10 - Designs for the postwar world

Summary

By mid-1940, a domesticated version of Keynesian-style macroeconomics – though certainly not unchallenged – was in the ascendant among economists operating within the Washington establishment. The threat of war (and subsequently its reality) meant, however, that Currie's vision of an American economy structured to achieve full employment through high consumption and low saving was put on hold for the duration. Successful economic mobilization instead required the deployment of policy tools to constrain private demand. Nevertheless, ingredients of the “official model of 1940” were expected to come into their own with the cessation of hostilities. Mass unemployment on the scale of the 1930s, it was feared, would again become a real and present danger. If the world was to enjoy a brighter future, the postwar economic order, on both the domestic and the international scenes, needed to be reorganized to keep that from happening.

Envisioning the postwar international order

Systematic thinking about the shaping of the postwar international economic system gathered momentum in early 1941. The “special relationship” between the United States and Britain was then in its infancy; in fact, it dated from the unexpected fall of France in May 1940. Before that, relations between the two countries had not been particularly close, and indeed there had been considerable intergovernmental testiness in the 1930s. Their collaboration was a by-product of the French defeat. The two countries then needed one another.