Finance & Development September 1998 - Harry Dexter White and the International Monetary Fund
Where the two founding fathers differed most was on the third theme: how independent and how powerful should the IMF be? To Keynes, what the world needed was an independent countervailing balance to American economic power, a world central bank that could regulate the flow of credit both in the aggregate and in its distribution. To White, what was needed was an adjunct to American economic power, an agency that could promote the balanced growth of international trade in a way that preserved the central role of the U.S. dollar in international finance. Because White prevailed in that argument, and the IMF became a dollar-based institution, the Bretton Woods system contained a fatal flaw. For international reserves to keep pace with the growth in world trade required an ever-expanding supply of dollars, which as the economist Robert Triffin observed in the late 1950s was incompatible with the preservation of a stable value for the dollar.
Where the two founding fathers differed most was on the third theme: how independent and how powerful should the IMF be? To Keynes, what the world needed was an independent countervailing balance to American economic power, a world central bank that could regulate the flow of credit both in the aggregate and in its distribution. To White, what was needed was an adjunct to American economic power, an agency that could promote the balanced growth of international trade in a way that preserved the central role of the U.S. dollar in international finance.
Because White prevailed in that argument, and the IMF became a dollar-based institution, the Bretton Woods system contained a fatal flaw. For international reserves to keep pace with the growth in world trade required an ever-expanding supply of dollars, which as the economist Robert Triffin observed in the late 1950s was incompatible with the preservation of a stable value for the dollar.
