Lauchlin Currie
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Lauchlin Bernard Currie (1902-1993) was a distinguished Canadian economist. As a naturalised American citizen he served as White House economic adviser to President Franklin Roosevelt from 1939-45. It was later alleged, controversially, that he spied on behalf of the Soviets during the wartime Grand Alliance. In 1949-53 he directed a major World Bank mission to Colombia and related studies, and became a Colombian citizen after the United States refused to renew his passport in 1954.
He was born in New Dublin, Nova Scotia, Canada, son of Lauchlin Bernard Currie, who operated a fleet of merchant ships, and Alice Eisenhauer Currie, a schoolteacher. When his father died in 1906 his family moved to nearby Bridgewater. Most of his schooling was in Bridgewater, but he also attended schools in Massachusetts and California, where he had relatives. After two years at St. Francis Xavier's University, Nova Scotia (1920-1922), he studied at the London School of Economics (1922-25) under Edwin Cannan, Hugh Dalton, A. L. Bowley, and Harold Laski.
From the LSE he moved to Harvard, where his chief inspiration was Allyn Abbott Young, then president of the American Economic Association. He earned his Ph.D. for a dissertation on banking theory. He remained at Harvard until 1934 as assistant to, successively, Ralph Hawtrey, John H. Williams, and Joseph Schumpeter. There, he constructed the first money supply and "income velocity" series for the United States. He blamed the Fed's "commercial loan theory" of banking for monetary tightening in mid-1929, when the economy was already declining, and then for its passivity during the next four years in the face of mass liquidations and bank failures (Currie 1934). In a January 1932 Harvard memorandum on antidepression policy, Currie and fellow instructors Harry Dexter White and Paul T. Ellsworth urged large fiscal deficits coupled with open-market operations to expand bank reserves, as well as the lifting of tariffs and the relief of interallied debts (see Laidler and Sandilands, 2002).
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New Deal
In 1934 he became an American citizen and joined Jacob Viner's "freshman brain trust" at the U.S. Treasury. He outlined an ideal monetary system for the United States, which included a 100-percent reserve banking plan to strengthen central bank control by preventing member banks from lending out their demand deposit liabilities, while removing reserve requirements on savings deposits with low turnover. Later that year Marriner Eccles moved from the Treasury to become governor of the Federal Reserve Board. He took Currie with him as his personal assistant. Harry Dexter White, another "freshman brain trust" recruit, became a top adviser to Treasury Secretary Henry Morgenthau, and for some years he and Currie worked closely in their respective roles at the Treasury and the Fed.
Currie drafted the 1935 Banking Act that reorganised the Fed and strengthened its powers. He also constructed a "net federal income-creating expenditure series" to show the strategic role of fiscal policy in complementing monetary policy to revive an economy in acute, persisting depression. When, after four years of recovery, the economy declined sharply in 1937 he was able to explain to President Roosevelt, in a four-hour interview, that the declared aim of balancing the budget "to restore business confidence" had damaged the economy. This was part of the "struggle for the soul of FDR" (Stein, 1969) between the cautious Morgenthau and the expansionist Eccles. At first FDR sided with Morgenthau and disaster followed. In April 1938 the president asked Congress for major appropriations for spending on relief and public works. In May 1939 the rationale was explained in theoretical and statistical detail by Currie ("Mr. Inside") and by Harvard's Alvin Hansen ("Mr. Outside") in testimony before the Temporary National Economic Committee to highlight the role of government budgets in the recovery process.
Named FDR's White House economist in July 1939, Currie advised on taxation, social security, and the speeding up of peacetime and wartime production plans. In January 1941 he was sent on a mission to China for discussions with Generalissimo Chiang Kai-shek and Chou En-lai, the Communist representative in the Chinese wartime capital of Chungking. On his return in March he recommended that China be added to the lend-lease program. He was put in charge of its administration under the overall direction of FDR's special assistant Harry Hopkins.
Currie was also asked to expedite the Flying Tigers program, in which U.S. Navy pilots were released for combat under Claire Chennault who commanded the Chinese air force against Japan. He also organized a large training program in the United States for Chinese pilots. In May 1941 he presented a paper on Chinese aircraft requirements to General George C. Marshall and the Joint War Board. The document, accepted by the Board, stressed the role an air force in China could play in defending Singapore, the Burma Road, and the Philippines against Japanese attack. It also pointed to its potential for strategic bombing of targets in Japan itself. These activities, together with Currie's work in helping to tighten sanctions against Japan, are said to have played a part in provoking Japan's attack on Pearl Harbor.
Currie returned to Chungking in July 1942 to try to patch up the strained relations between Chiang and General Joseph W. Stilwell, commander of U.S. forces in China. Currie was one of several of FDR's envoys who recommended Stilwell's recall and reassignment. Back in Washington, Roosevelt asked Currie to put this case to General Marshall, but the general dismissed the idea. Only much later did Marshall concede that his protégé's continued presence in China was indeed a mistake. Stilwell was recalled in October 1944.
Currie appears to have been involved in carrying out orders from Roosevelt to get U.S. intelligence services to return Soviet cryptographic documents to the Soviet Union and to cease decoding operations.
In 1943-1944 Currie ran the Foreign Economic Administration, and in early 1945 headed a tripartite (U.S., British, and French) mission to Bern to persuade the Swiss to freeze Nazi bank balances and stop further shipments of German supplies through Switzerland to the Italian front. He was also involved in loan negotiations with the British and the Russians, and in preparations for the 1944 Bretton Woods conference (staged mainly by Harry White) that led to the creation of the International Monetary Fund and the World Bank.
Post War
After the war Currie was one of those blamed for "losing" China. It was also alleged by Elizabeth Bentley, an ex-Soviet agent, that Currie and White had participated in wartime Soviet espionage through the Silvermaster ring. Though she had never met Currie and White personally, she claimed that they had illegally passed information to other Washington economists in the Silvermaster ring who functioned as "cut outs", to insulate her courier activities between them and Soviet intelligence. White and Currie were heavily involved in official wartime cooperation with the Soviets, and Venona project decrpytions of coded Soviet messages corroborated her allegations. White and Currie gave testimony before the House Committee on Un-American Activities in August 1948, but positive identification of code names had not been made yet. When identifications were made, the United States Justice Department concluded that the decrypts were inadmissible for prosecution because they would be considered hearsay. And the cryptogrtaphers would have to be called as expert witnessess seeing the Soviet case officers were unavailable for cross-examination. If the cryptographers had to take the stand, than a vital ongoing U.S. counterintelligence operation would be exposed in open court. Thus, the damage having been done, no prosecutions occurred.
In 1949 Currie headed the first of the World Bank's comprehensive country surveys, to Colombia. After his report was published in Washington in September 1950, he was invited by the Colombian government to return to Bogota as adviser to a commission established to implement the report's recommendations. He has been falsely accused (for example by Haynes and Klehr, 1999) of fleeing the United States to avoid charges of disloyalty. In fact he returned in December 1952 to give evidence in New York to a grand jury investigating Owen Lattimore's role in the publication by Amerasia magazine of secret State Department documents.
When Currie, as a naturalized U.S. citizen, tried to renew his passport in the poisonous atmosphere of 1954, this was refused, ostensibly on the grounds that he was now residing abroad and married to a Colombian. However, the reality was probably connected with the then secret "Venona" project, which had decrypted some wartime Soviet cables that mentioned Currie's name. He appears in the Venona cables as a Soviet source under the cover name "Page".
After a military coup in Colombia in 1953 he retired from economic advisory work and devoted himself to raising Holstein cattle on a farm outside Bogota, and developed the highest-yielding dairy herd in the country. With the return of civilian government in 1958, President Alberto Lleras personally conferred Colombian citizenship upon him and he returned to advisory work for a succession of presidents. However, between 1966 and 1971 he was abroad as a visiting professor in North American and British universities: Michigan State (1966), Simon Fraser, Canada (1967-1968 and 1969-1971), Glasgow (1968-1969), and Oxford (1969). He returned permanently to Colombia in May 1971 at the behest of President Misael Pastrana to prepare a national plan, the "Plan of the Four Strategies", with focus on urban housing and export diversification. The plan was implemented, with new institutions playing a major role in accelerating Colombia's urbanization.
Currie was chief economist at the National Planning Department from 1971 to 1981, followed by twelve years at the Colombian Institute of Savings and Housing until his death in 1993. There he doggedly defended the unique housing finance system (based on "units of constant purchasing power" for both savers and borrowers) established in 1972. The system significantly boosted Colombia's growth. He also advised on urban planning and played a major part in the first United Nations Habitat conference in Vancouver in 1976. His "cities-within-the-city" urban design and financing proposals (including the public recapture of land's socially created "valorización" or "unearned land value increments" as cities grow) were explained in Taming the Megalopolis (1976). He was also a professor at the National University of Colombia, the Javeriana University, and the University of the Andes. His writings were heavily influenced by his Harvard mentor Allyn Young. An important paper on Youngian "endogenous" growth theory was published posthumously in History of Political Economy (1997). On the day before he died, President Cesar Gaviria awarded him Colombia's highest honor, the Cruz de Boyaca, for services to his adopted country.
Bibliography
Currie's collected papers are in Duke University's Special Collections Library ([1] (http://scriptorium.lib.duke.edu)). His China papers are also archived at the Hoover Institution, Stanford University. His most influential early work on monetary theory and policy is The Supply and Control of Money in the United States (1934). His 1932 Harvard memorandum on antidepression policy was published in History of Political Economy 32, no. 2 (2002) with a foreword by David Laidler and Roger Sandilands that explains its influence on the Chicago School monetary tradition. A biography of Currie is Roger Sandilands, The Life and Political Economy of Lauchlin Currie: New Dealer, Presidential Adviser, and Development Economist (Duke University Press, 1990). For further discussion of his work in the New Deal, see Herbert Stein, The Fiscal Revolution in America (1969), Ronnie J. Phillips, The Chicago Plan and New Deal Banking Reform (1995), and a special issue of Journal of Economic Studies 31, Nos 3/4 (2004) that contains some of his hitherto unpublished FRB and White House memoranda. For discussion of the allegation that Currie was a Soviet spy, see John Earl Haynes and Harvey Klehr, Venona: Soviet Espionage in America in the Stalin Era (1999); Roger Sandilands, "Guilt by Association? Lauchlin Currie's Alleged Involvement with Washington Economists in Soviet Espionage," History of Political Economy 32, no. 3 (2000); and James Boughton and Roger Sandilands, "Politics and the Attack on FDR's Economists: From Grand Alliance to Cold War," Intelligence and National Security 17, no. 3 (2003). Obituaries are in the New York Times, 30 Dec. 1993, and the London Times, 10 Jan. 1994.
External link
- Politics and the Attack on FDR's Economists (http://www.cooperativeindividualism.org/sandilands_fdr_economists.html)
- Venona: Soviet Espionage and the American Response, 1939-1957 (http://www.cia.gov/csi/books/venona/preface.htm)