Charles P. Kindleberger Oral History Interview

Charles Kindleberger  

Oral History Interview
Charles P. Kindleberger

Economist with the Office of Strategic Services, 1942-44, '45; chief, Division German and Austrian Economic Affairs, Department of State, Washington, 1945-48; and Intelligence Officer, 12th U.S. Army group, 1944-45.
July 16, 1973
by Richard D. McKinzie

See also Charles P. Kindleberger Papers finding aid

[Notices and Restrictions | Interview Transcript | List of Subjects Discussed]

This is a transcript of a tape-recorded interview conducted for the Harry S. Truman Library. A draft of this transcript was edited by the interviewee but only minor emendations were made; therefore, the reader should remember that this is essentially a transcript of the spoken, rather than the written word.

As an electronic publication of the Truman Library, users should note that features of the original, hardcopy version of the oral history interview, such as pagination and indexing, could not be replicated for this online version of the Kindleberger transcript.

The Charles P. Kindleberger Papers finding aid is also available online.

This oral history transcript may be read, quoted from, cited, and reproduced for purposes of research. It may not be published in full except by permission of the Harry S. Truman Library.

Opened March, 1977
Harry S. Truman Library
Independence, Missouri

[Top of the Page | Notices and Restrictions | Interview Transcript | List of Subjects Discussed]

Oral History Interview with
Charles P. Kindleberger

Cambridge, Massachusetts
July 16, 1973
by Richard D. McKinzie


MCKINZIE: Professor Kindleberger, maybe a place to start would be to ask you why and how you entered the Government service in the 1930's, It would appear that you had specifically trained yourself for an academic career, and then, as I recall, in 1936 you began to work for the Federal Government. Had you had that in mind during the course of your training?

KINDLEBERGER: Well, let me try to recall to you the position in the 1930's. I heard later that at Harvard one job for a Ph.D. in economics came in in



1935, and in 1936 one job came in. As far as I know there was nobody looking for academic jobs at Columbia where I trained because there weren’t any academic jobs. Very early I decided I wanted to get into the Federal Reserve Bank of New York to learn more about foreign exchange from the factual point of view. I met Randolph Burgess at a party at Jim [James] Angell's house, or maybe it was at Arthur Burns', and asked him whether they had any jobs?

He said, "Come down and see me," I went down to see him and it turned out that I arranged in the June of ‘36 to take a job in October, not before. I was still working on my thesis. I hadn't finished the thesis. I decided to go down to Washington, and then I got a job with Harry White and Frank Coe, two people who later had career troubles, and



worked the summer of ‘36 with them in the Treasury on purchasing power parity calculations. It’s a technical kind of question about the foreign exchange rates. I studied particularly France. I have in my files quite a number of papers, I think, would show what I was doing there. Later on, that association turned up to haunt me. And particularly it was said by George Sokolsky that I was one of (Henry, Jr,) Morgenthau's men put into the State Department to carry out the Morgenthau plan. You can see how it’s easy to draw that inference, but it was erroneous. At the end of the summer I told Harry White I was leaving to go to the Federal Reserve Bank where I had this job arranged.

He said, "Do you want to stay?"

I said, I didn't know whether I wanted to stay. I was really quite interested in this foreign exchange question. On the other hand, if



you would raise me to a full P-2 -- I was getting $2400 -- and I said, "If you'll raise it to $2600, I’ll stay."

And he said, "No, I guess not." And I have recounted this story in the preface of my book on the world depression. I went then to the Federal Reserve Bank of New York. In the Federal Reserve Bank of New York I worked with Emile Despres half time and with Louis Galantiere half time. Louis Galantiere ran the Foreign Research Department, and Emile Despres was interested in foreign exchange transactions. He wrote a weekly letter to the Secretary of the Treasury on what was happening in the foreign exchange market. When he went to Littauer School in 1938, I think it was, I took that over from him. So Despres and I had been associated as early as '36, a long and intimate, and very fruitful association for me.

A little later on the Bank of International



Settlement said they wanted some young American economist to work on their staff. They asked the Federal Reserve Bank in New York to nominate somebody, and they asked I think through Leon Frazer who was then the President of the First National Bank, and Allen Sproul -- I think probably Allen Sproul not Werner Knohe, or not Randolph Burgess, Sproul asked me. I thought that would be a good experience. Fairly stupid of me to do that, because a man with broader vision could have seen a war was coming, but I couldn't. I agreed in February of '39 to go to Europe to work for three years. It happened that with the fall of Czechoslovakia I didn’t see how I could change that arrangement. I was then beginning to be quite discouraged. I went to Europe with my wife. We had no children at the time. After the fall of Paris though I decided I wanted to get out. Either the war would be short and the wrong people would win, or



it would be long and it was a poor place to be. So Emile Despres, who was then with the Federal Reserve Board in Washington, and I corresponded with each other. He would write telegrams to Mr. McKittrick urging me to come back signed (Marriner S.) Eccles. I should perhaps note that Mr. Eccles really signed them, but they were drafted by my friend, Despres.

The Federal Reserve Board paid my way back and that of my furniture, which in a lighthearted moment I'd taken over. This cost a couple thousand dollars which I didn't have. That's how I got back to work at the Federal Reserve Board with Despres. Now I worked directly under Walter Gardner who was the head of the Foreign Research Division. I was in on the lend-lease negotiations just briefly, as a ‘fly in the wall’ with Walter Gardner. Eddie Playfair and Roy Allen were the low level negotiators for the British and I worked with them on the balance



payments estimates. I saw Harry White and saw something of his unpleasantness when he forced the British to sell American Viscose, if you recall that episode.

It wasn't winning the war much that I could see. Still it was better than sitting in Basel doing nothing. And then bit by bit, OSS got formed.

MCKINZIE: Wasn't there an interim period where you were sort of the Secretary of the Joint Economic Commission of the United States and Canada?

KINDLEBERGER: That's true, yes. I forgot to indicate that. Alvin Hansen who was working on the staff of the Federal Reserve Board in Washington was appointed by Mr. Roosevelt, the American head of the Joint Economic Committee for Canada and the United States, and he asked me to be Secretary, and I was. Then we saw White and Coe again there. And as a matter of fact, I was



questioned later on by the FBI about some Canadians who were regarded as suspicious characters. This was a Committee which didn't really do much in the long run. What it essentially did was to introduce people to each other. Once the people who were doing, say, price control in Canada met the people who were doing price control in the United States they didn't want us sitting around listening to them all day, They wanted to get on with the business. Initially the War Production people had to meet and then the power people always met, and the fiscal people had always met, and working on a similar problem Bureaucrats on both sides would work close together. In a war situation there were some that hadn’t joined up and found the modus operandi. Once that was done we really had very little to do.

MCKINZIE: I talked to a lot of people who contend that



that those very early cooperative endeavors with the Canadians and with the British, and a number of other bilateral things, and lend-lease itself, were not simply a matter of winning the war. That they had in mind, conceivably, a different kind of world after the war. That lend-lease, for example, was not just a system of providing material to Allies, but that the provisions of it were consciously for the creation of a different kind of economic world after the war. Did you see that at the time?

KINDLEBERGER: Well, there were aspects of that. As Secretary of the American side my counterpart was a man named Skelton. Sandy Skelton, the son of the former Foreign Affairs Permanent Secretary in Canada (a Civil Service Canadian type). He and I wrote a long paper on postwar plans. Once you got a certain number of things going there was a



question as to what one would expect of postwar plans. I never was really very sold on that -- that struck me as a make-work. You were too far away to see what the end situation would be. So much of what went into the Canadian agreements were ad hoc.

The Hyde Park agreement of '41, for example. The Hyde Park agreement was in fact a way to finance Canada by helping it to finance Britain. We would lend-lease certain things to Britain, but give them to Canada.

To a certain extent the Canadians didn't want any help from the United States, that was a matter of pride, and I thought that to a certain extent we were window dressing. The Canadians always had this special relationship with the United States and with Britain, and they always played it carefully. It wasn't that they really didn't want to have a close tie with the United



States. They wanted to stay right in the middle the way they always did. And I thought that when they needed help from us -- they wanted it both ways, of course, as everybody does, They wanted to be a big independent country that grants aid, but doesn’t receive it. This meant that we needed some devices by which the United States would help them to help Britain by putting things through. I don't mean to make too much of that, but the special situation of Canada involved a great deal of ad hoc things. 1 don't think I have a copy of that memorandum I wrote with Skelton anymore. A lot of other postwar work was being done by [Leo] Pasvolsky in the State Department.

MCKINZIE: Yes, indeed.

KINDLEBERGER: I can't remember that I took it very seriously. I ground it out. No problem to grind out memoranda, but obviously nobody paid any attention



to it later on.

MCKINZIE: The question is prompted by the contention by some writers that there was a kind of "Hullian vision" of an integrated economic world after the war. And that from the very early days of the war all U.S. assistance to Allies, and all planning for treaties was directed toward that kind of integration of economies.

KINDLEBERGER: I think that's fair enough. That certainly is in Article 7 of lend-lease, and in the Atlantic Charter, and its in the Hot Springs meeting of FAO, and it's in a great many aspects. But the Canadian business was really rather separate and very much ad hoc, I think. It involved a special relation not the universal, not the multilateral. By the way it is of some amusement to me that a young man named Preeg came by the other day from the



National Planning Association with a manuscript, which he asked me to comment on -- talking about the world's being regionalized and Canada is in the United States orbit.

I said, "Aye, I have read that book fifteen years ago when William Yandell Elliot wrote it with a study group on postwar economic foreign policy for the United States." (It was written [Theodore] Geiger and [H. van B] Cleveland) "and I didn’t believe it then, and I don't believe it now, because the Canadians don't want it like that. They have their pride and their independence, and they want to be at a certain amount of arms length. They need the favors and they’ll take the favors, but they want it dressed up so they don't seem to be taking them," and so on. But I would have thought that the Canadian case was an exception. By the way, in my book in the depression Hull comes out looking rather poorly



I think. He has a monomania on tariffs, and Mr. Clayton, whom I'm a tremendous admirer of, is a little bit like that, but not nearly so bad. The OSS came along. A good many people were getting out of the Federal Reserve and going over to OSS. Despres and Chandler Morse did this fairly early. Chandler Morse was a great friend of mine, too, and a great friend of Despres. After I had been at the Board two years--I said I'd wait two full years really to give them a little value for moving my furniture. Actually I was getting quite restless in working on postwar things. 1942 was a very poor time to work on postwar matters, I thought. There was nothing left to do currently, with respect to the Canadian work, and talk about distant future didn't interest me, so when an opportunity came to go over to OSS I went.

Despres was a member of the Board of Analysts



of the Research and Analysis Division, a Board headed by William Langer and having on it Finney Baxter and Ed (Edward S.) Mason. It was a very distinguished group of people. Sherman Kent the Yale historian, and a geographer from Wisconsin, whose name I forget, and the Russian historian Girard T. Robinson. It was a very distinguished group of scholars organized in OSS to do, not the hokey-pokey, not the fancy spying, but simple straight analysis to see what brains could do. I was asked to come over to start something called the Military Supplies Section. I knew nothing about military supplies; that didn't make any difference. The hypothesis was, a good one I think, that any economist who put his mind to something could learn it. We could create instant experts. I remember telling (Harold J.) Barnett, "Barney, next Monday you are an expert on oil." Now we had some absolutely brilliant experts like Walter Levy the oil consultant,



who now has a private firm in New York. If you haven’t talked to him you really should, because he is superb. He later worked in the Mutual Security Administration on oil. And if you are interested in the question as to whether oil interests dominated the United States policy, Levy is the man who can tell you how he fought them, and how he won most of the time. He's a great man, I think. For example, he's the man who insisted on changing the pricing system for oil, under the Marshall plan, and so on--with the backing of his betters. He has a lot to contribute I think in the analysis of the ideological, to people who are interested in ideological problems.

I went over to work in OSS with Chandler Morse who was the head of the Research and Analysis Branch in economics. I was the head of the section on, military supplies. Sidney Alexander



was head of a section on industrial economics. He’s a distinguished economist here at M.I.T. now. There were many others. Wheeler whose brother defected to Czechoslovakia, Donald Wheeler was in manpower, Carl Kaysen, who later was in the White House, worked for Alexander. There has always been an issue as to whether the OSS had a more distinguished group of economists than the OPA. Walter Salant, my good friend, and [J. Kenneth] Ken Galbraith think that OPA had more, Seymour Harris was OPA, But Despres, and I, and others think they were wrong--no matter. But as I understand, Mr. [Major Gen. William D.] Donovan's insight into the whole reason for OSS was that nature had abhorred a vacuum, he assumed there would be many vacua and that in the course of this he would find a use for good people. He made some silly mistakes. For example; he hired a lot of polo players, I'm told, and taught them how they run speed boats, and hoped that there'd be occasions where the people who knew



how to whip and dash and turn would be able to find useful employment in the war. I'm told these Winston Guests’ and Pete Boswicks' sat out the war doing nothing. But in the case of intellectuals he was entirely right, and it was .found that the intelligence services of the Army, Navy, and Air Force were extremely limited, bureaucratized, and ineffective. Very early I found myself in this military supplies business working on bombing targets in Germany. We wanted to know what was going on in German production of weapons and what to do about it. In February of ‘43 went to Europe to work with the American forces. The Americans at this time were buying their intelligence from the British readymade, and we had to prove ourselves by showing that the British made mistakes. We did so in a rather interesting episode when we were persuaded the British were advising the American Air Forces to bomb a target that had



been abandoned by the Germans, and that proved to be right. It was rather a dramatic encounter. I had asserted to this English officer that the plant had been moved to Marienburg in East Prussia. He said, "Oh, no, here is the compass correction card of a shot down craft which has 'Foche-Wulf, Bremen' on it." And I took it from him, turned it over, and it had Marienburg written in hand on the back. You have to record a few of such wins to gain the faith of your customers. On the London staff I had [Walt] Rostow, [Harold] Barnett, young William Salant, John deWilde. I had Carl Kaysen. Later on Bob Roosa. A very distinguished group of economists. We worked like dogs, and I think we were effective. Among other things we worked out the plan to bomb France--for this invasion. We got in a big hassle with the British as to how to bomb a transport system. The American ground forces then wanted somebody to tell the American



Air Forces what to bomb, and I was one of the few experts around on German supply and transport. So I was out to get a little nearer to the action. I went on General [Omar] Bradley's staff in intelligence as a G-2 Section, Supply and Transport. And there the OSS business of their vacua to be filled, you know, they had lots of these intelligence guys being trained at--wherever it was--but they didn't have the economists approach to many things, There are times when I got things done; we worked out a system of bombing railroads. Once the Army learned the technique they did it all the time even when it wasn't appropriate. I can remember going down to a prisoner of war interrogation center and saying you've got all these prisoners what are you asking them. Well, they were asking them for the old crap about order of battle and stuff like that. I say what we need to know is



what railroads are running and where they are going. And I'd like you to find out how everybody got to the battle from where, and what lines they are going through and so on. Well, you know, these guys just loved being asked to work. The routine work was stupid on the part of these prisoner of war interrogators, they just loved having a creative job to do, and they produced brilliant reports, I thought. At the end of the war then, I found myself in Germany on the staff of General Bradley. The war has been won, and now how the hell do I get out? I have a bunch of my letters back to my London office, and I don't know quite where they are. I didn’t go through the files, but that's another collection of these letters. [The letters Ambassador Kindleberger refers to here and in other places in this transcript are (1) letters from the 12th Army Group in Europe to members of his staff in London; (2) letters from Kindleberger to his office as he toured Brussels, Berlin, and Vienna for the Department of State in 1946; and (3) letters to his office from Moscow in March-April, 1947.] You can see that I write a lot. You can hear that I talk a lot;



I think they have historical value although they are difficult to interrupt because there's lots of jargon and in house jokes and so on. I propose to leave these papers plus some more from the State Department period to the Truman Library.

I got back to Washington through OSS and Despres. OSS was stopping work for the military and was beginning to work for the State Department. Despres said the State Department needs people to tell them what to do about the peace. There had been work going on as recorded in Panrose's book which you know, [James W.] Riddleberger had been with JEC and others. But Despres said we have to build a staff for the reparations question. We have to staff--the whole backstopping of the ground forces, General [John H.] Hilldring's operation in Germany. He said, "Come on back." And he got me out of the grind back into OSS from the Army, and this led me to the State Department.



I was anxious to rejoin my loved ones after two and a quarter years away, so I bought it.

I got home and I said, "Well, now Emile I'm going to take a two months vacation."

He said, "We’ll give you a week." And there I was, you know, having sold myself like a Faust, I got a week of holiday and went back to work. I was a reparations adviser in the State Department to backstop the group that had gone with [Isador] Lubin and [Edwin W.] Pauley to Moscow. Despres, Collado and other experienced people were going to Potsdam and they needed someone in Washington to backstop the field operation. Collado you ought to talk to.

MCKINZIE: Right, I have talked to him.

KINDLEBERGER: Despres went to Potsdam with [William L.] Clayton and I guess with Mason too. He was on the board of analysts with Despres and he and



Despres were very close, and I was very close to him too, then. I don't see as much of him as I'd like to now. But I decided I didn't want any more Germany. I was sick of it, I had had a lot of it, and I tried to say that I'd like to get out. There was a job open as an adviser in the British section and Collado was the head of the Office of Financial and Economic Development, whatever it's called, OFD. He was an old friend of mine. He had been in the Federal Reserve Bank in New York and he actually had been at the Treasury in 1936 and he had been at the Fed beginning about ‘37 or ‘38, so that our careers had wandered in and out. He got me over there, and I started to work on the British loan. And then it seemed that the German problem was getting worse. I had no affinity to stay in German affairs. I wanted out, and this is particularly of relevance later on to the Sokolsky suggestion that I was



a Morgenthau man planted to carry out German policy, which was absurd. But finally Mason, and Despres, and Collado all said that they really had to organize a section to work on German-Austrian Economic Affairs, a division of the State Department, and they. were going to set up a division on Japan and Korean Economic Affairs. Would I take over, and bring in my gang which were all streaming back from overseas? We went to work. I knew nothing of the people up to that point who were working on property. That was the [Seymour J.] Rubin's, the [Monroe] Karasik’s, the [Walter S.] Surrey's, these lawyers who had been interested in the Safe Haven Program of granding German assets. I had nothing to do with that up to that stage, but…

MCKINZIE: But this division was at first supposed to take care of occupation areas, was it not, in Japan, Korea, Austria, Germany?



KINDLEBERGER: The office was. I can't remember who was the head of it at first. Rubin was the Deputy. I can't remember who they had, that's funny. And I was in charge of one division, Ed [Edwin M.] Martin was in charge of Japan-Far East, and Surrey was in charge of enemy property. That was a coordinate division, which worked in both areas, whereas each of the others of us worked in separate areas. It so happened that more property people like Karasik came in to work with me. I inherited an odd body like George Adams, who now teaches economics at Cornell. The whole gang worked together very well, John deWilde who was Deputy--I was Chief--he was Deputy Chief. Barnett was in charge of the reparations section. Rostow was in charge of the production section. I would say. Salant worked on--I can't remember, William Salant not Walter, the younger brother. By the way the State Department



historians got them mixed up, and I wrote them a letter straightening out the...I said in my memorandum, "Walter Salant told me."

They said, "That’s William Salant," it wasn’t, it was Walter, but they are tricky to separate out.

We then went to work on reparations and we did that for a long time. There were reparations issues, reconstruction issues, feeding issues. I went to Berlin and Austria in the summer of ‘46, that’s where one of those piles of letters comes from. We elaborated the policies with respect to reparations, which are published in the documents in not just in Foreign Affairs, but in these little things.

MCKINZIE: Oh, it’s a State Department Publication, Our Occupation in Germany.

KINDLEBERGER: Yes. Lots of these. That's the one I



had in mind U.S. Economic Policy Toward Germany. I think most scholars don’t recognize these, and that has some darn important statements in it.

MCKINZIE: This is a transcript here. It is Publication 26-30, 1946, I suppose, isn't it?

KINDLEBERGER: I think so. What we did was to try to rationalize the 1067, and the Potsdam Agreement, and to say we wanted reparations not to hold the Germans down forever, but to have a short, sharp. quick surgical kind of thing. It was a way to try to get on with the job of democratization, and so on.

MCKINZIE: May I ask, so many people that I have talked to who comment on reparations issues have invoked the unfortunate experience after the first World War and contend that that was on everyone’s mind?



KINDLEBERGER: That's true. There isn't any doubt that's true, and in particular people were worried that the United States paid German reparations to France and England--World War II by lending Germany the money which was later not paid back. As a matter of fact, we paid German reparations to Russia this time, by the Russians grabbing the food while we had to feed the Germans. The truth is that economists just like generals fight the last war, and we were anxious to treat Germany as a single economic unit. That was the so-called first charge principle that the first charge on all exports would be the imports that the country had to have. This meant that you have to treat the four zones as a single unit economically, so that you couldn't take something out of one zone which was needed in a separate zone. We failed



utterly on this.

MCKINZIE: At the time did you think that there was still hope?

KINDLEBERGER: I can’t remember when we thought there was still hope. The hope was beginning to fade very rapidly, in the spring of '46, by the way, there’s an issue from the spring of ‘46 which is unclear in my mind. General [Lucius D.] Clay stopped paying reparations out of removals of property from the Western zones to the Soviet Union in May of ’46. This was well before the Stuttgart speech of September '.46. And he did that without, as far as I knew, any authority from the State Department. I'd never seen a telegram anywhere which says that he was authorized to do this. Since he was presumably following U.S. policy laid down by the State Department and the President it was unclear to me what happened.



Well, Jimmy Riddleberger never told me but he said, "Have you contemplated the possibility that Mr. [James] Byrnes at the Council of Foreign Ministers in Paris telephoned him and authorized it?" I have contemplated that possibility since, and I think it’s quite likely. I think Jimmy was telling me something. The fact of the matter is here's a fundamental change in U.S. policy--stop paying reparations out of the Western zones to--of which there’s no piece of paper--no historical record. I think that's interesting. It's not clear at all to me that President Truman was consulted in this, because Mr. Byrnes probably didn't consult him on the telephone from Paris. I know the tension between Byrnes and Truman, and it's an interesting historical point that's all--small point.

MCKINZIE: Right. Did your division draw up any kind of game plan to be followed? Everybody seemed to be



grinding out papers on this and that, on not only reparations, but on the plan for the development of Germany after the war.

KINDLEBERGER: Sure, sure, oh, yes. This document I speak of was one part of it. Particularly the statement which is a reinterpretation of JCS-1067. More than that, very early, as early as the summer of ‘46, we were trying to get the [Gerhald] Colm, [Joseph M.] Dodge, [Raymond W.] Goldsmith report going, to get the monetary situation straightened out. Now that didn't take effect as you know until '48, and that was a continuous frustration for everybody, a frustration which came about for a number of reasons, This is another one of the interesting things which historians have missed out on terribly that is the monetary problems of armies of occupation, "Red herrings" abound in this field, In particular



it was thought by many people that because Morgenthau gave the plates to print occupation currency to the Russians that lost a lot of money for the Army. Nothing could be further from the truth. Whether you lose money in your occupation currency depends only on whether you redeem local currency. [Gen. Douglas] MacArthur lost three hundred million dollars in Japan where the Russians had no access to occupation currency. The Americans lost four hundred million dollars in Germany, and it had nothing to do with the plates. Frank Southard's book on The Finances of European Liberation about Italy shows that they lost zero in Italy because they very quickly decided in the Economic G-5 Section that they wouldn't redeem any lira. They'll convert dollars into lira, but they will not convert lira into dollars. And if anybody sells cigarettes for lira, or Mickey Mouse watches, or cigarettes, or candy, or silk stockings, or



coffee, or anything else they can't get dollars for them. They can get lira, but not dollars. The problem is that the people who were interested in the issue all were later smeared with the McCarthy brush and never could get their story out. The Army basically covered up. The Army nickeled and dimed--stole the money back over the next five years in the occupation currency. What they would do is pay out yen and take out dollars. And so they really took it from the civil GARIOA plan. Anytime anybody wanted any local currency, the Army would sell it for dollars, keep the dollars and put them in the Troop Pay account. In contrast the British went to Parliament. and said we need an appropriation of two hundred million dollars to make good our Troop Pay account deficit. It's a fascinating story, which really should be put together sometime



but it is very difficult. People like Harold Glasser, who were in the middle of it were excoriated as Communists, and have not surfaced again. Harry White would know about this. I was told one time by Harold Glasser that he'd keep a record of all his dealings with the Army Paymaster General, because it occurred to him at this time that this was a bad thing to do, but I don’t know what's happened to that. I suppose that story really belongs to the Roosevelt administration, rather than to the Truman administration,