In the 1960s, Jacques Rueff Preached the Inevitable Implosion of the Dollar-Based Bretton Woods System

De Gaulle gave a famous press conference on February 4, 1965, in which he elaborated the economic logic behind his conclusion that the dollar could never act as “an impartial and international trade medium . . . it is in fact a credit instrument reserved for one state only.” De Gaulle was no economist, so it was apparent that the acuity of his analysis owed to someone schooled in the art. Though he denied being “in any degree scriptwriter to General De Gaulle,” this was unmistakably Keynes’s old intellectual sparring partner over German World War One reparations, Jacques Rueff. Rueff became, with Triffin, the most notable prophet of doom during the 1960s preaching the inevitable implosion of the dollar-based Bretton Woods system. Though the diagnosis of the two was identical, their cures could not have been more different.

Triffin harked directly back to Keynes’s “bancor” alternative to the White Plan: a new international reserve currency managed by the IMF. He suggested some bureaucratic safeguards against the potential inflationary bias of the scheme, but was otherwise satisfied simply to quote Keynes at length. Rueff, in stark contrast, advocated a return to the pre-1914 classical gold standard. He was adamant that he had “no religious belief in gold”; other commodities might in principle do as well, even if gold had history on its side. It was rather the mechanism of a genuine gold standard that was needed to ensure that global imbalances were automatically restrained by credit expansion in the surplus country and contraction in the deficit country—or put alternatively, “to prevent the home population from consuming a part of domestic production that must be made available for export” in order to counteract a payments deficit. Triffin’s (and Keynes’s) alternative of a new international reserve unit, in Rueff’s view, represented a “purely arbitrary creation of means of foreign payment”; or put more bluntly, “nothingness dressed up as currency.” It had a built-in inflationary dynamic that no bureaucracy would be able to control. For his part, Triffin believed that Rueff’s vision “impl[ied] the total surrender of national sovereignty . . . over all forms of trade and payment restrictions, and even over exchange rates. Such surrenders,” he said, were “utterly inconceivable today in favor of a mere nineteenth century laissez faire, unconcerned with national levels of employment and economic activity.”

—Benn Steil, epilogue to The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order (Princeton, NJ: Princeton University Press, 2013), 334-335.