The main purpose of this thesis is to explore why Franklin D. Roosevelt (FDR) decided to convince the United Kingdom (UK) during 1941-1944 to accept the creation of the World Bank (IBRD) and the International Monetary Fund (IMF) to tackle the postwar economic and financial crises, chose the Department of Treasury (DoT) rather than the Department of State (DoS) in arranging the Bretton Woods Conference in 1944, and placed his personal trust in Treasury Secretary Henry Morgenthau, Jr. rather than State Secretary Cordell Hull to take full responsibility in the creation of the two financial and monetary institutions.
FDR envisioned that the U.S. should lead its allies to establish a Stabilization Fund and a Bank for Reconstruction and Development so that the United States could manage the postwar economic and financial crises. In both international financial agencies, it was proposed that American dollar would be the postwar new-reserved currency until the world’s gold supply was re-allocated through international trade. Although they were close allies during the war, the American and British Governments disagreed on a variety of issues.
From the perspective of Rational Actor Model (RAM), Washington insisted that the postwar world must create two international agencies to tackle its postwar economic and financial problems, whereas London believed that the International Clearing Union (ICU) would be sufficient to manage the postwar financial and reconstruction crises. In the eyes of the U.S., Lord John Maynard Keynes’ proposal simply provided the proposed ICU with a method of creating money that could be used in settling these balances, British balances in particular. The U.S. thus believed that such an arrangement would only be favorable to the U.K. In other words, the creation of bancor, which is a supranational currency, might be in the interest of the UK, it was not in the interest of the U.S.
From the perspective of Organizational Behavior Model (OBM), President Roosevelt placed more trust in DoT than DoS on the postwar monetary and investment policies in part because the DoT was an organization in charge of routine economic and financial affairs. The DoT gained the upper hand over the DoS because the former had more economic and financial experts and more professional expertise and practical experience in tackling monetary and financial affairs than did the latter. The tension between the DoS and the DoT was reflected in their sharp intelligence warfare in particular. More importantly, in keen competition with the DoT, the DoS lost most of its battlegrounds in the economic and financial policies largely because the organizational culture of State Department was not finance-oriented.
From the perspective of Governmental Politics Model (GPM), Treasury Secretary Morgenthau was the closest friend of President Roosevelt, whereas Secretary Hull was only the President’s friend chosen to be the Secretary of State. Morgenthau was a man FDR could not afford to ignore largely because he had his assistant Harry Dexter White to design an economic and financial blueprint in the postwar years. Moreover, Secretary Morgenthau had better access to FDR than did Secretary Hull. Furthermore, Secretary Hull, in most cases, was nothing but a messenger between Secretary Morgenthau and U.S. ambassadors in foreign countries.
The main theme of this thesis is that the U.S successfully convinced the UK to accept the creation of the IBRD (World Bank) and the IMF to manage the postwar reconstruction and financial affairs; the Department of Treasury was more influential than the Department of State as a result of its organizational culture, financial experts and expertise in the economic and financial arenas; Treasury Secretary Morgenthau enjoyed better access to and more influence on FDR than did State Secretary Hull.