The Rise of the American System - Liberal Leviathan: The Origins, Crisis, and Transformation of the American World Order - page 134

though creditor countries were not as obligated as Keynes had sought for coming to the as-
sistance of debtor states, monetary arrangements were establish to bias the system in favor
of expansionary forms of adjustment. The agreement between British and American monet-
ary planners was particularly important because it served to transcend the stalemate over the
postwar trade system. The Bretton Woods proposals represented a middle way that generated
support from both the conservative free traders and the new advocates of economic planning.
The international economy would be open, but it would also be managed—and governments
would be given tools to support domestic full employment. 66 These compromises that were
reached at Bretton Woods in 1944 attracted political support on both sides of the Atlantic
and, in the process, reshaped the logic of an open liberal system.
But even with the Bretton Woods agreements, the weakness of the British economy—and
the failing continental European economies—drove the United States into further actions. In
the fall of 1945, Keynes returned to Washington seeking a loan to address Britain's increas-
ingly precarious financial position. Britain's declining gold and dollar balances were under-
mining the ability of its new Labor government to make good on ambitious economic and
social welfare programs. As in the past, American officials tied financial assistance to Brit-
ish movement to trade liberalization and monetary convertibility. The loan was agreed to in
return for British willingness to remove currency controls and restrictions on trade. This is
the argument that the Truman administration made to Congress in its effort to build domest-
ic support for passage of the loan agreement. British movement toward an open multilateral
system depended on American assistance. Treasury Secretary Fred Vinson argued to Con-
gress that without the loan, the British would move back to barter trade and currency blocs,
dividing the world yet again—and “rival blocs would mean economic warfare.” 67 Yet Con-
gress remained skeptical.
By early 1946, the Truman administration began to add a national security argument to its
congressional appeal. In February, Stalin gave his famous “two camps” speech, depicting the
struggle between the capitalist West and the socialist world. The next month, Churchill gave
his “iron curtain” speech in Fulton, Missouri. 68 Suddenly, the vision of a one-world open
system was giving way to one where ideological and geopolitical clashes would continue to
divide the world. In these new circumstances, economic support for Britain was necessary to
strengthen Western unity in the face of an emerging Soviet threat. As Joseph Jones, a State
Department official, argued to a senator in the spring of 1946: “If these areas are allowed to
spiral downwards into economic anarchy, then at best they will drop out of the United States
orbit and try an independent nationalist policy; at worst they will swing into the Russian or-
bit.” 69
The loan passed Congress, but the economic circumstances that prompted it continued to
worsen. The British government made sterling convertible in July 1947 only to see a massive
run on the currency as traders turned pounds into dollars. The loan failed and the govern-