this affected India and its independence. The American hardball in dismantling the British Imperial System is what the new Monetary system was mostly about. This clearly forced Britain to withdraw from India and all other colonies in due course, rendering the imperial model obsolete. All the rhetoric of freedom, democracy and justice that we have become used to, look like cold economic considerations from this angle. Which is what it is, and will be. Books such as this are important reminders of what really matters.
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