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Chapter 1: The Keynes and White Plans (1941–42)

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International Monetary Fund
Published Date:
February 1996
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It is Difficult even for those familiar with the International Monetary Fund as a working organization to realize what a remarkable achievement its creation was. It came into being as a result of a supreme act of faith—the decision to surrender to an untried and imperfectly visualized international body the supervision of one of the most cherished attributes of national sovereignty, the right to change the rate of exchange. That this surrender was hedged round with safeguards is not surprising; that it was made at all, and was accompanied by vesting in the same body an appreciable fraction of the members’ international reserves, can be explained only by the coincidence of the hour and the men.

The men primarily concerned were two: Harry Dexter White and John Maynard Keynes (later Baron Keynes of Tilton). White joined the staff of the U.S. Treasury in 1934, becoming an Assistant Director in the Division of Research and Statistics in 1936, Director of the Division of Monetary Research on March 25, 1938, Assistant to the Secretary on August 30, 1941, and Assistant Secretary on January 3, 1945. He resigned on May 1, 1946 to take up the post of U.S. Executive Director of the Fund. He relinquished this position with effect from June 1, 1947, and died a little over a year later, on August 16, 1948. Keynes combined a brilliant and multifaceted career with the position, from July 1940 until his death on April 21, 1946, of Honorary Advisor to the British Treasury. Both men, in the proposals that they put forward, were animated by a belief that the economic distresses of the interwar years could be avoided after the end of World War II only by international cooperation on a previously untried scale.

Their proposals were drafted in 1941 and 1942, negotiated in 1943, and adopted at an international conference in 1944. To understand how, in the midst of World War II, it was possible to focus the attention of the major powers on postwar monetary reconstruction, we must recall briefly how complete had been the collapse of the international financial mechanism upon which, until 1931, the world had relied.

Background

During the 1920’s, the leading industrial nations had concentrated their efforts on restoring the gold standard, shattered by World War I. But the exchange rates established, particularly that of sterling, took insufficient account of the divergences of prices and costs since 1914. The precarious equilibrium that resulted was undermined by the onset of the Great Depression in the United States in 1930 and by the departure of the United Kingdom from the gold standard in 1931.

The ensuing decade saw the greatest collapse of commodity prices and shrinkage of world trade that the modern world has ever known. Between 1929 and 1932 the world price index, measured in gold values, fell by 47.5 per cent. During the same three years the gold value of world trade fell by 63 per cent. The decline was, as always, felt most acutely by the less developed countries: the price index of raw and partly manufactured goods fell by 56 per cent. Even for industrial countries, the fall in the gold value of manufactured products by 37.5 per cent was more than sufficient to create major problems. No country could avoid almost overwhelming deflationary pressures and nearly every major country began to seek ways of defending itself against undercutting of its prices from abroad—some by exchange depreciation, some by introducing flexible exchange rates or multiple rates, some by direct controls over imports and other international transactions. Sooner or later, the currencies of practically all countries were effectively devalued. But all these arrangements concerned individual countries only; the London Monetary and Economic Conference in 1933 showed only the diversity of national interests, and there was no international cooperation in monetary matters until 1936. Even the Tripartite Agreement then negotiated was not much more than a token move toward a new international system. It did little to offset the division of the major currencies between those based on gold and those related to sterling.

The most extreme example of individualism in currency arrangements was afforded by Germany. Under the guidance of Dr. Schacht,1 exchange control and import licensing were progressively intensified with a view to limiting imports to what could be afforded. Discrimination in imports admitted was accompanied by a moratorium on payments in foreign exchange of interest and dividends. In addition, a number of bilateral agreements were negotiated, especially with countries in southeastern Europe and Latin America, through which increased imports were exchanged for increased exports. For some of these agreements Germany fixed rates of exchange for the mark below the official rate, thus obtaining the benefits of devaluation without actually devaluing. The system as a whole constituted a regime which was as far as possible removed from the multilateralism and automatism of the theoretical gold standard. Dislike of it was part of the common ground on which the United States and the United Kingdom stood in their subsequent approach to international monetary arrangements.

This, then, was the situation which had developed when World War II began: an international economic community where “beggar-my-neighbor” policies were the rule, and where the best-intentioned attempts to restore order to the financial system were endangered by the desperate attempts of weaker countries to hold their own in the face of cutthroat competition. It was a situation which challenged most notably the economists of those countries that might expect to lead the postwar world. This book is the record of one of the ways in which that challenge was met.

Despite the generality of the situation just described, its characteristics in the United States differed materially from those in the United Kingdom, and the differences were reflected in the main purposes of the schemes which Keynes and White prepared. White was prompted by a vivid appreciation—heightened indeed by personal experience—of the Great Depression. The change in the current of U.S. economic life from 1929 to 1932 had indeed been catastrophic. Industrial production in these three years had fallen by 47 per cent and the national income by 52 per cent. By March 1933, there were at least 14 million unemployed. The depression had stemmed primarily from domestic developments and, in particular, from the speculative fever of the period 1928–29. It had, however, been accentuated by the difficulties of export industries, and particularly of U.S. agriculture, confronted with the progressive devaluation of competitors’ currencies as the depression took its course. The United States had not suffered from an overvalued currency and the U.S. Treasury foresaw no need to repeat the devaluation of the dollar effected in 1933. At the same time, it disliked and distrusted the fragmentation of the international monetary scene into currency areas—the sterling area being a particular bugbear—and the proliferation of multiple currency practices and the like.

Hence, for White, the prime need for the postwar years was a mechanism which would ensure the stability of currencies and avoid the recurrence of competitive devaluations and of the restrictions on payments which other countries had built up after 1933 against the competitive power of U.S. exports. In the U.S. scene, such a plan had to be so framed as to be acceptable to a Congress of isolationist tendencies and conservative financial outlook, which was still concerned about the use made by President Roosevelt in 1933 of the authority given to him to change the gold content of the dollar.

For the United Kingdom, on the other hand, the political problem was simpler. If a plan could be “sold” to the Treasury and, with its help, to the Cabinet, its acceptance by Parliament could safely be expected. In two other respects, also, British conditions imposed fewer constraints than were felt in Washington: one was the absence of a written constitution; the other was the greater extent to which the older financial institutions (especially the gold standard) had been discredited while their antithesis, the Schachtian regime, had become a bogey to be feared. Both in and out of Parliament memories were long; they reached back to 1921, when, after a short boom in the immediate postwar years, British industry had suffered a slump from which it had never fully recovered—at least, until rearmament in 1938–39. In 1921 more than 2,400,000 persons were unemployed—some 22 per cent of those available for work. After settling at about half that figure from 1923 to 1929, the total again exceeded two million from 1930 to 1935. The effects of the world-wide slump were accentuated for the United Kingdom by the restoration in 1925 of the pre-1914 exchange rate, which (as Keynes thought at the time) overvalued the pound.

There was in both countries a widespread fear that the end of World War II would be followed by a slump, as had the end of World War I. But when considering how to avoid such a recurrence, it had to be borne in mind that for the United Kingdom, unlike the United States, exports were of overwhelming importance: British industry was export oriented to a degree far greater than that of the United States. The lesson which Keynes drew from these considerations was similar to White’s in stressing the importance of international trade, but differed in that, for Keynes, the right to correct an overvaluation of the currency was an essential part of any postwar plan. While, therefore, White drew up his proposals in terms of a stabilization fund, Keynes’ proposals for an international clearing mechanism were coupled with specific proposals for countries to adjust their exchange rates as and when required to encourage exports and maintain a steady expansion in the economy. These factors need to be borne in mind when considering the details of the plans which were developed.

Precedents

Anyone attempting in 1941 or 1942 to sketch out a plan for an international monetary agreement would naturally turn, in the first place, to the Tripartite Agreement signed on September 25, 1936. This arose from the decision of the French Government to devalue the franc. By it, the Governments of France, the United Kingdom, and the United States accepted the need for the French devaluation and undertook to take steps to minimize the resulting disturbance to international transactions. The Agreement specifically provided for consultations for this purpose between the three Governments, but took no steps to create formal institutional machinery.

In addition to the metropolitan governments concerned, the Agreement extended to the whole of the sterling bloc and of the French franc area. On September 26 the Belgian Government adhered to it, and some two months later the participants were joined by Switzerland and the Netherlands.

In pursuance of the Agreement, the Secretary of the U.S. Treasury announced on October 13 that, subject to revocation at 24 hours’ notice, he would sell gold for immediate export to, or earmark it for the account of, the exchange equalization funds of those countries willing to reciprocate, provided that the gold which these latter countries offered was made available at such rates and upon such terms and conditions as the Secretary deemed advantageous to the public interest. The United Kingdom and France were named on October 13 as complying with this condition. On November 24, the offer was extended to Treasuries and fiscal agencies in countries willing to reciprocate, and Belgium, the Netherlands, and Switzerland were added to those participating.2 This arrangement assured the monetary authorities of the countries adhering to the Tripartite Agreement of obtaining gold in settlement for balances of any other participant’s currency which they acquired on their own markets.

About the same time, the Bank for International Settlements, which had inherited a long tradition of informal inter-central-bank cooperation, put into operation a plan of its own for facilitating international payments for commercial transactions. It offered to central banks facilities for granting one another reciprocal credits in their own currencies or in gold, thus enabling each to provide credits for its exporters without incurring exchange risks.3

In July 1937 the United States entered into the first of a series of stabilization arrangements with Brazil, under which the United States agreed to sell gold to Brazil up to a total of $60 million. It also undertook to make dollar exchange available to the Government of Brazil, under conditions which would safeguard the interests of both countries, for the purpose of promoting exchange equilibrium.4 Similar arrangements were negotiated with other Latin American countries—for example, with Mexico in November 1941 for $40 million.5 At the Treasury, White was directly responsible for administering these agreements.

Although the United Kingdom had felt it necessary to establish a few bilateral clearings in defense of its own interests with countries that had been particularly affected by the Schachtian controls, it had no liking for monetary agreements of that kind in peacetime. After the outbreak of World War II, however, somewhat similar arrangements were negotiated with France in December 1939 and with Belgium and the Netherlands in June 1940 as a part of economic mobilization. Each party to these agreements undertook to accumulate balances of the other’s currency in unlimited amounts, and not to seek settlement in gold. The principal purpose of the agreements was to conserve gold for purchases from the United States, which had at that time to be made in cash. Currency accumulated under the terms of the agreements could be used only for purchases in the country issuing it, or in its currency area. Necessary elements in these arrangements were undertakings to fix the rate of exchange between the currencies of the two countries concerned, to carry out all transactions at that rate, and not to change the rate without consultation.

Certain common features of the agreements referred to above will be obvious. In the first place, they provided for the exchange of value for value, and not for the extension of a loan. Secondly, they temporarily shifted responsibility for settling a deficit in a country’s balance of payments from the debtor to the creditor. By this means, they enabled the debtor to avoid, at least for the time being, an exchange rate adjustment or the imposition of restrictions that might have been harmful to international trade. Both the U.S. stabilization agreements and the British monetary agreements effected this by exchanging currencies between creditor and debtor, thereby making it possible to limit the settlement to bilateral balances. The Tripartite Agreement, however, provided for an exchange of currency for gold, and thus implicitly permitted a multilateral settlement.

The third feature which the agreements had in common was the stabilization, albeit temporary, of the exchange rate between the two countries concerned. This was coupled with provisions for the adjustment of the exchange rate by agreement between the countries. The Tripartite Agreement provided, in effect, that 24 hours’ notice should be given of a wish to change the exchange rate, so that transactions currently in hand between the two countries’ central banks could be completed without exchange loss.6

In a report, dated January 26, 1938, which he was invited to make by the Governments of the United Kingdom and France, Mr. Paul van Zeeland of Belgium suggested the revision and extension of the Tripartite Agreement to help to meet the threat to international trade posed by monetary disturbances. He proposed that those countries willing to cooperate should (1) define the reciprocal parities of their currencies, and pledge themselves to keep variations in exchange rates within certain limits for a long enough period—six months to a year—to free current commercial operations from risk; (2) agree upon an adjustment of external debts; and (3) provide those countries which were free of exchange restrictions with credit facilities—for example, by an agreed extension of the method of reciprocal credits instituted by the Bank for International Settlements and described above.7

It may be added that, early in 1938, the Austrian Government suggested that the abolition of exchange control “would be facilitated if several countries were to undertake it simultaneously, and if the risks of the transition period could be guarded against by means of an international equalisation fund.”8

That the Tripartite Agreement would be in White’s mind when he started to think about an international plan is made additionally probable by the fact that he had recommended such an arrangement in 1935. In March of that year, he sent to his superior in the U.S. Treasury a report entitled “Recovery Program: The International Monetary Aspect.”9 In this he discussed the subject of international disequilibrium (which continued to preoccupy him for the rest of his life), and reviewed the appropriateness of the exchange rates of the United Kingdom, France, and Japan. He suggested that “the United States, through diplomatic channels, ascertain whether or not England and France are willing to enter upon an agreement or understanding covering a year or two. This informal agreement should specify as a minimum no change in the relationship … sterling = $4.65, yen = 28¢, and franc = 5.60¢.… The inescapable conclusion is that at least agreement on the essential points should be arrived at informally and secretly.”10 The informality was necessary because “a new alignment of exchange rates may be called for and the readjustment would take place more easily if the agreement provided for that contingency, or if we were not bound by any formal agreement but were merely acting co-operatively toward a tentatively agreed upon goal of stabilization.”11 That “stabilization” was the last word in this report may also be thought significant.

The importance attached to the Tripartite Agreement in the countries concerned was made abundantly clear in official statements. A typical example, and one directly relevant to the present purpose, is the following quotation from the Report of the Secretary of the U.S. Treasury, Fiscal Year 1940:

In the years before the outbreak of war … the accord proved that cooperation among stabilization funds can have definite value. The stabilization funds, working together, can iron out short-term fluctuations and prevent speculative drives from producing erratic exchange movements. The funds can also, in cooperation, facilitate orderly readjustment of a currency to a lower level and prevent explosive movements from carrying exchange rates below the level deliberately sought.12

Nevertheless, the effectiveness of such agreements—even of the Tripartite Agreement—was limited. In a memorandum on the future of gold, written early in 1940, White expressed the view that the arrangements between the United Kingdom and France could not be expected to work in peacetime conditions.13 Similarly, an early draft of his plan for a stabilization fund adduced the argument that the provisions for changing exchange rates in the Tripartite Agreement had “worked only tolerably well.”14 The Agreement’s limitations were partly due to its restricted scope: even at its widest, it included the originators of little more than 50 per cent of international trade. But these limitations were also partly a consequence of relying on the individual creditor to finance the deficits of its debtors—an arrangement that threatened to break down if one country accumulated credits to an extent greater or more prolonged than was within its reasonable capacity to carry. Hence, in both the United Kingdom and the United States, the conviction arose that any more permanent arrangement must provide for the international financing of future deficits.

Origins of the White Plan

On February 7, 1940, an Inter-American Financial and Economic Advisory Committee, created in the previous year by the Meeting of the Ministers of Foreign Affairs of the American Republics at Panama, adopted a resolution recommending to the Governments of the American Republics the establishment of an Inter-American Bank.15 The committee simultaneously submitted to the Governments drafts of a convention, a charter, and by-laws for the bank. In preparing these, the committee had been assisted by a group of experts from the U.S. Departments of State and Treasury, the Board of Governors of the Federal Reserve System, and the Federal Loan Agency. Of this group, White was a member.

The powers of the bank, as set out in Section 5B of the draft by-laws, were those needed for the conduct of normal commercial and investment banking functions. Its purposes, set out in Section 5A, included, in addition to these functions, the following:

(2) Assist in stabilizing the currencies of American Republics; encourage general direct exchanges of the currencies of American Republics; encourage the maintenance of adequate monetary reserves; promote the use and distribution of gold and silver; and facilitate monetary equilibrium.

(3) Function as a clearing house for, and in other ways facilitate, the transfer of international payments.

(8) Engage in research and contribute expert advice on problems of public finance, exchange, banking, and money as they relate specifically to the problems of American Republics.

The bank was to have a capital of $100 million to be contributed in graduated numbers of $1,000 shares by the American Republics, the scale of participation being decided “in relation to the dollar value of the total foreign trade of each” during 1938. Each participating Government was to have 20 votes, plus one for each share held in excess of 20. For certain purposes a four-fifths majority vote was required.

The administration of the bank was to be vested in a board of directors, composed of one director and one alternate appointed by each participating country. The board might appoint an executive committee.

The U.S. Government signed the convention establishing the bank on May 10, 1940. It was not, however, ratified by Congress, and no further progress was made with the plan for an Inter-American Bank until 1960.

With the exception of the three purposes detailed above, the bank bore little resemblance to the International Monetary Fund. A number of incidental features mentioned above, however, recur in White’s drafts for the Fund, and they clearly formed part of the background against which these drafts were evolved.

It appears from the evidence of associates that White began to give thought to the possibility of a comprehensive international agreement in the monetary field not later than the early part of 1941. His ideas envisaged both an organization to stabilize exchange rates and the means of providing the long-term capital that would be needed after the war. There is reason to believe that the first half of this plan had taken shape in his mind by the summer of 1941, and that the second part was drafted during a visit that he paid to Cuba in October of that year.16

An opportunity to present his ideas for an agreement was offered in December 1941. At 2:00 a.m. on December 14, Mr. Henry Morgenthau, Jr., Secretary of the U.S. Treasury, asked White to prepare a plan for an inter-allied stabilization fund to be used (1) during the war to give monetary aid to the allies and to hamper the enemy, (2) as a basis for postwar international monetary arrangements, and (3) to provide for a postwar “international currency.”17 No doubt the changed circumstances resulting from the attack on Pearl Harbor on December 7 had turned the Secretary’s mind to these problems, but there was also imminent the Third Meeting of Ministers of Foreign Affairs of the American Republics, to be held in Rio de Janeiro in the second half of January 1942.

White’s response to this invitation was to produce, before the end of December, a “Suggested Program for Inter-Allied Monetary and Bank Action.”18 The objectives of this program were stated as follows:

  • (1) To provide the means, the instrument, and the procedure to stabilize foreign exchange rates and strengthen the monetary systems of the Allied countries.

  • (2) To establish an agency with means and powers adequate to provide the capital necessary:

    • (a) to aid in the economic reconstruction of the Allied countries;

    • (b) to facilitate a rapid and smooth transition from a war-time economy to a peace-time economy in the Allied countries;

    • (c) to supply short-term capital necessary to increase the volume of foreign trade—where such capital is not available at reasonable rates from private sources.

Two organizations were visualized:

The task of supplying Allied countries with necessary capital not otherwise available except on too costly terms, should be the function of an inter-allied bank created for that specific purpose; whereas the task of monetary stabilization requires a different agency. Monetary stabilization is a highly specialized function calling for a special structure, special personnel, and special organization.… It therefore is recommended that consideration be given to the establishment of two separate institutions:

  • (1) An Inter-Allied Bank; and

  • (2) An Inter-Allied Stabilization Fund.

The accompanying outline of the Stabilization Fund contained almost all the features of the developed plan discussed later in this chapter.

After some revision in the Division of Monetary Research in the U.S. Treasury, the plan was shown to Mr. Sumner Welles, Under Secretary of State, in connection with the preparations for the meeting in Rio de Janeiro, which both Welles and White were to attend. Mr. Welles was impressed by the plan, and proposed to base on it a resolution for a conference to establish a stabilization fund. Secretary Morgenthau, however, felt that it was unwise to propose at the Rio meeting, without consulting the larger European powers, a scheme for so sweeping an international project. As a result, the resolution which was passed before the meeting broke up called only for a special conference of Ministers of Finance of the American Republics “for the purpose of considering the establishment of an international stabilization fund.”

On his return to Washington, White continued to refine his proposals. An undated typescript, preserved among the White papers at Princeton, appears to comprise parts of several redrafts, some of which clearly preceded the preparation of a definitive typed version, dated March 1942.19 The latter, with relatively small changes, became the first mimeographed text of the plan, dated April 1942, which is described below.

The text of these drafts shows that they were influenced to no small degree by the climate of U.S. Government policies at the time. Unlike the British system, which concentrated in the Treasury the ultimate responsibility for all aspects of international economic relations, the U.S. governmental organization limited the Treasury’s sphere to purely financial matters. In other fields—trade, commodity arrangements, the Export-Import Bank, even aviation and telecommunications—responsibility lay with the State Department, which, under Secretary Cordell Hull, was evolving a foreign economic policy based on concepts of trade liberalization and on a recognition of the need for reconstruction and development finance. It was against such a background that White devised his financial institutions.

Another indication of the way in which the wind was blowing in Washington at the beginning of 1942 was afforded by the visit to London of Professor Alvin H. Hansen, the Harvard economist, who was then advising the Federal Reserve Board, and Mr. Luther Gulick, a consultant of the National Planning Board and an expert on the Tennessee Valley Authority. Their visit was sponsored by the State Department,20 and resulted in a memorandum, the substance of which was embodied in a paper on the postwar balance of payments of the United Kingdom, presented to the War Cabinet by the Economic Section on January 31, 1942. This suggested that the Governments of the United Kingdom and the United States, in pursuance of policies to promote full employment, increasing production, a rising standard of living, economic stability, and world trade, should (1) establish an International Economic Board to advise the collaborating Governments on economic policy; (2) undertake an international resources survey; and (3) establish an International Development Corporation, with stock subscribed by Governments, to make development expenditures with the proceeds of bonds guaranteed by these Governments.

Before leaving this account of the origins of the White Plan, it is right to point out that, while the inspiration and the driving force that produced it were White’s own, its technical elaboration owed much to his colleagues in the Treasury. In particular, a leading part in developing the plan was played by Mr. Edward M. Bernstein, at that time a member of the Division of Monetary Research at the U.S. Treasury, and later Director of Research at the Fund. Mr. Bernstein combined high academic qualifications with exceptional lucidity of exposition, and supplied what White, for all his brilliance, lacked—technical sophistication and the power of persuasion.

Origins of the Keynes Plan

In the summer of 1941, Keynes was in Washington discussing with the U.S. authorities the terms of an agreement for lend-lease. On June 12 he had sent to Lord Halifax, the British Ambassador to Washington, a proposal to deal with the problem of “consideration,” which was to be the British response to the effective gift by the United States of lend-lease commodities. In his letter, Keynes had suggested that the United Kingdom would “agree … to make such contribution as lies in their power” to avoid encumbrances on free economic intercourse, and he had suggested that the Governments of the United Kingdom and the United States set up forthwith an Anglo-American Commission to consider how this should be done. Draft terms of reference for this commission provided that it would review the economic policies of the United States and of the British Commonwealth and recommend modifications to promote commerce between them. Subsequently, the Prime Minister decided that it was politically inadvisable to set up such a commission at that moment, but the aim of promoting Anglo-American trade remained in the forefront of the British negotiators’ proposals.

On July 28, 1941, the U.S. State Department handed to Keynes a draft for “the terms and conditions upon which the United Kingdom receives defense aid from the United States of America and the benefits to be received by the United States of America in return therefor.” Article VII of the draft agreement, which dealt with these terms and conditions, provided that they should be “such as not to burden commerce between the two countries but to promote mutually advantageous economic relations between them and the betterment of world-wide economic relations.” The Article then went on to provide specifically against discrimination in either the United States or the United Kingdom against imports from the other country, and concluded by specifying that the terms and conditions “shall provide for the formulation of measures for the achievement of these ends.” This provision was symptomatic of Secretary Hull’s policy, already mentioned, of seeking to promote unencumbered international trade.

Shortly afterward, Keynes returned to London and reported to the British Government on the draft agreement, with particular reference to the avoidance of discrimination. He had warned the U.S. State Department that, unless there was a large Anglo-American effort to restore equilibrium in international trade when the war was over, the United Kingdom would be obliged to perpetuate and, indeed, intensify the measures of exchange control and bilateral payments agreements which had been developed since 1939.21 But, although greatly concerned about the difficulty of abandoning discrimination while British resources were so depleted, he did not himself believe that bilateralism was an appropriate solution. Even before he left Washington he had turned his attention instead to what he called “elaborating a truly international plan which would avoid these difficulties,” by easing the pressure on debtors and compelling creditors to lend the resources which liberal trading and monetary policies would require.

He may well have judged that the time was ripe for such a plan. The Atlantic Charter, promulgated on August 14, 1941, at a conference between Mr. Roosevelt and Mr. Churchill, further emphasized the British commitment to postwar international cooperation. Its fourth point promised that the United States and the United Kingdom

will endeavour, with due respect for their existing obligations, to further enjoyment by all States, great or small, victor or vanquished, of access, on equal terms, to the trade and to the raw materials of the world which are needed for their economic prosperity.

And the fifth point of the Charter recorded that

they desire to bring about the fullest collaboration between all nations in the economic field, with the object of securing for all improved labour standards, economic advancement, and social security.

There is no evidence that at this stage Keynes knew anything about White’s plan. Certainly during his visit to Washington he had seen White, whom he had known since at least 1935,22 for, late in 1941, he reported to Whitehall that “White was a constructive mind.”23 But at that point the objectives of the two men were different: White was mainly interested in stabilizing exchange rates and Keynes in devising means by which nondiscrimination could be accepted by the United Kingdom despite the imminent exhaustion of British monetary reserves. In any case, Keynes had no need to borrow ideas; he had long before adumbrated a plan somewhat similar to White’s Stabilization Fund in his Treatise on Money (1930), where he had conceived a Supernational Bank which would act as a central bank for central banks.24 What was needed now was to link such an institution with the control of exchange rates and to clothe it with disciplinary powers. The result was a first draft of his proposals for a Clearing Union, which was circulated inside the British Treasury on September 8, 1941. These proposals are discussed later in this chapter.

References in the U.S. press to the resolution at the meeting in Rio de Janeiro, mentioned above, were transmitted by Sir Frederick Phillips, the British Treasury representative in Washington, to London on January 23, 1942; these may have helped to stimulate interest in London in the Clearing Union proposals. It was not until July 9, 1942, however, that a copy of the White Plan was sent to London for transmission to Keynes. Sir Frederick Leith-Ross writes of this episode:

Harry White … was not on close terms with Phillips, as he gave me, unasked, a copy of the American proposals for what was eventually the Bretton Woods agreement which Phillips had vainly been trying to obtain.25

In return, nearly at the end of August, a copy of the Clearing Union draft was handed by Sir Frederick Phillips to White for transmission to Secretary Morgenthau.

Unofficial Proposals

It may be well to mention at this point that a variety of proposals for postwar international economic and monetary mechanisms began from 1941 onward to appear in the technical journals, or as pamphlets issued by interested organizations. Three of these, summarized below, were mentioned by Keynes when he was asked, in October 1942, to what he had referred when stating in the preamble to his plan that “there is also a growing measure of agreement about the general character of any solution to the problem likely to be successful.”

In the issue of Foreign Affairs for January 1942, Mr. Herbert Feis, advisor on international economic affairs to the U.S. State Department, proposed in a personal capacity a scheme for a “Trade Stabilization Budget or Fund,” by which the U.S. Government would set aside an annual sum—initially $3–4 billion—which could be made available to designated foreign countries to enable them to pay for imports of goods or services or to discharge debts. The scheme envisaged stabilized exchange rates and the abolition of exchange controls.26

About the same time, an article by Mr. Zygmunt Karpinski, who was attached to the Polish Government-in-Exile in London and who later was for two months an Alternate Executive Director of the Fund, was published in The Polish Economist.27 This article advocated, in effect, the generalization of the procedures of the Tripartite Agreement, together with provisions for the absorption of excessive balances by triangular operations, by the sale of gold, or by changes in exchange rates.

In an address to the Economic and Business Foundation in May 1942, Professor Jacob Viner called for the creation of a workable international monetary system combining exchange stability and price-level stability. He urged the major countries to “accept a code which will prohibit resort to beggar-my-neighbor methods of escape from an impending depression,” and conceived of

a modified international gold standard, under which, to prevent world-wide inflation or deflation, and also to permit orderly adjustment when needed of the exchange-parities of particular currencies, changes in the monetary value of gold for at least the major countries would be permitted—or perhaps ordered—by an international body operating under general rules embodied in an international agreement.28

Keynes also cited “a good number of private memoranda.” Among these were a number of proposals and counterproposals put forward by members of the governments-in-exile in London, who were kept in touch by the Treasury with the planning that was going forward. The authors of these memoranda included Mr. Johan W. Beyen29 and Mr. Camille Gutt, both of whom were later to be associated with the Fund.

Mention may here be made also of an alternative to the internationalism of the Keynes and White Plans which attracted considerable support, particularly in banking circles, but which proved a blind alley. This was the so-called key-currency plan, expounded by Professor John H. Williams in December 193630 and again in July 1943.31 By it, the major countries would have had currencies linked to gold and countries of less international significance would have undertaken less rigid obligations. The links between member countries would have been similar to those in the Tripartite Agreement, but the cooperation between them would have been closer than was provided for in that Agreement and would have extended to coordination of internal policies. The essential feature of the plan was that it would have started with the U.S. dollar and sterling, and been extended only gradually to other currencies. Such a procedure was ruled out by the U.S. and British officials because of its discrimination between countries.

Details of the Keynes Plan

Both the Keynes and White Plans went through a number of drafts before being made public. There is no need here to recapitulate all the formulations which were successively attempted. It will suffice, in the first place, to describe the Plans as they were at the time when the White Plan reached London. So far as the Keynes Plan is concerned, this entails giving details of the fourth draft of the Plan, which was circulated on February 11, 1942.32

Much of the detail of the Plan as circulated described the need for it and the merits of it. This part of the argument can largely be taken for granted and is not summarized here. What follows is basically the bare bones of the Plan together with notes on certain special features which proved to have importance in later discussions.

The title given by Keynes to the Plan was Proposals for an International Currency (or Clearing) Union. The alternatives in this title reflected some uncertainty in Keynes’ mind as to the best name for his project. In the first draft, he conceived of an International Currency Union managing an International Clearing Bank (par. 3), and in later drafts the term Currency Union was retained as a general description for the body he envisaged.

This body was to keep banking accounts for central banks in exactly the same way as central banks in each country kept accounts for commercial banks. These accounts were to be denominated in an international currency, which, in this fourth draft, Keynes called bancor. (In the first draft, it had been tentatively called grammor.) Bancor was to be defined in terms of gold, but its value was not to be unalterable (pars. 1, 43). The Union would have power to change the value if it deemed this desirable. Member countries could obtain bancor in exchange for gold but could not obtain gold in exchange for bancor (par. 41).

Since the Currency Union was conceived primarily as a central bank for central banks to be run along the lines of the British banking system, it was provided that the debit balances, when they arose, should take the form of overdrafts and not of specific loans (par. 5). Unlike any ordinary banking system, however, the Union was to charge a rate of interest on both credit and debit balances (par. 17 (3)). This procedure, so far as creditors were concerned, was part of Keynes’ deliberate plan to place part of the burden of balance of payments adjustments on creditor countries (par. 16). Keynes was, however, conscious that it would not do to be too hard on creditors, if only because without them the Union would be unable to help its potential debtors. The slightly ambivalent attitude which resulted from this dilemma was neatly, if somewhat rudely, summed up by Professor Dennis Robertson in a letter to Keynes on March 3, 1943. “Are we,” he asked—

  • Are we to love, honour, cherish and thank or

  • To kick in the bottom the blokes who hold bancor?33

Elsewhere in the Plan, Keynes argued that credit balances would be no burden to creditors, being equivalent merely to idle reserves (par. 7). But while he wished to discourage credit balances in order to avoid the contractionary effect on international trade of large balance of payments surpluses, he also stressed the need for debit balances to be controlled (par. 17 (4)). He expressly commented that the right to an overdraft was no substitute for necessary readjustments in countries’ internal economies (par. 14).

In addition to the provision for charging interest on credit and debit balances, Keynes proposed to limit the right to accumulate a debit balance in any one year to one fourth of a quota to be allotted to each country (par. 17 (4) (a)). This quota would be related to its foreign trade; specifically, he suggested that the quota might be equivalent to, or perhaps somewhat less than, the total of exports and imports of the member averaged over three prewar years (par. 17 (2)). The quota was to be adjusted annually to the average of three (or, after a time, five) preceding years. The interest to be charged on both debit and credit balances was quoted as 1 per cent of balances over one fourth and up to one half of the quota, and an additional 1 per cent on balances exceeding one half of the quota (par. 17 (3)). Keynes suggested, however, that member countries should be able to avoid these charges by debtors borrowing from creditors after consulting the Governing Board of the Union (par. 17 (3)).

The Plan also provided for exchange rates to be fixed in terms of bancor and not to be altered without the permission of the Governing Board; however, the Governing Board was, during the first five years after the inception of the system, to “give special consideration to appeals for adjustments in the exchange-value of a national currency on the ground of unforeseen circumstances” (par. 17 (1)). At the same time, if a member had a debit balance in excess of one fourth of its quota on the average during the previous year, it was to be entitled to reduce the value of its currency by not more than 5 per cent yearly without the consent of the Governing Board (par. 17 (4) (a)). As balances increased in terms of quotas, so the action to be taken was more specifically provided. For example, as a condition of allowing a member state to increase its debit balance to more than half of its quota, the Governing Board was empowered to require the member to take all or any of the following measures: (1) devaluation by a specific amount, (2) imposition of control on outward capital transactions, (3) the outright surrender of a suitable proportion of the member’s international reserves in reduction of the balance (par. 17 (4) (b)). Should the debit balance nevertheless further increase to a point where it exceeded three fourths of the quota, or was excessive in the opinion of the Governing Board, the Board could require the member to take measures to improve its position; if these failed within two years, the Governing Board might declare the member in default and cancel its drawing rights (par. 17 (4) (c)).

Somewhat similar provisions applied to members with credit balances exceeding one half of their quota for a year (par. 17 (5)). They would be required to discuss with the Governing Board (while, however, retaining the ultimate decision in their own hands) appropriate measures, such as (1) the expansion of domestic credit, (2) a revaluation of the currency, (3) an increase in wage rates, (4) the reduction of tariffs, etc., or (5) making international development loans.

It was mentioned above that one of the measures which might be recommended to a debtor was the control of outward capital transactions. The Plan, however, contemplated that such control would normally exist, and recommended that, if possible, all capital movements should be controlled in all countries (par. 45). The main object, on the one hand, was to control short-term speculative movements and, on the other hand, to distinguish between long-term loans by surplus countries and movements of funds out of deficiency countries lacking the means to finance them (par. 46).

The Plan, as drafted, contemplated world-wide membership of the Union. Nevertheless, it provided for a special position for the United States and the United Kingdom as founder members (par. 3). It suggested that these two should be able to outvote the remainder of the members and that the head office of the Union should be in London, with the Governing Board meeting alternately in London and in Washington (pars. 56, 57). Another aspect of the special relationship envisaged for the founder members was implicit in the provision for a period of relief and reconstruction after the war. This clearly envisaged that, despite lend-lease assistance, the United Kingdom would emerge from the war impoverished and in debt, and the United States as a major creditor (pars. 10, 61). One of the arguments put forward for the Plan, accordingly, was that it would be of particular value in this postwar period (par. 61)—the “transitional period,” whose prospective length proved to be one of the issues on which it was most difficult to reach agreement. It may be inferred from the provision for changes in the members’ exchange rates, cited above, that at this time Keynes was envisaging a transitional period of about five years (par. 17 (1)).

As put forward by Keynes, the Plan dealt only with the Clearing Union. It did, however, specifically contemplate a number of parallel organizations, including international bodies charged with postwar relief, rehabilitation, and reconstruction (par. 54). The Union was conceived as facilitating the work of such bodies, not only by setting up clearing accounts through which their transactions could be channeled, but also by giving them preliminary overdraft facilities—to be eventually discharged, if necessary, out of the Union’s reserves or a levy on credit balances in the Union. Other international bodies which were envisaged included one with functions similar to the United Nations, another charged with the management of a Commodity Control, a Board for International Investment, and an International Economic Board, with the function of maintaining the stability of prices and controlling the trade cycle, which also might advantageously work in harmony with the Clearing Union.

The Plan quite specifically contemplated some surrender of member countries’ sovereign rights, although it argued that the surrender was no greater than that required in a commercial treaty (par. 50). A greater readiness to accept super-national arrangements was, however, stipulated as a prerequisite for the postwar world (par. 51).

Details of the White Plan

The White Plan as circulated in April 1942 was entitled Preliminary Draft Proposal for a United Nations Stabilization Fund and a Bank for Reconstruction and Development of the United and Associated Nations. It therefore covered what became both the International Monetary Fund and the International Bank for Reconstruction and Development. Only the part of the draft dealing with the Fund is discussed here.34 The objectives which the Plan had in view were conveniently summarized in the first section, and the order in which these were stated has some significance. The purposes read as follows (par. I and pp. 46–48):

  • To stabilize foreign exchange rates of the United Nations.

  • To encourage the flow of productive capital among the United Nations.

  • To liberate blocked balances.

  • To help correct the maldistribution of gold among the United Nations.

  • To facilitate the settlement and servicing of international debts—both public and private.

  • To shorten the periods of disturbing disequilibrium in the international accounts of member countries and help stabilize price levels.

  • To reduce the necessity and use of foreign exchange controls.

  • To eliminate multiple currency practices and bilateral clearing arrangements.

  • To promote sound note issuing and credit policies and practices among the United Nations.

  • To reduce barriers to foreign trade.

  • To promote more efficient and less expensive clearings of international exchange transactions.

Unlike the Clearing Union, the White Plan was a contributory one, with subscriptions totaling “at least $5 billion” (par. IV.1 and p. 73). No provisions were made in the outline of the Plan for the size of individual countries’ contributions, but in the commentary a somewhat complicated formula was suggested, based on proportions of gold holdings, gold production, national income, foreign trade, population, foreign investments, and foreign debts (p. 74). The effect of this formula would have been to require contributions, inter alia, as follows: from the United States, $3,196 million; from the British Commonwealth, $1,055 million ($635 million from the United Kingdom); from the U.S.S.R., $164 million; from the Netherlands and colonies, $157 million; and from Brazil, $50 million. Fifty per cent of the country’s contribution was to be paid up, consisting of 25 per cent in interest-bearing government securities (on which the interest and principal were to be payable in “gold or its equivalent”) plus a minimum of 12½ per cent in gold and a maximum of 12½ per cent in the member’s own currency (par. IV.2).

Any member might purchase from the Fund the currency of any other member on three conditions, viz.: (1) The currency demanded from the Fund was required to meet an adverse balance of payments vis-à-vis the country issuing the currency. (2) After the purchase, the total in the Fund of the currency of the country making the purchase should not exceed the total of the gold, currency, and government securities contributed by that member. (3) The relevant rate of exchange would be determined by the Fund (par. II.2 and pp. 49–50).

Provision was made for a member country to purchase a larger amount from the Fund than specified in the previous paragraph, provided that the member could secure 80 per cent of the members’ votes, and provided (1) that the Fund had reason to believe that it could dispose of its excess holdings of the purchasing member’s currency within a reasonable time, (2) that those holdings were matched by actual, or prospective, gold holdings of the member, or, as a further alternative, (3) that the member undertook measures recommended by the Fund to correct its balance of payments (par. II.3 and pp. 52–54). For such an additional purchase, the Fund would stipulate a time limit within which it should be repaid (p. 52).

Detailed provisions were made for the governments of member countries to sell to the Fund blocked foreign balances acquired from their nationals, within limits to be set by the Fund. Among the conditions to be imposed were that the country selling the blocked balances and the country in which the balances were held should each agree to purchase 40 per cent of them from the Fund at the rate of not less than 2 per cent a year, beginning after three years (par. II.4 and pp. 54–59). The former would do so either in the currency that it had received from the Fund or in its own currency, at the Fund’s option. The country in which the balances were originally held would pay the Fund either in gold or in New International Units, later called Unitas (p. 87) to be issued by the Bank for Reconstruction and Development (p. 81). The remaining 20 per cent would be sold by the Fund as soon as the 80 per cent thus underwritten had been repurchased. A service charge of 1 per cent of the balances, payable in local currency, would be made against each country, and possibly also an annual charge of 1 per cent on the balances actually held by the Fund (par. II.4.g and p. 56).

As noted above, the Fund could determine the rates at which it would exchange one member’s currency for another’s. When doing so, it was to aim at stability in exchange relationships (par. II.5 and p. 60). Changes in the rates were to be made only “when essential to correction of a fundamental disequilibrium”—a term which was to give rise to prolonged but unsuccessful attempts at definition—and only with the consent of 80 per cent of members’ votes. A similar majority was required for several other activities by the Fund, including (1) the retention of nonmember countries’ currencies beyond 60 days (par. II.8); (2) the borrowing of any currency (par. II.9 and p. 60); (3) investing any currency it held in short-term securities—commercial or government (par. 11.10); (4) selling the obligations of a member country (par. 11.11); and (5) selling any currency for the purpose of adjustment of a foreign debt (par. 11.12 and p. 61). For purposes of (3) and (4) above, the approving votes had to include that of the country whose securities were involved. By a 75 per cent majority, the Fund could permit any member to borrow its own currency from the Fund for a year or less, up to three fourths of the Fund’s holdings of that currency. The member would pay only 1 per cent per annum interest to the Fund and thus might find borrowing from the Fund cheaper than borrowing in its own market (par. 11.13 and p. 60).

Eligibility to participate in the Fund was offered to all members of the United and Associated Nations, provided, however, that they agreed (1) to abandon within a year all restrictions and controls over foreign exchange transactions with member countries, except with the approval of the Fund (par. III.1 and pp. 63–64); (2) to alter their exchange rates only with the consent of the Fund, except for a narrow range to be fixed by the Fund and permitted to all member currencies (par. III.2 and pp. 64–66); (3) not to accept or permit deposits or investments from another member country without the consent of that country, and to make available to the government of any member at its request all property in the form of deposits, investments, and securities of the nationals of that member country (par. III.3 and pp. 66–67); (4) not to enter upon any bilateral clearing arrangements (par. III.4) nor to establish any “geographically preferential exchange rates” (p. 67); (5) not to adopt any monetary or general price measure or policy, the effect of which, in the opinion of a majority of the members’ votes, would bring about, sooner or later, a serious disequilibrium in the balance of payments, providing that 80 per cent of the votes of the Fund members disapproved the adoption of such a measure (par. III.5 and pp. 68–69); (6) to embark upon a gradual reduction of trade barriers (par. III.6 and p. 69); (7) not to permit any defaults on foreign obligations of the government, central bank, or government agency without the approval of the Fund (par. III.7 and p. 71); and (8) not to subsidize, directly or indirectly, exports to member countries without the consent of the Fund (par. III.8 and pp. 71–72).

The Fund was to be managed by a Board of Directors. Each member would appoint one Director, and the Board would elect a Chairman and a small operating committee (par. V.1, 2 and pp. 75–76), whose members would devote their full time to the Fund’s work. It was suggested that the Fund might need branch offices on each continent, and that it would require to be served by a large and highly skilled technical staff (pp. 48, 52, 76). It was contemplated that there would be regular consultations between the Fund and its members, although whether these would be conducted by a committee of Directors or by the staff was not made clear (p. 69). Provision was made for an executive committee to examine requests for changes in exchange rates, since the obvious need for secrecy would preclude the open discussions of such requests (p. 65). To keep the Board informed, the staff would need to watch, inter alia, quarterly balance of payments figures for each member (p. 59).

Each member of the Board would have 100 votes, plus 1 vote for the equivalent of every million dollars subscribed in gold or currency to the Fund by his government (par. V.3 and pp. 76–77). It was calculated that this would give the United States 25.32 per cent of the total votes, Latin America 34.47 per cent, the British Empire 17.56 per cent, other European countries and their colonies 15.91 per cent, the U.S.S.R. 2.85 per cent, and China 2.26 per cent (p. 75). The President of the Bank for Reconstruction and Development, who was to be a member of the Board of the Fund, would have 100 votes, or 1.63 per cent of the total (par. V.6 and pp. 75, 77). When considering proposed changes in exchange rates, however, each country would have 1 vote only (p. 66). Finally, the profits were to be distributed in the currency of each member, after 50 per cent of the net profits earned had been placed to reserve until the reserves equaled 10 per cent of the Fund’s assets (par. IX).

On May 16, 1942, Secretary Morgenthau sent a copy of the preamble to the White Plan to President Roosevelt, with a memorandum calling attention to the political capital to be made from the Stabilization Fund as a Free World answer to the “New Orders” being imposed by the Axis powers on Europe and Asia. He recalled that Resolution XV of the Rio meeting proposed an international conference to consider the establishment of a stabilization plan. In preparation for such a conference, he suggested that an Interdepartmental Committee should be set up to work with the Treasury on the White Plan. He enclosed a draft invitation to the conference, an agenda and timetable for it, and a list of Finance Ministers who might be invited.35

On the same day the President replied asking for a continuance of the studies in progress, in conjunction with the State Department, the Board of Economic Warfare, and the Export-Import Bank of Washington. He suggested that Secretary Morgenthau should mention the matter of a conference to him again when the studies had been completed and the opinion had been obtained of the Secretary of State (Hull) and the Under Secretary of State (Welles). An Interdepartmental Committee was duly constituted, and met for the first time on May 25. It set up a technical subcommittee, chaired by White, which met on May 28 and at frequent intervals thereafter.

The later evolution of both the White Plan and the Keynes Plan is described in the next chapter.

Dr. Hjalmar Schacht was President of the Reichsbank from 1933 to 1939 and Minister of Economics of Germany from 1934 to 1937.

Report of the Secretary of the U.S. Treasury, Fiscal Year 1937, pp. 258–62.

Roger Auboin, The Bank for International Settlements, 1930–1955, Princeton University, Essays in International Finance, No. 22 (Princeton, 1955), p. 12. Bank for International Settlements, Eighth Annual Report (Basle, 1938), p. 109.

Report of the Secretary of the U.S. Treasury, Fiscal Year 1938, p. 268.

Report of the Secretary of the U.S. Treasury, Fiscal Year 1942, p. 291. A draft of this agreement, dated August 25, 1941, is reproduced in U.S. Congress, Senate, Committee on the Judiciary, Interlocking Subversion in Government Departments (Hearings Before the Internal Security Subcommittee), 84th Cong., 1st sess., 1955, pp. 2344–46.

League of Nations, International Currency Experience: Lessons of the Inter-War Period (Geneva, 1944), p. 147.

Mr. van Zeeland’s report was published by the British Government as Cmd. 5648, pp. 14–17 (translated at pp. 38–41).

League of Nations, Report on Exchange Controls (Geneva, 1938), p. 45.

Harry Dexter White’s papers deposited at the Princeton University Library (hereafter cited as “Princeton papers”), Box 1, File 6.

Ibid., pp. 45, 47.

Ibid., p. 58.

Report of the Secretary of the U.S. Treasury, Fiscal Year 1940, p. 137.

A draft, undated but referable on internal evidence to the first half of 1940, was reproduced in the Hearings Before the Internal Security Subcommittee cited above (note 5), pp. 2664–92; reference is to p. 2686.

Draft dated April 1942 (reproduced below, Vol. III, p. 66); see also p. 21 of this chapter.

Federal Reserve Bulletin, Vol. 26 (1940), pp. 517-25.

In discussion in 1950 with Mr. R. W. Oliver, Mr. Frank Coe, then Secretary of the Fund, who was a former colleague of White’s, is reported to have stated that the plan for the Bank was prepared in the late summer or early autumn of 1941.—R. W. Oliver, The Origins of the International Bank for Reconstruction and Development, unpublished thesis, Princeton University, 1959, pp. 320–21.

John Morton Blum, From the Morgenthau Diaries: Years of War, 1941–45 (Boston, 1967), p. 228.

The first surviving draft is dated December 30, 1941.

Both versions are in Princeton papers, Box 8, File 24.

R. F. Harrod, The Life of John Maynard Keynes (London, 1951), p. 527.

Ibid., p. 513.

See Report by White to Mr. Haas, dated June 13, 1935 (Princeton papers, Box 1, File 4).

Harrod, op. cit., p. 507.

John Maynard Keynes, Treatise on Money (London, 1930), Vol. II, pp. 399–402.

Sir Frederick Leith-Ross, Money Talks (London, 1968), p. 298.

Foreign Affairs, Vol. 20 (1941–42), pp. 282–92.

The Polish Economist (London), January–June 1942, pp. 40–53.

“Objectives of Post-War International Economic Reconstruction,” reprinted in American Economic Objectives, William McKee, ed., Economic and Business Foundation (New Wilmington, Pa., 1942), pp. 161–77. The quotations are from pp. 168, 174.

For Mr. Beyen’s views, see his Money in a Maelstrom (New York, 1949), especially pp. 148–51.

John H. Williams, Paper delivered to American Economic Association and American Statistical Association, December 28, 1936 (reprinted in American Economic Review, Vol. XXVII, No. 1, Supplement, March 1937, pp. 151–68). Partly reproduced below, Vol. III, pp. 119–23.

John H. Williams, “Currency Stabilization: The Keynes and White Plans,” Foreign Affairs, Vol. 21 (1943), pp. 645–58. Partly reproduced below, Vol. III, pp. 124–27.

Reproduced below, Vol. III, pp. 3–18.

In his Utility and All That (London, 1952), p. 173, Professor Robertson quotes a quatrain, of which these (slightly revised) were the two concluding lines, as having been evolved and circulated by “someone” during discussions of the Clearing Union. There seems little doubt that he was himself the author.

The memorandum comprises an outline in the form of a series of numbered paragraphs, reproduced in Vol. III below on pp. 41–45, followed by a detailed commentary, partly reproduced on pp. 46–82. The parenthetical references in the discussion here are to the numbered paragraphs and/or to the pages in Volume III where the commentary is to be found.

Morgenthau papers, Hyde Park, N.Y. The original of the memorandum is undated, but there is a dated carbon copy in Princeton papers, File 24 (not in a box).

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