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Wed, Jul 23 2014. 01 18 AM IST
The Indian delegation to Bretton Woods in 1944. It was led
by two British officialsJeremy Raisman and Theodore
Gregory. The Indians in the team were C.D. Deshmukh,
Shanmukham Chetty, A.D. Shroff and B.K. Madan. Photo:
worldbankimflib.org
A page from history: 70 years before the Brics bank
Delegates from 44 countries met at Bretton Woods to build a new global monetary system that is now being challenged by the Brics
nations
Mumbai: Almost exactly 70 years before Narendra Modi became
one of the signatories to an agreement between five developing
countries to establish a development bank as well as a formal
arrangement to provide liquidity support to members facing balance
of payments difficulties, delegates from 44 countries met at a hotel in
the town of Bretton Woods near the US east coast to build a new
global monetary system that is now being challenged by Brazil,
Russia, India, China and South Africa (Brics). There was a small
Indian delegation at the conference; it made up for its lack of
numbers with intellectual heft.
The reasons for the choice of the venue were interesting. Bretton
Woods was attractive because of its salubrious climate at a time
when air conditioning was not a common offering. The conference
was held at the Mount Washington Hotel because it was open to
Jews. The delegates met over three weeks in July 1944 to ensure
that a repeat of the financial calamities that had scarred the world in
previous decades would be avoided in the future with sensible
international coordination done through new global institutions.
The Indian delegation to Bretton Woods was led by two British
officialsJeremy Raisman and Theodore Gregory. The Indians
in the team were C.D. Deshmukh, Shanmukham Chetty, A.D. Shroff and B.K. Madan. Deshmukh later became finance minister. So
did Chetty. Shroff was a director of Tata Sons. Madan became an executive director of the International Monetary Fund (IMF). David Meek
was an advisor to the Indian delegation.
In his fine history of Indian finance, Barons of Banking, Bakhtiyar K. Dadabhoy says that the Indian delegation to Bretton Woods had four
main concerns: to convince the conference participants that IMF should also be sensitive to economic development issues, a fair
settlement of the problem of sterling balances that had built up during World War II, securing a satisfactory quota for India and bagging a
permanent seat on the executive board of the institutions that emerged from the Bretton Woods negotiations. The last two items are still
contentious issues for those who quite rightly argue that developing countries need higher quotas as well as a greater say in the
governance of major global institutions, or the so-called quota and voice reforms. Deshmukh also worked very closely with John Maynard
Keynes on the commission that designed the World Bank; it is said Keynes was deeply impressed by the abilities of his Indian colleague.
The transcripts of the Bretton Woods negotiations have recently been released in a book edited by Kurt Schuler and Andrew
Rosenberg. The main debates were between the Americans headed by Harry Dexter White and the British led by Keynes. Much has
been written about how the global power that came to dominate the post-war world got its way against the older power that was soon to be
cut down to size by decolonization. But the transcripts also show how the Indians punched way above their weight. So did delegates from
Belgium, Cuba, Czechoslovakia, Greece and Norway, according to the editors of the transcripts.
One issue should interest all those who currently worry that the New Development Bank that will be set up by the Brics nations will be a tool
of Chinese hegemony.
The Indian delegation at Bretton Woods protested when the original quotas suggested by the Americans gave $300 million to India and
$600 million to China. The main worry was not the absolute numbers but the relative lack of importance given to India compared to China.
France was another country that felt slighted.
Dadabhoy notes: It was here that Keynes played a decisive supporting role having sensed that India was as much concerned with equality
or near equality with China than with the absolute amount. Keynes convinced White that some rebalancing was necessary. India eventually
got a quota of $400 million while China was given $550 million.
The Bretton Woods transcripts suggest that new institutions emerge from a combination of high idealism, intellectual clarity and hard
bargaining. What the Indian delegation did in 1944 is now a forgotten episode in our history. But their commitment to protect national
interest even as they were ready to play a positive role in the creation of new international institutions is exemplary. The United States and
the United Kingdom had the greatest influence at the conference...but Bretton Woods was a genuinely multilateral negotiation. The other
7/23/2014 A page from history: 70 years before the Brics bank - Print View - Livemint
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large and medium-size countries also shaped the conference, say Schuler and Rosenberg in their introduction to the transcripts.
Many commentators believe that the two new institutions being set up by the Brics nations will eventually threaten the Bretton Woods
system that has not created more space for countries such as India and China despite their economic resurgence. There is also talk about
how this could be the first step towards dislodging the dollar as the global reserve currency.
Most of this seems far-fetched. But it is definitely ironical that this potential challenge to Bretton Woods comes almost exactly seven
decades after 730 delegates from across the world met in a hotel to redesign the global monetary architecture.