President Obama recently nominated Jim Yong Kim, the president of Dartmouth, to be the next president of the World Bank — a privilege accorded to the United States since the bank’s founding in 1946. A European, in turn, gets to run the International Monetary Fund.
In the wake of World War II, such a divvying up of the top spots among the great powers was inevitable. But how did the United States, the primary founder and financer of the two institutions, wind up taking the helm of the World Bank, and not the I.M.F., which was of vastly greater importance to its government?
In fact, that was the original goal of Harry Dexter White, the Treasury Department’s key representative at the Bretton Woods conference of July 1944, where the two institutions were created. The I.M.F. was central to White’s vision of a postwar global financial architecture dominated by the American dollar.
White relegated the British delegation head, John Maynard Keynes, to the commission creating the World Bank specifically to keep him away from the main event: creating the I.M.F. White so masterfully outmaneuvered the British that they wound up signing on to a dollar-centric design for the fund, one they thought they had already blocked.
Then, on 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.
Nominating another American to sit above White, however, would have raised red flags. Why was the fund’s chief architect being passed over? It was a question the White House wished to avoid.
On March 5, Vinson met with Keynes, now the British governor of both the I.M.F. and the World Bank. He said Truman had decided not to put White’s name forward for the I.M.F. top job, despite his being “ideally suited” for it. The United States would, instead, back an American for the World Bank. Keynes was shocked.
Washington got its way, of course, and a Belgian, Camille Gutt, became the first head of the I.M.F., while an American, Eugene Meyer, became the first head of the World Bank. Though the United States was clearly in a powerful enough position to claim the I.M.F. job after Gutt’s departure in 1951, the fund was for the moment effectively moribund, its role supplanted by the Marshall Plan, and the United States was content keeping the World Bank post.
As for White, he resigned from the I.M.F. in 1947. The next summer Bentley and Whittaker Chambers accused him of spying for the Soviets, a charge he denied before the House Un-American Activities Committee on Aug. 13. He died of a heart attack three days later.
Following Alger Hiss’s perjury conviction in 1950, Representative Richard M. Nixon revealed a handwritten memo of White’s given to him by Chambers, apparently showing that White had passed classified information for transmission to the Soviets. Yet his guilt would only be firmly established after publication of Soviet intelligence cables in the late 1990s.
Instead of treating the World Bank presidency as a sacred American birthright, we should remember that it was never more than a consolation prize for an administration trying to dodge a spy scandal.
Benn Steil, the director of international economics at the Council on Foreign Relations, is the author of the forthcoming The Battle of Bretton Woods.