Where Did the Tradition of a European IMF Managing Director Start? Thank J. Edgar Hoover.
Benn Steil, director of international economics at the Council on Foreign Relations has an interesting peek at the history of the formation of the World Bank and IMF in a New York Times op-ed. From their inceptions, the World Bank has traditionally had an American President and the IMF a European Managing Director. But why? I had learned in college that it was a grand bargain needed to ensure European (particularly French) support. But Steil examines a more precise question: why did the Europeans get the IMF post, particularly when the IMF was the institution that the Americans viewed as being more central to their own interests? The answer, it seems, relates less to theories of international organization management and more on J. Edgar Hoover.
Harry Dexter White, the Treasury Department’s key representative at the Bretton Woods conference and a key architect of the IMF had a “vision of a postwar global financial architecture dominated by the American dollar.” Steil continues:
[O]n Jan. 23, 1946, Harry S. Truman nominated White to be the first American executive director of the I.M.F. (such directors representing the major member countries). Truman was also widely expected to nominate White for the fund’s top post of managing director.
But trouble soon arose in the form of J. Edgar Hoover, the F.B.I. director. White had been under surveillance for two months, suspected of being a Soviet spy. Hoover prepared a report for the president, based on information provided by 30 sources, including the confessed spy Elizabeth Bentley, asserting that White was “a valuable adjunct to an underground Soviet espionage organization,” was placing individuals of high regard to Soviet intelligence inside the government. If word of his activities became public, Hoover stressed, it could jeopardize the survival of the fund.
Oblivious, the Senate Committee on Banking and Currency approved White’s nomination on Feb. 5, the day after Hoover’s report was delivered.
Secretary of State James F. Byrnes, having read the report, wanted Truman to withdraw the nomination; Treasury Secretary Fred M. Vinson wanted White out of government entirely. Truman, who did not trust Hoover but who knew he had a major political problem on his hands, decided to quarantine White as the American I.M.F. executive director, a huge step down from managing director.
And what started as a defensive manoeuvre, hardened onto tradition and expectation. The whole op-ed is interesting, with some great bits on John Maynard Keynes. I look forward to Steil’s forthcoming book, The Battle of Bretton Woods.