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History of Political Economy 32.3 (2000) 473-515
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Guilt by Association?
Lauchlin Currie’s Alleged Involvement with Washington Economists in Soviet Espionage
Roger J. Sandilands
The attorney general’s list of proscribed organizations, which had been drawn up by the FBI, was above challenge. The groups on it were not allowed to argue their innocence. If a civil servant had held membership in one of them—or, in many cases, if he merely knew someone who belonged—he was given notice. Guilt was, quite literally, by association.
—William Manchester, The Glory and the Dream:
A Narrative History of America, 1932–72
In July 1948 the testimony of Elizabeth Bentley, a self-confessed Soviet espionage agent, was made public. Her most sensational testimony, in the charged atmosphere of the 1948 presidential election campaign, was that for many years up to 1945 an espionage ring had been operating in Washington controlled by Nathan Gregory Silvermaster, an economist who had held a variety of posts in the government, including positions with the U.S. Treasury, the Department of Agriculture, and the Board [End Page 473] of Economic Warfare. Miss Bentley named eight or nine government economists who she alleged had links with Silvermaster (plus seven or eight in other groups) and who had provided information that was passed on to the Soviets. Two of the most prominent (although not the most allegedly complicit) were the wartime Assistant Secretary of the Treasury Harry Dexter White and White House aide Lauchlin Currie.
In 1995 the United States National Security Agency (NSA) revealed for the first time to the general public that after World War II they had succeeded in partially decrypting many diplomatic cables that had passed between Moscow and the United States during 1942–45. This top-secret code-breaking project continued at NSA headquarters until 1980 and was itself code-named Venona. Over the next two years, 1995–96, the NSA released some 2,900 decrypts. This article reassesses the controversial case of Lauchlin Currie in the light of Venona and the many fresh allegations (Benson and Warner 1996; Haynes and Klehr 1999; Weinstein and Vassiliev 1999; West 1999) it has spawned about him and other Washington economists.
Harry Dexter White (1892–1948) and Lauchlin Currie (1902–1993) both entered graduate school at Harvard in 1925. Currie stayed on as an instructor until 1934 (White until 1932), successively assisting Ralph Hawtrey, Joseph Schumpeter, and John H. Williams in classes in money and banking. White and Currie were both recruited into the U.S. government by Jacob Viner as members of the Treasury’s “freshman brain trust” in the summer of 1934.1 White became the right-hand man of Treasury Secretary Henry J. Morgenthau Jr. and was given the title of “Assistant to the Secretary” in August 1941. He was the architect of the International Monetary Fund and was made assistant secretary of the Treasury in January 1945 to give him more clout when shepherding the Bretton Woods agreements through Congress. He resigned from the Treasury to assume responsibilities as America’s executive director of the IMF in May 1946 (Rees 1973; Craig 1999).
Currie, a native Canadian who had studied at the London School of Economics before moving to Harvard in 1925, left the Treasury in [End Page 474] November 1934 to move to the Federal Reserve Board as deputy director of research and assistant to the new chairman, Marriner Eccles. In view of the later allegations that he was a Communist sympathizer it is worth recording that his long professional record shows him to have been motivated by a desire to make the free enterprise system function more efficiently and democratically. This required government intervention to promote competition and mobility, but also to maintain national income at a high and sustainable level through appropriate monetary and fiscal policies without resort to comprehensive nationalization and central planning. He was the intellectual author of the 1935 Banking Act that reorganized the Federal Reserve System and substantially enhanced its powers in the conduct of...