CURRIE, LAUCHLIN

Lauchlin Currie (October 8, 1902–December 23, 1993) was born in a small fishing village in Nova Scotia, Canada, where his father owned a fleet of vessels. When his father died in 1906 his family moved to the town of Bridgewater, but Currie's early schooling also included short periods in Massachusetts and California. After two years at St. Francis Xavier's University, Nova Scotia (1920–1922), Currie studied at the London School of Economics (1922–1925) where his teachers included Edwin Cannan, Hugh Dalton, A. L. Bowley, and Harold Laski. In 1925 Currie joined Harvard's graduate program, where his chief inspiration was Allyn Abbott Young. His Ph.D. was on banking theory, and he remained at Harvard until 1934 as assistant to, successively, Ralph Hawtrey, John H. Williams, and Joseph Schumpeter. In 1934 he became a U.S. citizen and joined Jacob Viner's famous "freshman brain trust" at the U.S. Treasury. There he outlined an "ideal" monetary system for the United States (including a 100 percent reserve banking plan) and teamed up with Marriner Eccles shortly before the latter became governor of the Federal Reserve Board (November 1934). Eccles recruited Currie as his personal assistant.

At the Fed Currie drafted what became the 1935 Banking Act, which created a true central bank for the United States with increased control over money. At Harvard he had bitterly attacked Fed policy, blaming its "commercial loan theory" of banking (or real bills doctrine) for monetary tightening at a time when the economy was already declining (mid-1929), and then for its passivity in the face of mass liquidations and bank failures from 1929 to 1933. In a January 1932 Harvard memorandum on anti-Depression policy, Currie and two fellow instructors, Harry Dexter White and Paul T. Ellsworth, urged large fiscal deficits, open-market operations to expand bank reserves, the removal of tariffs, and the relief of inter-allied debts. White, another "freshman brain trust" recruit in 1934, became top adviser (and later the assistant secretary) to Treasury Secretary Henry Morgenthau. White and Currie worked closely in their respective roles at the Treasury and Fed, from 1934 to 1939, and also after 1939 when President Roosevelt appointed Currie as his White House adviser on economic affairs.

At the Fed Currie constructed an important "net federal income-creating expenditure series" to show the influence of fiscal policy in acute Depression. When, after four years of recovery, the economy declined sharply in 1937, he was able to explain to President Roosevelt, in an unprecedented four-hour interview, how damaging was the declared aim of balancing the budget "to restore business confidence." This dialogue was part of the "struggle for the soul of FDR" between Secretary Morgenthau and Governor Eccles. At first the president sided with Morgenthau and disaster followed. Not until April 1938, after the worst period of his long tenure in the White House, did Roosevelt at last ask Congress for more than $3 billion of spending on relief and public works. In May 1939 Currie joined Harvard's Alvin Hansen in testimony before the Temporary National Economic Committee (TNEC) to explain the additions and offsets to the circular flow of income and expenditure and the role of government in stabilizing this flow at full employment.

As the White House economist from July 1939, Currie advised on budgetary policy, social security, and peacetime and wartime production plans. In March 1940, at the President's request, he prepared a lengthy Memorandum on Full Employment Policy that attempted to allay the President's fears that the large expenditures being planned for defense, housing and social security were economically unsound. Currie wrote: "I have come to suspect that you are somewhat bothered by the apparent conflict between the humanitarian and social aims of the New Deal and the dictates of 'sound economics.' I feel convinced that in place of conflict there is really complete harmony and for that reason only the New Deal can solve the economic problem."

After a mission to China in January 1941 Currie advised that China be added to the lend-lease program, which he then administered. In 1943 and 1944 he ran the Foreign Economic Administration, and in early 1945 he headed a mission to Switzerland to secure the freezing of Nazi assets. After the war Currie was one of those blamed for "losing" China. It was also alleged that he had participated in wartime Soviet espionage. No charges were laid and in 1949 and 1950 he headed an important World Bank mission to Colombia. He stayed on to advise on the implementation of his report. He assumed Colombian citizenship in 1958 and was the country's leading economic adviser until his death in 1993. Currie's extensive collected papers are archived at Duke University's Special Collections.

See Also: BRAIN(S) TRUST; ECCLES, MARRINER; FEDERAL RESERVE SYSTEM; MONETARY POLICY.

BIBLIOGRAPHY

Currie, Lauchlin. The Supply and Control of Money in the United States. 1934.

Laidler, David, and Sandilands, Roger J. "An Early Harvard Memorandum on Anti-Depression Policies." History of Political Economy 34(2) (2002): 515–552.

Sandilands, Roger J. The Life and Political Economy of Lauchlin Currie: New Dealer, Presidential Adviser, and Development Economist. 1990.

Sandilands, Roger J. "Guilt by Association? Lauchlin Currie's Alleged Involvement with Washington Economists in Soviet Espionage." History of Political Economy 32(3) (2000): 473–515.

Stein, Herbert. The Fiscal Revolution in America. 1969.

Tobin, James. "Hansen and Public Policy." Quarterly Journal of Economics 90 (1976): 32–37.

Roger J. Sandilands