In this Rising Tide Foundation lecture, historian and Africa expert Lawrence Freeman presents a deep dive into the life, policies and political battles of Franklin Delano Roosevelt with a focus on the New Deal followed by an analysis of the clash between post-WW2 ideologies (British imperial vs American republican) at Bretton Woods in 1944.
Transcript of Lawrence Freeman’s presentation:
Franklin Delano Roosevelt, A U.S. President Committed to the Development of Humankind.
Roosevelt’s The Reconstruction Finance Corporation and Bretton Woods
I come to this important subject as a specialist in Africa with increasing degrees of involvement on the continent over what is approaching 35 years. I also bring to Africa my knowledge a physical economy and consider myself to be a student of Alexander Hamilton, and the American System of Political Economy. I have an acute understanding of the lack of development across the African continent and the need for African nations to become sovereign nation states, free from external economic manipulation. This requires that African nations become industrialized. My outlook distinguishes me with few exceptions from the majority of so called Africanists in the United States, Europe and also many Africans.
To achieve economic progress in Africa, one must understand the importance of the role of credit; not money. Roosevelt applied the Hamiltonian concept of credit to further his policies for development both in the United States and internationally. I have been educating my friends in Africa and in the United States on the concept of credit as understood by Hamilton and Roosevelt. I am collaborating with them to create an African Infrastructure Development Bank, standing on the shoulders of Hamilton and Roosevelt,
Other presentations on this platform have discussed Franklin Roosevelt and his policies. I will contribute to this learning process by explaining some of the key features of FDR’s policies to augment our understanding of his philosophy for the development of humanity. I will concentrate in this presentation on two aspects of FDR’s work. If we like, I can do another presentation of President Roosevelt’s battle against the British Empire- a part II, if you will.
A Bit of History
There have been four principal applications of Hamilton’s national banking concept in the US.
From 1791 to 1811 we had Hamilton’s First National Bank, initiated under President George Washington. The second National Bank from 1816 to 1836, which included the period of the US economic expansion during the administration of President John Quincy Adams. In 1862, President Abraham Lincoln created the greenbacks and in 1863 we had the national banking act. From 1933 to 1957, we had FDR’s new vehicle to create credit for economic expansion, the Reconstruction Finance Corporation, which we will discuss today.
In this presentation we will be discussing some specific measures by FDR to change and improve the United States during the Great depression with the Reconstruction Finance Corporation- RFC, and internationally with the creation of what has become known as the Bretton Woods system. I believe this will reveal the thinking process of FDR; his mindset. It is impossible in this presentation or probably in any single presentation to go through all of the aspects of what Franklin Roosevelt accomplished during his 12 years in the presidency. Nor is it possible to go through all the accomplishments of the New Deal but we will touch on some key aspects of the thinking of Franklin Roosevelt behind those initiatives.
It is always important when looking at individuals to at least understand the historical periods that they came from. Franklin Roosevelt was born on January 30th, 1882 and died on April 12, 1945. His birth was less than one generation from the end of the civil war, which means there was a continuation of the culture created by the leadership of Abraham Lincoln and the victory of the north for the survival of the Union-our Republic. That culture would impact Roosevelt’s development. However, 1882 was also in the period of the Jim Crow laws.
great, great, grandfather was Isaac Roosevelt. Known as Isaac the Patriot in the family. He was a member of the Federalist Party and a collaborator of Alexander Hamilton. Roosevelt, later on in his life had more leisure time to examine Alexander Hamilton’s policies for building the economy of the young republic, while he was recovering from the initial impact of polio. Earlier in 1903, as a Harvard undergraduate, he wrote his senior thesis on Alexander Hamilton, where he demonstrated his understanding of Hamilton’s economic principles:
“Washington the first president under the constitution made Hamilton secretary of the treasury the greatest of the cabinet offices. As Hamilton had stabilized the problem of state, so now he ordered the finances of the country, and it was his impetus that that removed for all time the risk of disintegration of the states.”
Roosevelt also commented on the importance of Hamilton’s contributions to defeating Aaron Burr, and setting up an economic system and a nation state that would prevent the establishment of a northern confederacy, which Burr advocated as part of his effort to break up the United States
The Roosevelt family arrived in the US -1650. First generation Nicholas Roosevelt had two sons. Jacobus established the Hyde Park Roosevelts in NY state, from which FDR came. His brother Johannes gave birth to the Oyster Bay Roosevelts, which is where Teddy Roosevelt came from, a pro slavery branch of the family. Teddy and FDR were fifth cousins. FDR’s wife Eleanor was a niece of Teddy, who rejected her family’s outlook.
- Guiding Principle
The guiding principle of Roosevelt’s RFC, like all of his policies mentioned above, flowed from the principle of the general welfare, cherished by FDR, and enshrined in the eloquently poetic Preamble to the US Constitution:
“We the People of the United States, in Order to form a more perfect Union, establish Justice, ensure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”
Americans today, do not understand the US Constitution, falsely believing that the Bill of Rights is the source of the exceptionalism of the US.
Roosevelt’s foreign policy was also guided by the general welfare principle as expressed in his Good Neighbor policy, which was his orientation to Latin America to Europe, and Africa. Roosevelt’s commitment to the principle of the general welfare and his Good Neighbor policy, led him to find ways to collaborate with other great powers such as Russia and China, which are unfortunately being demonized and threatened today by the United States.
Roosevelt’s practical application of the general welfare principle will be discussed throughout this presentation. He makes very clear in his first inaugural address on March 4, 1933, exactly how he intends to apply this principle to the depression conditions of the United States. I will quote just a couple of paragraphs, but I recommend everybody take the time to read or listen to this very powerful speech.
“Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the government itself, treating the task as we would treat the emergency of a war, but at the same time through this employment, accomplishing greatly needed projects to stimulate and reorganize use for natural resources…
“Finally, in our progress towards the resumption of work we require two safeguards against a return to the evil of the old order: there must be a direct supervision of all banking credits and investments, so that they will be an end to speculation with other people’s money; and there must be a provision for an adequate but sound currency…
“In the field of world policy, I would dedicate this nation to the policy of the Good Neighbor—the neighbor who resolutely respects himself and, because he does, respects the rights of others-the neighbor, who respects his obligations and respects the sanctity of his agreements in and with a world of neighbors”
- Reconstruction Finance Corporation -RFC
FDR is famous for what he accomplished in his first 100 days after taking office in 1933. Listed below are his major initiatives.:
- March 5th, the day after his inauguration he proclaimed a bank holiday.
- March 9th, the emergency banking act was presented to Congress
- March 29th, the Securities Act of 1933
- March 31st, established Civilian Conservation Corps -CCC
- April 9th, he took the dollar off gold
- May 12th, the Emergency Farm Mortgage Act which included the Agricultural Adjustment Act
- May 12t, the Federal Emergency Relief Act
- May 18th the Tennessee Valley Authority Act
- May 18th, the Glass Steagall Act
- June 3rd, the Home Owners’ Loan Act.
- June 16th, the National Industrial Recovery Act
All of these initiatives were invaluable and help lift the nation out of the depression and actually establish policies that have served us for many decades including today in 2022. Yet we have to look at the establishment of the Reconstruction Finance Corporation-RFC as possibly the most single important structure created by Franklin Roosevelt, which influenced US policy for the next 12 years of his administrations until he died.
The RFC was a unique Hamiltonian credit machine that restored the United States from the Great Depression and saved the world from succumbing to Nazi fascism.
IIIa) FDR Transforms the RFC
Following the stock market crash of 1929, the US entered into a deep depression. Between 1929 to 1930, investment collapse by 35%, banks defaulted on 100,000s of their depositors, 82 bread lines appeared in New York City serving 85,000 per day. President Herbert Hoover wanted to believe that government intervention was not necessary, and that the depression would be over soon. That is what he kept telling himself and the American people.
Hoover created the Reconstruction Finance Corporation on January 22nd, 1932, and it became operational the following month. Hoover’s Federal Reserve Board chairman, Eugene Meyer, a financier, a political insider, and publisher of the Washington Post to be the chairman of the RFC. He also appointed Jesse Jones as part of a democratic group to be on the board of the RFC.
Under president Hoover the RFC was authorized to lend money primarily to financial institutions, railroads, small banks, but included a loan of $65 million to the Bank of America. The idea was to prop up these financial institutions and that would solve the depression. It didn’t work.
The RFC was funded with $500 million of capital from the sale of RFC stock to the Treasury Department, and it was authorized borrow another $1.5 billion through the sales of bonds to the Treasury. Thus, its funding was enabled by the issuance of new debt. The RFC had to be reauthorized periodically and it also received additional spending authorizations, which entailed creating more debt. During the course of 1932, the RFC continued to lend money, the largest portion to smaller banks, but it was not changing the economy. Small banks and other institutions were simply using the money to pay off their loans to the larger banks. Liquidity from the RFC was not resulting in increased lending by the banks. Consequently, the depression was actually getting worse for the American people.
Let me quote here from Steven Feinberg, the author of the book, Unprecedented Power: Jesse Jones, Capitalism, and the Common Good. Here is what he had to say:
“The cold wintery months between Franklin Roosevelt’s November 1932 election, and his March 1933 inauguration were among the most painful and harsh of the Great Depression. From 1929 to the start of 1933, national income shrunk by half and stock market prices had fallen 75%. Wheat sold for $0.30 a bushel down from its high of $3. Home foreclosures surged from a normal 78,000 annually to 273,000 by the end of 1932. 20% of the nation’s children did not have enough food to eat. During 1932 more than three times as many people left the United States as immigrated to it.”
What happened that began the long process of turning the depression around? On March 9th, 1933, just a few days after President Roosevelt had been inaugurated, the Congress passed his Emergency Banking Act, in a mere seven hours. Title III of the EBA authorized the RFC to purchase preferred stocks in banks, trust companies, and other financial institutions. These were no longer loans but forms of ownership. In other words, the government was moving from simple loans to government ownership. Government intervention into the economy to reconstruct and expand the economy. In May of 1933, FDR appointed Jesse Jones, a well-known banker and businessman from Texas, to become chairman of the RFC. The like mindedness of Jones and FDR began the process of transforming the United States and the world over the next 12 years.
FDR and Jones literally, not figuratively, saved the US and the world,
IIIb) Injecting Credit Into the Economy
Both Jones and FDR knew that the key to reversing the depression was to get credit into the economy, credit to help businesses, credit to help people-to alleviate the suffering of the population. Together they were both acting on the principle of the general welfare and for the common good, not just for the United States, but as we shall see later, for the world
The problem they had was the banks did not want to lend money. They were using the loans to build up their liquidity and pay dividends, but they did not want to lend money for the actual expansion of the economy. We have seen this kind of problem from bankers in more recent times. Jones tried to convince the banks that they had to lend money. He said:
“the manufacturer, the processor, the merchant, the employer must all have additional capital and additional credit if they are to be able to carry out the recovery program. Banks must exert themselves to meet the situation by lending…Credit is the bloodstream of all business and banking is the heart. Banks that accept deposits but do not extend credit in a reasonable way will not contribute to the general health and economic welfare, nor to a business recovery.” He was very clear and blunt.
We will see time and time again that both gentlemen understood the role of credit and understood the responsibility of government. Jones repeatedly told the banking community; you should be lending this money but if you do not lend credit to this economy then the United States government will be the lender of last resort. And that is what the RFC did, on a unprecedent scale. Credit to promote the general welfare!
Jones told a group of bankers in 1934:
If the banker fails to grasp his opportunity and to meet his responsibility, there can be but one alternative–government lending. The question therefore follows–will our banking be continued in private hands or, of necessity, be supplanted by the government. The answer is with you–the banker. He went on to say: “No one must be allowed to suffer for a lack of food, clothing, or shelter or become medicants for the lack of credit for agriculture, business, and industry, small as well as large…Banking should be conducted in a spirit of public service other than purely for profit. It should be more a profession than a business involved with speculation.”
IIIc) Government Helps the People
Roosevelt’s next expansion of the RFC’s power occurred on June 24th, 1934, when he authorizes the RFC to make direct loans to businesses and industry, not just financial institutions. As you can see, in each year Roosevelt continued to expand the credit lending authority of the RFC directly into US economy. The RFC lent money to all of Roosevelt’s programs which we have listed before, and more.
The RFC not only assisted the banks, but also mortgages and construction loans through Fannie Mae. It funded The Federal Housing Administration, the Export Import Bank, the Commodity Credit Corporation, and the Public Works Administration. It bought gold on the market to raise its price under instructions from FDR. The RFC lend money to small entrepreneurs and disbursed more funds to farmers than any other category than defense.
For example, let us take a look at how the RFC assisted one of the key agencies set up by Roosevelt; the Rural Electrification Administration-REA.
At the beginning of the depression approximately 20% of the rural households and farms in the United States had no access to electricity. Within years, 90% of those same farms and residents had power. This came about by the RFC lending the REA $40 million per year for 10 years at a 3% interest rate. That’s the kind of credit extension/intervention, which was necessary, and could also be applied today in the US, and Africa.
I should add at this point that the RFC did not lose money. They had their loans paid back, so there was not a deficit created. Rather the RFC was the credit arm of Roosevelt that he was able to deploy with sound reasoning with through his close collaborator the head of the RFC, Jesse Jones.
IIId) RFC Wins WWII
Everyone has heard of the Arsenal of Democracy. But there would have been no arsenal of democracy and no victory in World War Two without the RFC.
President Roosevelt delivered one of his famous fireside chats on May 26th, 1940, about what was necessary to win the war which he knew was coming
“I know that private business cannot be expected to make all of the capital investment required for the expansion of plants and factories and personnel which this program calls for at once… Therefore, the government of United States stands ready to advance necessary money to help provide for the enlargement of factories, the establishment of new plants, the employment of thousands of necessary workers, the development of new sources of supply for hundreds of raw materials required, the development of mass transportation of supplies.” All of this would fall to Jones in the RFC
One month later, in June 1940, by an act of Congress, the RFC was authorized to purchase, build, and lease plants for the upcoming war effort. This was the largest involvement by the RFC in the US economy. In the period from 1940 to 1945 the RFC authorized more money building up the industrial capacity and infrastructure necessary for United States to win the war, than the entire banking system. In 1940 the Defense Plant Corporation-DPC was created by the Roosevelt administration to build the industrial base for the war. The RFC was an essential part of the entire funding process. For example, in 1943 the RFC owned 1,022 of the 1,479 wartime plants that were operating in the United States. DPC accounted for more than 30% of all new facilities built across the nation. By the end of the war the US government owned 5,000 plants
Let me list for you the eight RFC wartime subsidiaries that were used to build up the capability of the United States:
Metals Reserve company,
Rubber Reserve company,
Defense Plant Corporation,
Defense Supplies Corporation
War Damaged Corporation
US Commercial Company,
Rubber Development Corporation,
Petroleum reserve Corporation.
RFC created from scratch a synthetic rubber industry, a magnesium industry, and expanded the aluminum, and steel industries
In 1939 Japan had 7700 planes, Germany at 8,295 planes, and the US had only 2,500 planes, and 200,000 men in uniform. Roosevelt had called for the production of 185,000 planes, 120,000 tanks, 55,000 aircraft guns plus uniforms and supplies for millions of U.S. soldiers. RFC delivered.
Think about all of the building materials and products that goes into just having enough clothes, enough food, and enough barracks for an army, plus for a workforce which was expanding with the entry of more women.
It is hard to precisely calculate the total disbursement of money by the RFC. Estimates prior to the war are $13 billion and between 20 to $24 billion for the war mobilization. Putting total disbursement well over $30 billion. President Roosevelt reverses the Great Depression and defeats the Axis powers, using billions of dollars of credit and no inflation. How many of our leaders today understand that this was accomplished through the productive use of credit?
- Principles of Bretton Woods
Rightly, many of my African friends today complain of the Bretton Woods system because of its unfair treatment especially, towards the developing sector. However, the International Monetary Fund-IMF and World Bank today are not what Franklin Roosevelt intended when he created these institutions in 1944. His intent which is clear from all of his discussions during the course of the war, was for the elimination of the colonial-imperialist system, and for development of all nations. Here we will discuss what the actual principles our Franklin Roosevelt’s Bretton Woods system were. We should look at two presentations by Franklin Roosevelt in 1941, months before the US officially entered the war, which reveal his philosophy, the intent of his Grand Design following the end of WWII
Franklin Roosevelt on January 6, 1941, delivered a message to the Congress where he put forth the basic principles for the future of the world even though the United States was still almost 12 months away from entering the war. Quoting from his remarks:
“In the future days, which we seek to make secure, we look forward to a world founded upon four essential human freedoms.
The first is freedom of speech and expression, everywhere in the world
The second is freedom of every person to worship God in his or her own way, everywhere in the world.
The third is freedom from want, which translated into world terms means economic understandings, which will secure for every nation a healthy peacetime life for its inhabitants, everywhere in the world…
The fourth is freedom from fear, which translated into world terms, means a worldwide reduction of armaments…anywhere in the world.”
These four simple principles give us an insight into what Roosevelt was thinking as early as a beginning of 1941 and we see these principles acted upon in his creation of the Bretton Wood system four years later.
The Atlantic Charter
In August 1941, President Roosevelt had his first face to face meeting with Winston Churchill off the coast of Canada. Roosevelt had a contentious discussion, the first of many with Churchill about the future of the post-war world. It is clear that FDR had a post war design in mind, years before the war ended. Roosevelt insisted that the British imperialist methods, British economic free trade system, and the British colonial control of its colonies had to be ended after the war. The Atlantic Charter turned out to be a compromise agreement between Churchill and Roosevelt, but nevertheless gave the world a very clear picture of what Roosevelt intended for all nations. I discovered for myself that Africans, still under the colonial rule of Great Britain, saw signs of hope for their independence when they read about the Atlantic Charter. I will just read three of the eight sections of the charter to give you an idea of Roosevelt’s view:
“Third, they[countries] respect the right of all people to choose the form of government under which they will live; and they wish to see sovereign rights and self-government restored to those who have been forcibly deprived of them;
Fourth, they will endeavor, with the respect of their existing obligations, to further the enjoyment by all states, great and small, victor of vanquished, of access on equal terms, to the trade into the raw materials of the world which are needed for their economic prosperity;
Fifth, they desire to bring about the fullest collaboration between all nations in the economic field with the object of securing, for all, to improve Labor Standards, economic advancement, and Social Security”
IVa) A Bank for Development
July 1st, 1944, in the White Mountains of New Hampshire, the Bretton Woods conference was officially opened with the introductory remarks by Henry Morganthau, Secretary of the Treasury of the United States. However, the point man at the conference for FDR was Henry Dexter White, assistant secretary of the treasury, who shared the same outlook as Roosevelt for development of the world.
Most people are familiar with one of the two institutions formed by the Bretton Woods. That is the International Monetary Fund IMF created to coordinate currencies and create financial stability between nations. However, the more important aspect of the Bretton Woods was the second facility, the International Bank for Reconstruction and Development-IBRD. It was through what became known as “The Bank,” whose creation, orchestrated by his agent, Harry Dexter White, was intended to create a new world financial system after the war. One which would be based on the economic development of all nations, especially developing nations.
White’s draft of the final agreement for the creation of The Bank-IBRD, makes explicit his and Roosevelt’s intention that The Bank was to be created for development. He wrote in the articles of agreement the purpose of the IBRD:
“To assist in the reconstruction and development of territories of members by facilitating the investment of capital for productive purposes, including the restoration of economies destroyed or disrupted by the war, the reconversion of productive facilities for new peacetime needs and encouragement of the development of the productive facilities and resources in less developed nations.”
Author Eric Helleiner comments on the intentions of White regarding the creation of the Breton Woods system in his book: Forgotten Foundations of Bretton Woods: International Development and the Making of the Postwar Order.
“White outlined innovative provisions for long term development finance, compensatory short-term balance of payments financing, debt restructuring, commodity price stabilization, the control of capital flight, and support for infant industry trade protection in Southern countries [the developing sector].”
These ideas were not new to Franklin Roosevelt. In the 1930s, Roosevelt had his Good Neighbor Policy towards the region of the Americas that included a lending institution called the Inter American Bank IAB, whose central feature was to promote economic development for the region. In the 1936 address to the countries of Latin America, Roosevelt said; “through democratic processes we can strive to achieve for the Americas the highest possible standard of living conditions for all our people.” Thus, we see that there is a consistent orientation of Roosevelt to construct a new pro-development based economic-political order in the world. Hilleiner comments that US support for International Development was influenced by the values of the new deal. He writes, if the US president was to be chosen as a pioneer for International Development, Franklin Roosevelt deserves the title.”
Preparing for the ideas of the Bretton Woods system, White wrote in 1942;
“The lesson that must be learned is that prosperous neighbors are the best neighbors: that a higher standard of living in one country gets a higher standard of living in others, in the higher level of trade and business is most easily attained when generously and widely shared.” (Are these not the ideas and the basis for the “win-win” concepts of the Chinese Belt and Road Initiative-the Chinese Silk Road?)
In White’s draft for the Reconstruction Bank, which was written in 1942, he was explicit that the provisions of the Reconstruction Bank must involve; “a provision of long term capital for desirable productive projects that served directly or indirectly to permanently raise a standard of living of the borrowing country.”
White wanted a facility:
“to supply the huge volume of capital that will be needed for relief, reconstruction and economic development essential for the attainment of world prosperity and higher standards of living…. Interest on such loans could not be excessive, and loans could not be for the purpose of repayment of an old loan. (Emphasis added)
IVb) US versus British Imperial Outlook
It is well known that the Bretton Woods conference was dominated by advance sector nations and that it is often attacked for this reason. However, it is important to know that there was significant representation from the developing sector.
There were attendees from 19 Latin American countries, four African countries present; Egypt, Ethiopia, Liberia, and South Africa, and five delegations from the Asian continent; China, India, Iran, Iraq, and the Philippines. There was input from these nations. This included large delegations from China 33 people, Brazil 13, Cuba 10, and India 8. The Chinese delegation had a pro development perspective that they brought to the conference. This came from the great leader, Sun Yat-sen and his book International Development of China. China supported the Bretton Woods agreement and considered it a confirmation of the policies of Sun Yat-sen. In this they were correct. The policies of Sun Yat-sen did correspond with the policies of FDR, both derived from Hamilton’s American System of Political Economy.
The British were represented at the Bretton Woods conference by John Maynard Keynes, who did not hide his dislike for the conference, and his dislike for the policies put forward by Henry Dexter White and Franklin Roosevelt. He also did not hide his contempt for the representatives of the nations from the developing sector. Keynes said of the countries that were invited to this conference: “Twenty-one countries have been invited which clearly have nothing to contribute and will merely encumber the ground…” He went on to name them, the vast majority from the developing sector, and called them: “The most monstrous monkey house assembled for years.”
Keynes was not just any representative. He was the advisor to the British chancellor of the exchequer, but more importantly, he was their most famous and influential economist, who believed and supported the racist imperialist policies of the British Empire. That is who White was battling the entire time. Keynes representing the British Empire opposed the conference and opposed the policies of White and Roosevelt for a new post war financial system.
At the heart of the British opposition to Bretton Woods was the fact that the dollar was now going to be the world reserve currency and all other currencies would be fixed to the dollar and kept within a narrow band to prevent speculation. The British now realized that their sterling based system was history. They also opposed the idea of nations determining their own economic development outside of the British imperialist system. Keynes and the Brits did not support the idea of extending large amounts of credit for internal improvements and for industrial development, especially for developing sector nations.
The purpose of the International Monetary Fund having a fixed rate exchange system was to facilitate stability in currencies for long term trade and development. The Reconstruction Bank was formed to lend capital for internal improvements in development in countries around the world and tariffs to protect developing industries. John Maynard Keynes opposed these ideas and instead proposed a Clearing Union. His Clearing Union would be a global central bank for central banks, not under the control of governments therefore usurping the sovereignty of nations. And in Keynes’ plan the dollar would not be the reserve currency, but a new global currency called the Bancor would be created. White defeated Keynes’ proposal for a new global bank and currency.
At the heart of Roosevelt’s proposals for the Reconstruction Bank was his understanding, along with many of his advisors, that private financial investment was insufficient for the countries of Asia, Africa ,Polynesia, and South America to develop their own industrial capability. That these underdeveloped nations needed billions and billions of dollars in investments. Roosevelt and his advisors understood that increasing the standard of living of people living in undeveloped nations would actually benefit the entire world. It would lead to an increase in trade among nations. A constantly rising standard of living would stimulate an increase in exports and imports throughout the global economy. Roosevelt understood that an infusion of credit was necessary for these nations and supported the concept of state-led development. FDR knew this from his experience in the New Deal, which had pulled the United States out of the Great Depression. After all Roosevelt had applied Hamiltonian’s policy to provide credit for the US economy beginning in 1933. He rebuilt the US economy through credit and creating public-private authorities like the Tennessee Valley Authority that physically transformed the US economy.
Keynes, and the British colonial empire wanted to the keep these countries economically backward, to make them permanent agrarian economies, and opposed their industrial development. Sadly, this condition of African nations being largely agrarian based and not industrialized still exists today. It reflects the hegemony of the British financial system after the death of Franklin Roosevelt under the leadership of the new president, Harry Truman.
The British system, the British imperialists wanted the post WWII order to be controlled by the City of London dominated financial system. They did not want to see nations, especially in the developing sector, having sovereign independent development strategies supported by the Bretton Woods system.
The Case of Ethiopia
The case of Ethiopia is instructive. As I mentioned earlier Ethiopia was one of four African nations attending the Bretton woods conference. However, it was the leading nation of sub-Saharan Africa and therefore represented the aspirations of all Africans and African Americans around the world. Ethiopia officially supported the Bretton Woods system. Unlike today, under Franklin Roosevelt, the US politically and economically supported the independence of Ethiopia, before during, and after the Bretton Woods conference. After the British helped kick out Mussolini in 1941, Ethiopia wanted to assert its economic independence, but the British try to prevent that from happening. Ethiopians wanted to have their own central bank with their own currency and control over their own credit. The British had other ideas and tried to prevent that. The British tried to force Ethiopia to adopt a British pound as their currency that would be controlled by a London currency board. Ethiopia wanted to control their own currency and their own credit and no longer wanted to be treated as a colony, which in fact they never were!
In August 1942, Ethiopia re-opened the Bank of Ethiopia. The Ethiopians cited the Atlantic Charter as the justification for having their own independent financial system to promote economic development as specified in Roosevelt’s inspired document. In May 1944, Ethiopians had their new dollar currency produced secretly in the United States to the extreme consternation of the British, who were now forced to accept this new fait accompli, made possible by FDR. Officials at the US Federal Reserve called this monetary reform: “a step toward the economic emancipation of Ethiopia.”
Even though the British were forced to accept this arrangement with Ethiopia they could not hide their anger. The British accused the US of “pandering to the worst Ethiopian instincts rather than advise in accordance with the British school masterly tradition.” Ethiopians, who are trying to rebuild their country after a five year invasion by Mussolini and develop their sovereign economic development policy, were described by the British as, “nothing more than unqualified incompetent and greedy amateurs.” The Americans, who in contrast wanted to support Ethiopia, complained that British policy was “dominated by crude concepts of Empire” and “made no effort to help the country develop.”
As late as 1942, the British were still campaigning for Ethiopia to be made a protectorate, even though was an independent nation. FDR and the US defeated this British attempt to colonize Ethiopia.
Nations from the developing sector, were supportive of the Bretton Woods, in particular the idea that the new financial system was there to help them in their development and help them attain prosperity. Unfortunately, this died when Franklin Roosevelt died on April 12, 1945. Truman, the new president appointed Eugene Meyer as head of the World Bank, who was a monetarist. He resigned after six months, when Truman appointed John J McCloy, an investment lawyer, banker, and member of the Anglo American establishment. to head the bank. McCoy did not share the development goals of Franklin Roosevelt and Harry Dexter White. McCloy increasingly denied loans for the developing sector nations and using their imbalance in debts as justification.
FDR Message on Bretton Woods
On February 12th, 1945, two months before the death of Franklin Roosevelt, he delivered a message to Congress urging the adoption of the Brenton Wood agreements. Let me quote a few sentences from that important message.
“As we dedicate our total efforts to the task of winning this war, we must never lose sight of the fact that the victory is not only an end in itself but, in a large sense, victory offers us the means of achieving the goal of lasting peace and a better way of life…
“These proposals for International Fund and International Bank are concrete evidence that the economic objectives of the United States agree with those of the United Nations. They illustrate our unity of purpose and interest in the economic field. What we need and what they need correspond–expanded production, employment, exchange, and consumption–in other words, more goods produced, more jobs, more trade, and a higher standard of living for all. To the people of the United States this means real peacetime employment for those who will be returning from the war and for those at home whose wartime work had ended. It also means orders and profits to our industrial and fair prices to our farmers. We shall need prosperous markets in the world to ensure our own prosperity, and we shall need the goods the world can sell us…
(Does this not precisely foretell the win-win strategy of China’s Belt and Road?)
“The main job restoration is not one of relief. It is one of reconstruction which must largely be done by local people and their government…It is at this point that our highly developed economy can play a role important to the rest of the world and very profitable to the United States.”
Roosevelt had intended the Bretton Woods system to be a central feature of his grand design following the end of World War II. Unfortunately, much of the world, including Americans, and those in the developing sector do not know the true history of Bretton Woods and see it wrongly as the imperialist institution it is today; not what it was intended to be.
It should be obvious to my African friends, that this method, of a war type mobilization to raise the standard of living of African nations, applying Hamiltonian credit is more than feasible for the continent. It has already been done successfully by President Roosevelt. With the creation of an African Infrastructure Development Bank-a credit bank, we can accomplish the elimination of hunger and poverty on the African continent today. Hopefully, this lecture will aid in the rediscovery of the Bretton Woods, and President Franklin Roosevelt’s strategic understanding of credit and economic development.
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