This week marks the 75th anniversary of the United Nations Monetary Conference held at Bretton Woods, New Hampshire. The conference, which led to the creation of the International Monetary Fund (IMF) and the International Bank for Development and Reconstruction (World Bank), has passed over into popular history and mythology as a founding moment of the “Liberal International Order”. This order, in turn, is widely held to be in crisis, owing to the rise of authoritarian populism that disavows the older ideals of a liberal world economy and global cooperation.
The anniversary of Bretton Woods is a useful opportunity to remind ourselves that this tale of inclusive and benevolent cooperation masks the stark realities of power that have underpinned the “Liberal International Order” from its inception. India’s participation in the conference offers an interesting window into the construction of this order.
New scholarship on Bretton Woods has identified the presence of countries such as India as significant and argued that the conference provided an important venue for them to inscribe their developmental concerns on the emerging, post-war international order. To be sure, India’s presence in the conference even before it had gained Independence suggests that Bretton Woods was an inclusive affair. But this perspective is also misleading. In a recent article, Aditya Balasubramanian and I argue that India’s participation in Bretton Woods needs to be situated in a longer and broader historical context.
In the first place, we need to understand India’s presence not as a novel feature of emerging liberal order, but as stemming from its peculiar positioning in the global economy. From the second half of the 19thcentury, India had been an important part of Britain’s economic empire and, by extension, the global economy. India is best understood as a subordinate, but a systemically significant actor. India was subordinate inasmuch as its interests seldom took precedence over those of the empire, but its role in upholding the imperial and global economic system was critical. This led to India’s participation in a series of international economic conferences in the inter-war years as well as its membership of the League of Nations and the International Labour Organization.
Participation in international fora fostered, in turn, a substantial body of experts on economic development in India—both academic and bureaucratic. This process also intersected with the emergence of an Indian capitalist class that was nationalist and sought an arena of capital accumulation autonomous of British interests. The diffusion of ideas and practices between these domains—bureaucracy, technical expertise and business—was crucial to the formation of the ideas that India sought to articulate at Bretton Woods. Even the composition of the Indian delegation reflected this legacy of the inter-war years. Jeremy Raisman and Theodore Gregory came from the late colonial bureaucracy—the latter had also been a well-known academic economist. Shanmukham Chetty and A.D. Shroff represented Indian capitalists—although the former was closer to the British. C.D. Deshmukh, a member of the Indian Civil Service, had then recently been appointed governor of the Reserve Bank of India. These delegates were supported by a team of Indian economists.
The immediate backdrop to their participation in Bretton Woods was India’s important role in the Second World War. India’s financial contribution to the war reversed its long-standing relationship as a debtor of Britain. By the end of the war, Britain owed India a whopping £1.3 billion. Not only did India have to fork out these resources in real-time, but the inflationary financing of the war effort led to massive deprivation, including the famines in Bengal and Travancore. Indians also feared that Britain might unilaterally write down these debts after the war. Indeed, the sterling balances featured significantly in financing the various schemes for post-war reconstruction of the Indian economy that were drawn up, including the famous Bombay Plan.
So, on top of the Indian agenda at Bretton Woods was the multilateral settlement of the sterling balances. The Americans, however, strongly opposed any such idea. They saw the conference as a forum in which to cement their hegemony over the world economy. Settlement of third-party war debts was unnecessary and even counterproductive insofar as it complicated their own plans vis-à-vis Britain. This fit well with Britain’s desire to take the issue of the conference’s agenda. Shroff put his finger on the power politics at work: “It may be unfortunate that situated as we are politically, perhaps the ‘big guns’ in the conference may not attach importance to a country like India.”
In the event, India had to make do with assurances from Lord Keynes – who held the British delegation –that Britain would honourably settle the sterling balances. In his memoirs, Deshmukh (who went on to become India’s finance minister from 1950-56) would write that, on the whole, Britain had accommodated India’s interests. Few of his contemporaries would have agreed with this assessment. The issue remained on the minds of Indian leaders across the political spectrum. On his first visit to the United States in 1949, Jawaharlal Nehru bluntly told his hosts: “When you think of those sterling balances about which there is often so much discussion, think of the price that India paid for them in blood and suffering.” But the United States refused to place this issue on a multilateral agenda.
Ultimately, Britain not only wrote down around 31.5 per cent of the sterling balances owed to India, but released the rest in dribs and drabs—a pattern that precluded any systematic deployment of these financial resources for India’s development. On the contrary, by the time the sterling balances were paid down in 1956, India was staring at a serious balance of payments crisis—the first of a series that would force India to engage with the IMF on rather different terms.
The Indian experience at Bretton Woods is a small reminder that the ideological claims and lamentations about the “Liberal International Order” conjure away the realities of power. It may be tempting for New Delhi to chime in with calls for a return to a “rules-based” system of international cooperation. But India’s ability to preserve its equities will hinge on how it copes with the emerging structure of power politics.
The author is Professor of International Relations and History at Ashoka University and a Senior Fellow at Carnegie India. Views are personal.