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Central bankers as good neighbours: US money doctors in Latin America during the 1940s

Published online by Cambridge University Press:  18 March 2009

Eric Helleiner
Eric Helleiner
Affiliation:
University of Waterloo, Ontarioehellein@uwaterloo.ca
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Abstract

This article analyses a set of financial advisory missions led primarily by Robert Triffin of the US Federal Reserve Board to Latin American countries during the 1940s. These missions developed a new approach to international ‘money doctoring’ that rejected both the content and style of the better-known US financial advisory missions led by Edwin Kemmerer during the 1920s. The missions were driven by a number of motivations that emerged from the politics of the New Deal and the Good Neighbour policy. The episode highlights the diversity of international money doctoring experiences, the importance of the financial dimensions of the Good Neighbour policy, and the wider geographical impact of a new kind of financial internationalism that emerged in US foreign policy in the wake of the 1930s.

Résumés

Cet article analyse une série de missions conseillères financières menées essentiellement par Robert Triffin, du Conseil de la réserve fédérale américaine, dans les pays latino-américains dans les années 1940. Ces missions ont développé une nouvelle approche aux docteurs monétaires internationaux, approche qui rejette à la fois le contenu et le style des missions conseillères financières américaines mieux connues menées par Edwin Kemmerer dans les années 1920. Les missions ont été inspirées par un nombre de motivations ayant émergé des politiques du New Deal et de bon voisinage. L'épisode souligne la diversité des expériences de docteurs monétaires internationaux, l'importance des dimensions financières de la politique de bon voisinage et l'impact géographique plus étendu d'une internationalisation financière qui a émergé dans la politique étrangère des Etas-Unis dans le sillage des années 1930.

Abstrakte

Dieser Artikel analysiert eine Reihe von Finanzberatungsmissionen, die hauptsächlich unter der Leitung von Robert Triffin vom US Federal Reserve Board in den 1940-er Jahren in lateinamerikanische Länder unternommen wurden. Diese Missionen bewirkten die Entwicklung einer neuen Herangehensweise an das internationale ‘Money Doctoring’, die sowohl Inhalt als auch Stil der besser bekannten US-amerikanischen Finanzberatungsmissionen ablehnte, die in den 1920-er Jahren von Edwin Kemmerer geleitet worden waren. Den Missionen lagen eine Reihe von Motivationen zugrunde, die der Politik des New Deal und der Good Neighbour Policy entsprangen. Diese Episode unterstreicht die unterschiedlichen Erfahrungen mit dem internationalen Money Doctoring, die Bedeutung, die den finanziellen Dimensionen der Good Neighbour Policy zukommt, sowie den breiteren geografischen Einfluss einer neuen Art des finanziellen Internationalismus, der die US-Außenpolitik nach den Erfahrungen der 1930-er Jahre kennzeichnete.

Resúmenes

Este artículo analiza una serie de misiones financieras consultivas dirigidas principalmente por Robert Triffin de la Junta de la Reserva Federal de los E.E.U.U hacia países latinoamericanos durante los años 40. Estas misiones desarrollaron un nuevo acercamiento a la manipulación monetaria en otros países que rechazaba tanto el contenido como el estilo de las mejor conocidas misiones financieras consultivas dirigidas por Edwin Kemmerer durante los años 20. Las misiones estaban motivadas por una serie de razones que surgieron de la política del New Deal y de la política del Buen Vecino. El episodio subraya la diversidad de las experiencias de manipulación monetaria en otros países, la importancia de las dimensiones financieras de la política del Buen Vecino y el mayor impacto geográfico de un nuevo tipo de internacionalismo financiero que surgió en la política exterior estadounidense al principio de los años 30.

Type
Articles
Information
Financial History Review , Volume 16 , Issue 1 , April 2009 , pp. 5 - 25
Copyright
Copyright © European Association for Banking and Financial History e.V. 2009

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References

2 For the more interventionist ideology underpinning the Bretton Woods order, see especially Ruggie, John, ‘International regimes, transactions and change’, International Organization, 32 (1982), pp. 379–405CrossRefGoogle Scholar.

3 See especially Gardner, Lloyd, Economic Aspects of New Deal Diplomacy (Madison, WI, 1964)Google Scholar; Gellman, Irwin, Good Neighbor Diplomacy: United States Policies in Latin America 1933–1945 (Baltimore, MD, 1979)Google Scholar; Gellman, Irwin, Secret Affairs: Franklin Roosevelt, Cordell Hull, and Sumner Welles (Baltimore, MD, 1995)Google Scholar; Gilderhus, Mark, The Second Century: U.S.–Latin American Relations Since 1889 (Wilmington, DE, 2000)Google Scholar; Green, David, The Containment of Latin America: A History of the Myths and Realities of the Good Neighbor Policy (Chicago, 1971)Google Scholar; Grow, Michael, The Good Neighbor Policy and Authoritarianism in Paraguay: United States Economic Expansion and Great-Power Rivalry in Latin America During World War II (Lawrence, KS, 1981)Google Scholar; Guerrant, Edward, Roosevelt's Good Neighbor Policy (Albuquerque, 1950)Google Scholar; Pike, Frederick, FDR's Good Neighbor Policy (Austin, TX, 1995)Google Scholar.

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10 The Federal Reserve Board was also formally renamed the Board of Governors of the Federal Reserve System, but the phrase ‘Federal Reserve Board’ continued to be used. I use the two terms interchangeably in this article. For this history, see for example Woolley, John, Monetary Politics: The Federal Reserve and the Politics of Monetary Policy (Cambridge, 1984)CrossRefGoogle Scholar.

11 Gardner to Eccles, 29 May 1939, pp. 3–4, US National Archives, Records of the Federal Reserve System (henceforth RG82), Board of Governors International Subject Files (henceforth ISF), box 236, file: ‘Foreign Missions, General (1922 – Feb. 1945)’.

12 Mr Taylor to Secretary Morgenthau, 21 Nov. 1938, p. 2 in US National Archives, Records of the Treasury Department (henceforth RG56), 450/81/20/07, box 28, file: ‘Latin America Monetary Research Study – 1939’.

13 Gardner to Eccles, 29 May 1939.

14 Nathaniel Weyl to Gardner, 30 June 1941, in RG82, ISF, box 157, file: ‘Latin America General (1930–1942)’.

15 Gardner to Goldenweiser, 12 Sept. 1941, p. 1 in RG82, Board of Governors Central Subject Files (CSF), 501.2-15 box 2270.

16 Ibid.

17 Carpenter to Goldenweiser, 17 Sept. 1941 RG82, CSF, 501.2-15 box 2270.

18 Gardner and Vest to Board of Governors, 16 Oct. 1941, RG82, CSF, 501.2-15; Gardner to Goldenweiser, 2 Nov. 1941, RG82, CSF, 501.2-15 box 2271.

19 Gardner to Goldenweiser, 2 Nov. 1941, p. 3.

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22 For example ‘Excerpt from the Minutes of the Meeting of the Board held on Feb. 6, 1942’, RG82, CSF, 501.2-15 box 2271; Blum, John Morton, The Morgenthau Diaries: Years of War 1941–1945 (Boston, MA, 1967), p. 232Google Scholar; ‘Comments by American Technical Mission to Cuba on memorandum submitted by Mr W. R. Burgess of the National City Bank of New York’, RG82, CSF, 501.2-15 box 2272.

23 His PhD thesis was a theoretical work and was published as Monopolistic Competition and General Equilibrium Theory (Cambridge, 1940).

24 Gardner to Goldenweiser, 24 July 1943, RG82, ISF, box 148, file: ‘Latin America 1923–1954, Banking, General’.

25 Grow, Good Neighbor, 53.

26 US Government, Foreign Relations of the United States: Diplomatic Papers 1939, vol. 5: The American Republics (Washington, DC, 1957), p. 764Google Scholar.

27 Eric Lamb, ‘Memorandum for Mr Duggan’, 9 Sept.1941, US National Archives, Records of the Department of State (henceforth RG59), 834.516/104; Laurence Duggan to Mr Compton, 12 Sept. 1941, RG59 834.516/104.

28 Eliot Hansen to James Drum, 23 Sept. 1942, US National Archives, Records of the Dept of Economic Development, Office of Inter-American Affairs (henceforth RG229), box 589, ‘Paraguayan Bankers Study Mission’; Gardner to Goldenweiser, 19 Dec. 1942, RG82, ISF, box 231, file: ‘Foreign Missions, Paraguay (1942 – Oct. 1943)’.

29 Triffin, ‘Suggested Outline of Study for Dr. Gonzales’, 12 Dec 1942, p. 2, RG82, ISF, box 259, file: ‘International Training Program, Paraguay (1942–44)’. See also Triffin to Gardner, 3 Dec. 1942, RG82, ISF, box 259, file: ‘International Training Program, Paraguay (1942–44)’.

30 Gardner to Goldenweiser, 19 Dec. 1942, RG82, ISF, box 231, file: ‘Foreign Missions, Paraguay (1942 – Oct. 1943)’, p.1.

31 deBeers to Harry Dexter White, ‘United States economic advice to Latin America’, 22 Jan. 1943, RG56, 450/81/20/07, box 28, file: ‘General vol. 1’.

32 Robert Triffin, ‘Address to the Pan American Society on recent monetary and exchange developments in Latin America’, 11 April 1945, pp. 2–3, RG82, ISF, box 156, file: ‘Latin America, General (1943 – May 1946)’.

33 Robert Triffin to Board of Governors, ‘Second Mission to Paraguay’, p. 7, 10 Jan 1945, file: ‘Paraguay, Monetary and Banking Reform’, RG82, ISF, box 162, file: Paraguay, General (1940–54).

34 Ibid., p. 6.

35 Ibid., pp. 4–5.

36 Triffin, Robert, Monetary and Banking Reform in Paraguay (Washington, DC, 1946), 25Google Scholar; US Federal Reserve, ‘Monetary developments in Latin America’, Federal Reserve Bulletin, 31.6 ( June 1945), p. 528Google Scholar.

37 Woodlief Thomas to Board of Governors, 16 Jan. 1946, p. 1, RG82, ISF, box 162, file: ‘Paraguay, Monetary and Banking Reform’.

38 These are Gardner's words describing the views of a Dominican government representative in: Gardner to Szymczak, 12 May 1945, p.1, RG82, ISF, box 221, file: ‘Foreign Missions, Dominican Republic (1945)’.

39 Triffin, ‘The New York Federal Reserve Bank and the Latin America Work’, no date [but January 1944], pp. 1–2, RG82, ISF, box 229, file: ‘Foreign Missions, Latin Missions (1934–1954)’. See also Triffin to Arthur Schlesinger, 13 May 1946, p. 6, RG82, ISF, box 156, file: ‘Latin America, general (1943 – May 1946)’.

40 Drake, Money Doctor, p. 25.

41 Triffin to Manuel Noriega M, p. 3, 14 April 1945, in RG82, ISF, box 138, file: ‘Guatemala, Monetary and Banking Reform (1945 – June 15, 1946)’.

42 Triffin to Prebisch, 25 Sept. 1945, RG82, ISF, box 138, file: ‘Guatemala, Monetary and Banking Reform (1945 – June 15, 1946)’.

43 Wallich to Sproul, 22 Oct. 1947, RG82, ISF, box 221, file: ‘Foreign Missions, Dominican Republic (1946–1954)’.

44 Triffin to Alfonso Rochac, 7 Jan. 1946, p. 1, RG82, ISF, box 221, file: ‘Foreign Missions, Dominican Republic (1946–1954)’.

45 Robert Triffin, ‘Address’, pp. 2, 14.

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47 Prebisch quoted in Dosman, ‘Markets and the state’, p. 90.

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49 For example Triffin, Robert, ‘National central banking and the international economy’, in his The World Money Maze (New Haven, CT, [1947] 1966), p. 141Google Scholar fn2.

50 Gardner to Federal Reserve Board, 18 Aug.1944, p. 1, RG82, ISF, box 230, file: ‘Foreign Missions, Paraguay (Aug – Dec 1944)’. See also Goldenweiser to Roger Evans, Feb 23, 1945, RG82, ISF, box 156, file: ‘Latin America, General (1943 – May 1946)’.

51 Prebisch to Triffin, 17 June 1945, p. 2, RG82, ISF, box 162, file: ‘Paraguay, Monetary and Banking Reform’.

52 Triffin and Hammond to Board of Governors, 11 Jan. 1945, p. 3, RG82, ISF, box 22, file: ‘Banking Central Bank Conference Mexico City 1946 (1944 – April 1946)’. See also Hammond, ‘Exchange of Personnel for Foreign Study’, 7 Aug. 1946, RG82, CSF 001.411.

53 Gardner to Eccles, 29 May 1939, RG82, ISF, box 236, file: ‘Foreign Missions, General (1922 – Feb 1945)’. See also Gardner, ‘Latin American Field’, 25 May 1943, RG82, ISF, box 231, file: ‘Foreign Missions, Paraguay (1942 – Oct. 1943)’; Gardner to Goldenweiser, 24 July 1943, p. 3, RG82, ISF, box 148, file: ‘Latin America 1923–1954, Banking, General’.

54 For the State Department's recognition of the importance of Triffin's work, see also Hammond to Triffin, 20 June 1944, RG82, ISF, box 231, file: ‘Foreign Missions, Paraguay (June – July 1944)’. See also Hammond to Governor, 18 Oct. 1943, p. 3.

55 Triffin to Board, ‘Questions on which Board decisions or guidance are needed’, 11 Jan. 1945, RG82, ISF, box 230, file: ‘Foreign Missions, Paraguay (1945–1954)’.

56 Braden quoted in Grow, Good Neighbor, p. 91. See also Green, Containment, p. 262, ch. 7; Gellman, Good Neighbor, pp. 207–11; Pike, FDR, p. 297.

57 See for example Gardner to Eccles, 29 May 1939, RG82, ISF, box 236, file: ‘Foreign Missions, General (1922 – Feb. 1945)’.

58 Triffin to Arthur Schlesinger, 13 May 1946, p. 2. Triffin, ‘Notes on an investment program for Latin America’, 25 Sept. 1942, RG82, ISF, box 152, file: ‘Latin America, Finance (1936–1954)’.

59 David Grove to Board of Governors, 11 Jan. 1945, p. 4, RG82, ISF, box 230, file: ‘Foreign Missions, Paraguay (1945–1954)’. The US ambassador to Paraguay noted that Triffin's 1943 monetary reform made the import of US products much easier because the cost of remittances fell dramatically; Lesley Frost to State Dept, 12 Nov. 1943, RG82, ISF, box 162, file: ‘Paraguay, General (1940–1954)’.

60 For example ‘Interview Havana August 27, 1942’, with Findlay, Burns and Lopez, RG82, CSF, 501.2-15 box 2272.

61 See especially Triffin to Arthur Schlesinger, 13 May 1946. See also his political affiliations in Belgium in the late 1930s, Robert Triffin, ‘Conversation avec Catherine Ferrant et Jean Sloover’, in Ferrant, Catherine and Sloover, Jean, Robert Triffin: conseiller des princes (Brussels, 1990)Google Scholar.

62 Triffin to Board of Governors, 2 Oct. 1945, RG82, ISF, box 221, file: ‘Foreign Missions, Dominican Republic (1945)’; Triffin, ‘Conversation’, p. 28.

63 See especially Ruggie, ‘International regimes’.

64 Triffin to Board of Governors, 2 Oct. 1945, p. 6; Triffin to Board of Governors, 11 Jan. 1945, RG82, ISF, box 230, file: ‘Foreign Missions, Paraguay (1945–54)’; Triffin to Board, ‘Questions’; Triffin to Hammond, 21 July 1944, RG82, ISF, box 109, ‘Colombia Money and Banking Study’; Hammond to Governor, 18 Oct. 1943, RG82, ISF, box 231, file: ‘Foreign Missions, Paraguay (1942 – Oct.1943)’. For an early statement of this link between Latin American work and the Bretton Woods institutions, see Gardner to Szymczsk, ‘Tentative program of the Latin American group for the year 1944’, 1 Dec. 1943, p. 2, RG82, ISF, box 148, file: ‘Latin America 1923–1954, Banking, General’.

65 Hirschman, Albert, ‘How the Keynesian revolution was exported from the United States’, in his A Propensity to Self-Subversion (Cambridge, 1995)Google Scholar; Salant, Walter, ‘The spread of Keynesian doctrines and practices in the United States’, in Hall, P. (ed.), The Political Power of Economic Ideas: Keynesianism Across Nations (Princeton, NJ, 1989)Google Scholar.

66 Gardner to Eccles, ‘Relations with FRBNY’, 23 Jan. 1944, pp. 1–2, RG82, ISF, box 148, file: ‘Latin America 1923–54, banking, general’; Triffin, ‘The New York Federal Reserve Bank’.

67 Triffin, ‘The New York Federal Reserve Bank’, p. 2.

68 Gardner to Eccles, ‘Relations with FRBNY’, 23 Jan. 1944, RG82, ISF, box 148, file: ‘Latin America 1923–54, Banking, General’.

69 ‘Memorandum of Conference on Foreign Missions, May 4, 1945’, RG82, ISF, box 230, file: ‘Foreign Missions, Mimeographed Letters’.

70 Szymczak to Board, 26 Feb. 1945, pp. 1, 2, RG82, ISF, box 230, file: ‘Foreign Missions, Mimeographed Letters’. See also No author, ‘Foreign Missions of the Federal Reserve System’, 29 March 1945, RG82, ISF, box 218, file: ‘Foreign and International Problems General (1945 – Feb. 1946)’.

71 ‘Memorandum of Conference’; Federal Reserve Board, ‘Statement of Procedure and Criteria to Guide the Board's Staff in Reviewing, and Making Recommendations with respect to, requests for technical assistance in foreign areas’, undated, RG82, ISF, box 230, file: ‘Foreign Missions, Mimeographed Letters’.

72 Triffin to Szymczak, 21 Aug. 1945, RG82, ISF, box 221, file: ‘Foreign Missions, Dominican Republic (1945)’.

73 Eccles to Sproul, 25 Nov. 1945, p. 2, RG82, ISF, box 218, file: ‘Foreign and International Problems General (1945 – Feb 1946)’; Eccles to Secretary Snyder, 9 April 1948, p. 1, RG82, ISF, box 273, file: ‘Meetings and Conferences General (1944 – June 1951)’.

74 See also Sproule's concerns about Triffin's advice: Sproul to Szymcak, 13 July 1945, RG82, ISF, box 221, file: ‘Foreign Missions, Dominican Republic (1945)’. See also O. E. Moore to Sproul, ‘Dr Herman Max’, 29 Oct. 1940, RG82, ISF, box 180, file: ‘Venezuela General (1923–54)’.

75 For example Rosenberg, Financial Missionaries; Drake, Money Doctor; Drake, Paul (ed.), Money Doctors, Foreign Debts and Economic Reforms in Latin America from the 1890s to the Present (Wilmington, DE, 1994)Google Scholar; Flandreau, Marc (ed.), Money Doctors: The Experience of International Financial Advising, 1850–2000 (London, 2003)Google Scholar.

76 Arthus Marget to Szymczak, 16 March 1951, p. 2, RG82, ISF, box 230, file: ‘Foreign Missions, Paraguay (1945–1954)’.