Eric Rauchway. The Money Makers: How Roosevelt and Keynes Ended the Depression, Defeated Fascism, and Secured a Prosperous Peace. New York: Basic Books, 2015. 336 pp. $28.99 (cloth), ISBN 978-0-465-04969-1.
Reviewed by Andrew Baker (Auburn University)
Published on H-War (May, 2018)
Commissioned by Margaret Sankey (Air University)
The New Deal and the Second World War have drawn no shortage of interest from professional and amateur historians. Numerous works assess Franklin D. Roosevelt’s program for recovery, its efficacy, and lasting impact on the state. Far fewer historians, however, have assessed the role of New Deal monetary policy in economic recovery and its impact on the course of the Second World War. Although often bypassed for other topics, such as the Civilian Conservation Corps or the creation of the Stock Exchange Commission, currency reform arguably played an important role in recovery from the Great Depression, Allied victory in the Second World War, and the postwar global economic boom. Given the recent development of and interest in such cryptocurrencies as Bitcoin, the impact of Roosevelt’s decision to move from the gold standard to a managed currency backed only by public trust remains as relevant as ever.
Eric Rauchway has previously written about the Great Depression and New Deal for Oxford’s Very Short Introduction (VSI) series. In The Money Makers, Rauchway moves away from a general narrative to a more tightly focused examination of the Roosevelt administration’s monetary policy. Motivated by the half-Keynesian response to the global financial crisis of 2008, Rauchway reevaluates Keynesian economics and Roosevelt’s embrace of Keynesian monetary policy. His thesis is built around several central premises. John Maynard Keynes was more interested in monetary than fiscal policy. Roosevelt’s monetary policy was consistently Keynesian and also effective. Keynesian monetary policy, “through which Roosevelt reinvented the United States dollar, was a central and successful instrument for both recovery from the Great Depression and victory in the Second World War” (p. xvii). Lastly, economic crises are avoidable through proper management and cooperation between governments.
Rauchway makes several challenges to the historiography. He argues that early memoirs from disgruntled administration officials understated the depth of Roosevelt’s economic knowledge. These writings were used by later historians and led to the undervaluation of Roosevelt’s acumen. Rauchway also contends that late twentieth-century economic crises have overshadowed the role Roosevelt’s monetary policy played in creating the so-called Golden Age of Capitalism that lasted from the immediate postwar years until the early 1970s.
In the early chapters, Rauchway wastes no time establishing the earnestness of Keynes and Roosevelt to solve the problems of the global financial system. He explores Keynes’s role as the chief representative of the British Treasury at Versailles and his rejected proposal to reorganize the currency system to better facilitate German payment of war debt. Keynes, Rauchway argues, was stymied by the intransigence of Woodrow Wilson and European leaders. His ideas, however, did not escape Roosevelt’s notice. Rauchway goes to great pains to illustrate that Roosevelt was conversant in economic theory and, in particular, acquainted with Keynesian thought.
In Rauchway’s telling, Roosevelt’s acceptance of Keynesian monetary policy led him to decisively withdraw the United States from the gold standard at the outset of his first term. He contends that scholars and contemporaries of Roosevelt, about whose discussions he includes a substantial historiographical endnote, have often misinterpreted Roosevelt’s public equivocation as a lack of decisiveness and have assigned a range of dates for the departure from the gold standard. Rauchway contends that Roosevelt’s “own private statements indicate that he believed he took the US off the gold standard on March 6, 1933—and meant to keep it off” (pp. 261-262). Political necessity rather than FDR’s uncertainty accounts for the public response. He casts the decision as something revolutionary. After March 1933, a dollar no long “meant metal in a vault somewhere.” Rather, it “meant confidence that policymakers had their eyes on the operations of the US economy” (p. 54).
Scholars of war and society may be particularly interested in the second half of The Money Makers in which Rauchway addresses the dollar’s role in fighting fascism. He treats the subject expansively. He argues that the domestic stability promoted by a managed currency helped fight fascism in the United States by weakening radical alternatives to democracy. He views the Three-Party Agreement of 1936, which created a system for managing exchange rates between the United States, Britain, and France, in a similar light. The principles of the lend-lease program are also cited as an example of the possibilities created when adherence to the gold standard no longer guided international transactions. Rauchway contends that the dollar became “a valuable tool for cementing alliances against fascism and for modeling the world after the war” (p. 132).
The Money Makers culminates with the Bretton Woods conference. Rauchway argues that despite conflict between Keynes and US treasury department official Harry Dexter White, the conference achieved its mission. He argues that the victory of Roosevelt and Henry Morgenthau Jr. ensured “the gold standard was gone for good and the recovery was here to stay” (p. 226). Even after the end of the Golden Age of Capitalism and a shift away from the policies of Bretton Woods, the system helped mitigate the worst effects of the 2008 global financial crises. Rauchway concludes with an admonition for policymakers to consider the successes of Roosevelt and Keynes.
Rauchway’s reinterpretation of Roosevelt, Keynes, and the impact of monetary policy on the Depression and war is ambitious. His argument, however, is compelling and may cause other scholars to reevaluate Roosevelt’s economic policies and his relationship with Keynes. Rauchway’s contention that the anti-fascist dollar helped to blunt Nazi currency manipulation will be of particular interest to scholars of war and society. The Money Makers follows a pattern of research that addresses society during wartime. It effectively illustrates how such elements as monetary policy may affect a society’s ability to endure economic warfare. As mentioned at the outset of this review, it is also timely given the rise of cryptocurrencies. The Money Makers may be appropriate for use in courses ranging from graduate or undergraduate offerings in war and society to undergraduate coursework in American history. The Money Makers is both accessible to a broad audience and useful to scholars working in a variety of fields.
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Andrew Baker. Review of Rauchway, Eric, The Money Makers: How Roosevelt and Keynes Ended the Depression, Defeated Fascism, and Secured a Prosperous Peace.
H-War, H-Net Reviews.
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