SEVENTY years ago, in the closing days of World War II, an historic conference convened in Bretton Woods, a remote town in the northeastern US state of New Hampshire, to create a new global financial framework for the postwar era.

Today, in the wake of the 2008 global financial crisis, some political and business leaders are calling for the establishment of a new Bretton Woods accord to address a much-changed world order.

The US, the world’s largest creditor nation in the 1940s, has become the world’s largest debtor. China, today’s dominant creditor nation, is eager to raise the status of its currency, just like the US managed to do at Bretton Woods.

“The conference was truly a fascinating saga,” said Benn Steil, director of international economics at the US Council on Foreign Relations. “But it was most surely not the triumph of economic thinking and international comity it is often painted to be.”

Steil was in Shanghai last month, where he gave a lecture at Fudan University.

In his latest book “The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order,” Steil delves into the intertwining personalities and events shaping that conference.

The book challenges the common conception that Bretton Woods was an amiable global collaboration.

For two years prior to the conference, Keynes, the renowned economist who led the British delegation, tussled with White, a senior US Treasury official who masterminded the postwar global monetary system.

Keynes, with some desperation, wanted to retain the remnants of an international role for the British pound sterling, even as Britain’s colonial empire was falling in tatters.

On the verge of bankruptcy due to the war, Britain had little bargaining power. After the conference, the one-time global giant was forced to end imperial trade preferences by cutting privileged access to the markets of its colonies and dominions, and by making the pound fully convertible to the US dollar at a fixed rate.

The Bretton Woods conference laid the foundation for the US dollar to become a global reserve currency and a substitute for gold.

“The centerpiece was to be a dollar-based international monetary system, overseen by a new US-dominated International Monetary Fund,” Steil wrote.

In fact, the conference led to the creation of not only the IMF, but also the International Bank for Reconstruction and Development, which is part of today’s World Bank.

“The Americans triumphed at Bretton Woods,” said Steil. “Yet, looking back 70 years later, it is clear that it was a pyrrhic victory.”

In 1971, US President Richard Nixon announced the closing of the American “gold window,” which terminated a gold-backed dollar. It removed a key cornerstone of the international monetary system set up by Bretton Woods and sounded an early warning alarm of its eventual failings.

“The Bretton Woods monetary architecture ultimately fell of its own contradictions,” Steil said. Among those contradictions was the reality that the US could not keep the world adequately supplied with dollars and simultaneously sustain the large gold reserves required by its gold-convertibility commitment.

The legacy of Bretton Woods still rages, and the currency issue remains a persistent bone of contention. The US is still pressuring countries like China on foreign-exchange rates.

In a recent article, Steil said China’s yuan is fairly valued based on an index using the price of the iPad mini as a standard.

“Despite the US Treasury’s understandable obsession with China’s trade, iPad mini prices show China’s currency is fairly valued against the dollar,” he wrote. “In contrast, the euro is way overvalued. It costs nearly 16 percent more to buy an iPad mini in France than it does in the US.”

History repeats itself in so many ways. Back in 1944, Britain was asking the US not to pile up reserves and not to depreciate the dollar. At that time, the US controlled nearly 80 percent of the world’s monetary gold stock, and US dollars were the only credible surrogate for gold.

Nowadays, China had record foreign-exchange reserves of US$3.95 trillion and remains under pressure to strengthen the yuan to narrow its trade surplus.

“Yet history suggests that a new cooperative monetary architecture will not emerge until the US and China come to the conclusion that the consequences of muddling on, without the prospect of correcting endemic imbalances between them, are too great,” Steil said.

Steil answered questions posed by Shanghai Daily.

Q: How do you evaluate the Chinese yuan? Is it possible for the yuan to challenge the US dollar and become a global currency?

A: Today’s US is no doubt a declining economic and political power, while China is growing much more rapidly and highly likely to do so for the future. But the US is declining on a relative basis, which is a very different situation from Great Britain in the 1940s.

The US dollar still represents more than 60 percent of global foreign-exchange reserves, and the country’s bonds are sought after by many. I don’t see any imminent rival to the US dollar.

As for the Chinese currency, China is moving towards making the yuan convertible, and the world has exhibited high demand for it.

But there are reforms China would have to undergo, including expanding, deepening and strengthening its bond market. Right now, the yuan represents only a few percentage points of global foreign-exchange reserves.

Q: Can you comment on the current roles of the IMF and World Bank?

A: Neither Keynes nor White would have believed that the IMF and World Bank, both created at Bretton Woods, should become crisis firefighters. The IMF was originally envisioned as an institution to discipline countries that were pursuing unsound economic policies. The World Bank was established to assist the reconstruction of Europe.

Regarding the structure of the IMF, China and the US actually see much more eye-to-eye on it than you may imagine. China, of course, like many other emerging markets, wants to have more influence based on its weight in the global economy. If the voting power is weighted on the basis of GDP, not only China would gain. The US would benefit as well. The biggest loser would be the old European powers that still have excessive influence on the US.

Q: Do you think it is necessary or possible for Asia to have its own version of IMF?

A: We have already seen some such examples. One is called the Chiang Mai initiative. The whole purpose of this initiative is to get away from the IMF.

But in order to borrow money, countries have to be on IMF programs and subject to IMF conditionality. What it tells you is that the Chiang Mai initiative members don’t trust each other. They are not confident about getting the money back.

Also, China has suggested the establishment of a development bank for emerging markets.

But we have seen absolutely no progress on that whatsoever. I think it might be a good idea to strengthen regional financial cooperation, but I’m skeptical about its practicality.

Q: How much does politics affect global trade and economics?

A: The massacre of emerging market currencies and bonds following Ben Bernanke’s taper-talk last May could serve to fuel trade tensions going forward. The countries worst affected had large current-account deficits and low dollar reserves.

Ukraine was hardest hit. The lesson the Fed taught these countries is that they need to build up current-account surpluses and dollar reserves, which will have the consequence of expanding global imbalances and rankling the US government.

Many in the US are now calling for anti-currency-manipulation provisions to be included in all future trade agreements.

Q: What do you think of Keynes and White, the two main figures at Bretton Woods?

A: One thing that struck me in my research is how nobody at the time seemed to have had a nice word to say about Harry Dexter White as a person.

Even those who admired his abilities generally found him abrasive and unpleasant. White appeared to have few true personal friends, and those he called friends tended to have links with his favored cause — aiding the Soviet Union. Keynes could be cuttingly cruel towards those with whom he disagreed , even though he changed his positions frequently.

He was also typically witty, eloquent and charming. American economists Paul Krugman and Brad DeLong no doubt model their sharp, and at times, obnoxious styles of discourse on the nastier side of Keynes.

(Shanghai Daily intern Qu Haowen contributed to this story.)