Independent New Hampshire Journalism · Northfield, NH

Forty-Four Nations Wrote the Postwar Money Rules at a New Hampshire Hotel in 1944. The United States Took 31 Percent of the Fund’s Quotas, and the Third-Largest Holder Declined to Sign.

The State Department’s published record of the Bretton Woods conference lists every quota set in July 1944. Five countries held 71 percent of the money. A voting formula gave small members a larger voice than their dollars alone would have, and the Soviet Union, holder of the third-largest quota, turned the agreements down about 17 months later.

On the afternoon of July 1, 1944, delegates from 44 nations sat down in the auditorium of a resort hotel at Bretton Woods, in the White Mountains town of Carroll, to write the rules for money after the Second World War. Three weeks later, on July 22, they signed a Final Act that carried the charters of two new institutions: the International Monetary Fund and the International Bank for Reconstruction and Development, the body better known as the World Bank.

The war was still being fought. The State Department published the conference’s minutes, reports and draft texts in 1948, in two volumes; the first alone runs past 1,100 pages. Those pages show something the familiar summary leaves out: exactly how the money and the votes were divided, who argued over the division, and how one of the largest shares went unclaimed.

Why a hotel in Carroll

The conference met at the Mount Washington Hotel. A National Park Service landmark nomination prepared in 1985 says the hotel was built in 1900 to 1902 for Joseph Stickney, a coal and railroad millionaire, to a design by the architect Charles Alling Gifford, and opened to the public on Aug. 1, 1902. Citing the Littleton Courier of June 1, 1944, the nomination says the hotel had not operated during the summer of 1943, had been sold shortly before to a group of Boston investors for $1.5 million, and was given “a complete face-lifting for the event.”

The same nomination quotes a 1984 recollection by Hobart Rowan, an economics writer for the Washington Post, that the village was “ill-prepared in 1944 for the invasion by 730 delegates from many countries.” Rowan’s piece quoted Edward M. Bernstein, a Treasury economist listed in the conference record as executive secretary of the United States delegation, on how the site was picked. Beyond the need for a large hotel in a cool spot in summer, Bernstein said, Treasury Secretary Henry Morgenthau Jr., who was Jewish, had had trouble getting into some fashionable places and was determined not to meet anywhere that drew a line between Jews and non-Jews. Those are recollections set down 40 years after the fact; the 1948 conference record itself does not explain the choice of site.

New Hampshire’s seat at the table

The United States delegation had 12 members, led by Morgenthau. One was Charles W. Tobey, a United States senator from New Hampshire and a member of the Senate Committee on Banking and Currency. At the second plenary session, on the morning of July 3, the delegate of Peru offered a resolution marking American Independence Day, and Morgenthau called on Tobey to answer for the United States.

Tobey told the delegates that it was “our common aspiration, I believe, that, assembled here among these eternal hills, we shall, under a deep conviction of the needs of humanity, discard trivia and refuse to be turned away from our great purpose …” He closed: “Gentlemen, we must not, we cannot, we dare not fail. The hopes and aspirations of the common people of each of our countries rest in us.” The minutes record that the motion was adopted by acclamation.

How the money was divided

The Fund’s charter gave every member a quota, an amount in dollars that fixed the member’s subscription to the Fund and its voting power and capped how much it could draw. For the countries at the conference, the quotas were written into a list called Schedule A. The draft charters carried the line “Schedule A to be added later” for most of the conference, because the numbers were the hardest part.

A quota committee, with the United States in the chair, sent its list to the full commission on July 15. The report says the recommendation was unanimous “with the exception of reservations by China, Egypt, the French Delegation, India and New Zealand.” It also records one trade: “The Mexican Delegation agreed to relinquish $10 million of its quota in favor of $5 million each for Colombia and Chile.”

The final list added up to $8.8 billion. The United States held $2.75 billion of it, 31.25 percent. The United Kingdom came second at $1.3 billion and the Soviet Union third at $1.2 billion. Together with China and France, the five largest quotas came to $6.25 billion, or 71 percent of the total. The smallest, for Liberia and Panama, were $500,000 each.

Votes did not follow the dollars exactly

The charter did not hand out votes strictly by quota. Article XII gave each member “two hundred fifty votes plus one additional vote for each part of its quota equivalent to one hundred thousand United States dollars …” Those 250 basic votes were the same for every member, which lifted the small countries’ share.

Applied to the 44 quotas in Schedule A, the formula yields 99,000 votes if every one of those countries joined. The United States would have held 27,750 of them, 28.0 percent, a little less than its 31.25 percent share of the money. Panama and Liberia, with $500,000 quotas, would each have had 255 votes, about a quarter of 1 percent of the total, roughly 45 times their share of the quotas. The 16 countries with quotas of $10 million or less held 0.8 percent of the money and would have cast 4.7 percent of the votes.

The 45th country

Schedule A lists 45 countries, one more than signed the Final Act. The extra one is Denmark. The conference’s credentials committee reported that Secretary of State Cordell Hull had invited Henrik de Kauffmann, Denmark’s minister in Washington, to attend the opening plenary “in his personal capacity,” and that Kauffmann had accepted. Denmark’s line in the schedule carries an asterisk instead of a number: its quota “shall be determined by the Fund after the Danish Government has declared its readiness to sign this Agreement but before signature takes place.”

A last-minute pledge

The Bank’s charter had its own Schedule A, with members’ subscriptions to its capital totaling $9.1 billion. The United States subscribed $3.175 billion. The Soviet Union’s line reads $1.2 billion, but that figure was settled in the final hours.

The closing plenary session opened at 9:45 p.m. on July 22. Morgenthau’s first words after calling it to order, as the verbatim minutes record them: “I have just received word that the Soviet Union has decided to increase its subscription to the International Bank for Reconstruction and Development from $900,000,000 originally agreed upon to the amount of $1,200,000,000.” He called the announcement “fraught with more significance and more hopeful meaning for the future of the world than any which those of us here have heard so far.”

From signatures to a deadline

The conference’s secretary general advised the conference in a written notice that signing the Final Act “would be a simple certification by those signing of the accuracy of the record presented.” Each government still had to accept the charters. In the United States, Congress passed the Bretton Woods Agreements Act, approved July 31, 1945, which authorized the president to accept membership in the Fund and the Bank.

The charters took effect only when governments holding 65 percent of the Schedule A totals had signed. The State Department worked out the thresholds in a December 1945 press release: $5.72 billion of the Fund’s quotas and $5.915 billion of the Bank’s subscriptions. Its circular to embassies said it was “a matter of great importance” that countries intending to be original members complete the steps before Dec. 31, 1945.

On Dec. 27, 1945, in a signing ceremony in Washington, representatives of 29 countries signed the Fund agreement, and the agreements entered into force. All but Colombia also signed for the Bank. By Granite State Report’s count from Schedule A, the 29 Fund signers held $7.08 billion in quotas, 80.4 percent of the total, well past the 65 percent mark. Fifteen of the 44 conference countries were not on the Dec. 27 list, among them Australia, Mexico, New Zealand and the Soviet Union.

Four days later, on Dec. 31, George F. Kennan, the American chargé in Moscow, cabled Washington that he had just received a letter from Vyacheslav Molotov, the Soviet People’s Commissar for Foreign Affairs, and quoted from it. The Soviet government, Molotov stated, “does not find it possible at present time to sign the draft agreement drawn up at Bretton Woods …” It found it necessary to study the questions further “in the light of those new conditions of the economic development of the world which are forming themselves in the postwar period.”

A State Department bulletin in January 1946 described the department’s reaction: “While we are concerned at Soviet failure to ratify, because of the possible implications as to Russia’s interest in international economic collaboration, we feel that no pressure should be exerted to get them to join.” The bulletin added that Soviet actions at Bretton Woods, “including dramatic last-minute acceptance of the increased Bank quota,” were hard to explain unless the Soviets had then intended to join.

With the Soviet Union outside, its $1.2 billion quota, 13.6 percent of the planned total, was not among the quotas of the Fund’s original members. In January 1946, the United States told other governments it would propose letting the Schedule A countries that had missed the deadline join for a limited time on the same terms, and invited them to send observers to the first meeting of the two boards of governors, set for March 8, 1946, at Wilmington Island, near Savannah, Georgia.

What came of it

The State Department’s Office of the Historian summarizes the result: the Fund was charged with overseeing “a system of fixed exchange rates centered on the U.S. dollar and gold,” and the system “endured for the better part of three decades,” until the exchange crises of August 1971, when President Richard M. Nixon suspended the dollar’s convertibility into gold, and of February and March 1973, after which floating rates became the norm for the major industrial democracies.

The hotel was still operating when the 1985 landmark nomination was written. It notes that several smaller meeting rooms used during the conference remained on the lobby floor, and that the hotel held a “Bretton Woods Revisited” celebration on the conference’s 40th anniversary in 1984.

What the record shows, and what it does not

The quotas in this article are the amounts written into the charter in 1944, in 1944 dollars. They are not the Fund’s later quotas, which this article does not cover. The vote totals are what the 1944 formula produces on paper for all 44 countries; the real totals at any date depended on who had joined. The account of how the hotel was chosen comes from recollections quoted in a 1985 federal nomination form, not from the 1944 record.

Check it yourself

Both volumes of the State Department’s Proceedings and Documents of the United Nations Monetary and Financial Conference are free to read and download from the Federal Reserve Bank of St. Louis’s FRASER library. The Fund’s Schedule A appears in the Final Act on page 976 of Volume I, and in the same form in the Commission I report on page 907. Tobey’s July 3 remarks appear near page 109, and the closing plenary’s minutes near page 1107. The December 1945 telegrams are published in the State Department’s Foreign Relations of the United States series.

— Granite State Report

Fact check

Editor’s note. Conference dates, delegate lists, quotas, subscriptions, the voting formula and quoted remarks are drawn from the State Department’s 1948 Proceedings and Documents of the United Nations Monetary and Financial Conference. Events of 1945 and 1946 are drawn from Foreign Relations of the United States, 1946, Vol. I, and the Bretton Woods Agreements Act. Details of the hotel come from the National Park Service’s 1985 landmark nomination. Percentages, vote counts and group totals the sources did not state are Granite State Report arithmetic.

Corrections: Granite State Report corrects verified errors promptly and appends a dated note identifying what changed and when. The corrections policy and the corrections register are public, and correction notes are never removed.