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Ahead Of Economic Summit, Bretton Woods Recalled


One of the prescriptions you hear nowadays for what ails the world financial system is, go back to basics. Or as we just heard, go back, at least in spirit, to Bretton Woods.

(Soundbite of vintage broadcast)

Unidentified Announcer: At Bretton Woods, New Hampshire, delegates from 44 allied and associate countries arrived for the opening of the United Nation's Monetary and Financial Conference. Invited by President Roosevelt to the first major world financial meeting since the London Conference of 1933, they will work in the seclusion of this White Mountains resort.

SIEGEL: The monetary and economic system that governed the world's big capitalist economies for decades was hatched at that conference in 1944 in New Hampshire. Who was there? What did they do? And what sort of model might that be for world leaders today as they plan a financial summit for next month? Well, those are questions that we have for financial historian John Steele Gordon. Welcome back to the program.

Mr. JOHN STEELE GORDON (Financial Historian): Delighted to be here.

SIEGEL: And first, set the scene for us. Why was there a big conference in Bretton Woods, New Hampshire, in July '44?

Mr. GORDON: Well, it had been in preparation for, actually, two and a half years because they could see that World War II - the end of World War II was in sight, and they needed to plan a post-war world. And everybody agreed that the 1930s had been a mitigated disaster for the international financial system, and they wanted to create a new one that hopefully would work better.

SIEGEL: So, what did they agree on, and how much did that change the world financial system from what had been in effect in the '30s?

Mr. GORDON: Well, what they agreed on was that the predatory devaluation of money by each country - there effectively trying to beggar thy neighbor by suddenly devaluating their own currency, thus making their trade goods cheaper in other countries, which triggered retaliatory devaluations and what have you, and the international trading system in the 1930s largely collapsed. Trade in 1939 was lower than it had been in 1896. And so what they wanted to do was find a way to create a new system in which that kind of behavior would not take place. And what they came up with at Bretton Woods was a new system.

SIEGEL: Well, first, who was there? Who actually took part in the conference at Bretton Woods?

Mr. GORDON: Just about everybody. There were 44 countries present in 1944. That was just about every sovereign state that was not, you know, being bombed into oblivion by the allies.

SIEGEL: There are institutions that exist to this day that were really created at Bretton Woods, or at least the idea for them was agreed to at Bretton Woods.

Mr. GORDON: Yes, the IMF, the International Monetary Fund, and the World Bank both came out of Bretton Woods.

SIEGEL: So the idea that there would be these agencies that would actually play an international role in addressing the grave economic problems of particular countries is an idea that came into force there at that meeting.

Mr. GORDON: Yes. Rather than independent countries having to be by themselves and to solve their own economic problems, these international institutions were supposed to help out countries that got into financial trouble. And sometimes they have, and sometimes it has been argued that they made matters worse.

SIEGEL: The moment of this conference in 1944 with World War II still in progress both in Europe and Asia, but people seeing an end in sight, emerged at a time when people understood there'd been a terrible crisis in the world, the war, and preceded by the Great Depression. Do you think there's any comparable consensus among financial leaders and government leaders today about what the problems are and what the solutions might be?

Mr. GORDON: Well, we're nowhere near the situation we were in in the 1930s or happened within World War II. We have a serious financial situation going on right now, but it is no way comparable to what we endured in the Great Depression. And this conference that's coming up is going to be nowhere near as big or as lengthy or as decisive, I expect, as Bretton Woods turned out to be.

SIEGEL: John Steele Gordon, thank you very much for talking with us.

Mr. GORDON: Thank you.

SIEGEL: That's financial historian John Steele Gordon, the author of, most recently, of "An Empire of Wealth: The Epic History of American Economic Power." Transcript provided by NPR, Copyright NPR.

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