Revealed: The banker who shaped the modern financial world after WWII was a Soviet spy who wanted America to become communist

• Harry Dexter White represented U.S. at Bretton Woods conference in 1944
• Helped create the institutions which led to capitalism taking over the world
  
• But he harboured communist views and dreamed of Soviet domination

By James Nye

PUBLISHED: 02:42 EST, 5 March 2013 | UPDATED: 07:34 EST, 5 March 2013

Harry Dexter White was the architect of the post-war financial system, which paved the way for the West to dominate the 20th century and win the Cold War.

But it has now emerged that the brilliant economist was in fact a staunch anti-capitalist who privately praised the Soviet Union's communism.

Documents unearthed at Princeton University prove that, although White devoted his life to strengthening western capitalism, he secretly despised the system he had created and believed it would eventually be overtaken by the state-controlled economy of the USSR and its allies.

The flawed genius did not live long enough to find out just how wrong he was, as he died in 1948, before both the decades-long boom enjoyed by the U.S. and Europe and the slow decline of the East.

Harry Dexter White, Assistant Secretary of the Treasury, was accused of providing information to the Soviets. He appeared before the House Un-American Activities Committee in August, 1948

The astonishing revelation of White's communist sympathies finally explains why he agreed to spy on his own country for the Soviets even while representing America at the 1944 Bretton Woods conference which would determine the post-war economic order.

Even though the conference ensured a postwar global financial climate dominated by the American dollar, White is thought to have been feeding information to Moscow for years.

While White's espionage has been an open secret and acknowledged by Presidents from Truman to Nixon, historian Benn Steil discovered new notes from the economist's Princeton archives dating from 1944 - when he was at the height of his powers in the administration of President Roosevelt.

The essay, headed 'Political-Economic Int. of Future', outlines a post-war world where the Soviet socialist model of economic planning takes over from the American liberal capitalist one, according to an article by Mr Steil in Foreign Affairs.

John Maynard Keynes, the famous British economist was outwitted by Harry White at the Bretton Woods conference of 1944

U.S. delegates attending the the Bretton Woods Conference, (l-r, standing): Assistant Secretary of Treasury Harry Dexter White, Fred M. Vinson, Dean Acheson, Edward E. Brown, Marriner S. Eccles, and Michigan Congressman Jesse P. Wolcott. Front row, seated: Senator Robert F. Wagner, Kentucky Congressman Brent Spence, Secretary of Treasury Henry Morgenthau Jr., and New Hampshire Senator Charles W. Tobey

The unpublished notes argue that the West has demonized the Soviet Union, and dreams of a strong alliance between the United States and their communist rivals that would create a new world order.

In his essay, White predicts that 'the change will be in the direction of increased control over industry, and increased restrictions on the operations of competition and free enterprise'.

Extraordinarily, he concludes: 'Russia is the first instance of a socialist economy in action. And it works!'

White had clearly deluded himself about the repressive nature of the Soviet government, claiming that officials had guaranteed the freedom of religion and denying that the USSR intended to meddle in the affairs of other countries.

White's communism is far from his image as the capitalist hero who so outmaneuvered the British and their legendary economist John Maynard Keynes that they ended up agreeing to the dollar being the currency of the IMF and World Bank instead of the pound.

The Bretton Woods conference comprised 730 delegates from all 44 Allied nations, including the Soviet Union, and even though White emerged as an American hero he had already begun feeding the Russians information for most of that year.

Among the consequences of the conference were the creation of the International Monetary Fund and the World Bank, two institutions which have been integral to the spread of liberal capitalism around the globe.

By contrast, soon after the end of the war the Soviet Union started to fall behind the U.S. and fast-growing Europe, and within three decades was significantly poorer than its western rivals.

White made such an impact at Bretton Woods that on January 23, 1946, President Harry Truman nominated White to be the first American executive director of the IMF and he was widely tipped to become the fund's managing director.

However, by this time FBI Director J. Edgar Hoover had begun to investigate White, and the paranoid law enforcement chief placed him under investigation for two months after colleagues became concerned about his political beliefs.

The investigation proved fruitful and Hoover presented a report to Truman that included information from 30 sources, including confessed spy Elizabeth Bentley saying that White was a 'a valuable adjunct to an underground Soviet espionage organization.'

Harry White fell under the suspicions of FBI Chief J. Edgar Hoover in 1946 - who unearthed the first evidence that the treasury official was a spy

Keen to keep tabs on White should he only be the tip of the iceberg, Hoover stressed to the president that the FBI's findings remain secret.

Indeed, the day that Hoover's report was delivered on February 5, the Senate Committee on Banking and Currency approved White’s nomination to the IMF.

Alarm bells rang in the White House and when Secretary of State James F. Byrnes read the report he wanted Truman to immediately withdraw the nomination and have White arrested as did Treasury Secretary Fred M. Vinson.

Regardless, Truman still had a healthy distrust of Hoover and instead of allowing White to ascend to IMF managing director kept him as executive director.

Knowing that appointing another American above White would alert him and his Soviet handlers, Truman searched for a solution he could feasibly pass off.

This came when Vinson met with the venerable Keynes, who was the British governor of both the IMF and the World Bank.

He said that Truman was not going to insist on an American head of the IMF but instead wanted an American head of the World Bank.

Joseph Stalin at the Potsdam Conference --- His network of spies across the Western allied nations was enormous in the aftermath of the Second World War and included Harry White at the U.S. Treasury Department

This shocked Keynes, but it set up the precedence that continues to this day of an American head of the World Bank and a European head of the IMF.

Ultimately though it worked in not alerting the Soviets that they might be onto White and he resigned the next year from the IMF in 1947.

The following summer, in August 1948, White was officially accused of spying for the Soviets and brought before the House Un-American Activities Committee.

He denied all the charges and died of a heart attack three days later - which many suspect was brought on by the stress of the hearings.

Following the trial and conviction of Alger Hiss in 1950, who was fundamental in the founding of the United Nations, Representative Richard Nixon revealed a handwritten memo of White’s given to him by Chambers, apparently showing that White had passed classified information for transmission to the Soviets.

However, White's ultimate guilt was established by declassified Soviet documents in the 1990s and In 1997, the bipartisan Moynihan Commission on Government Secrecy, chaired by Democratic Senator Daniel Patrick Moynihan, stated in its findings: 'The complicity of Alger Hiss of the State Department seems settled. As does that of Harry Dexter White of the Treasury Department.'