Lauchlin Currie

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Lauchlin Bernard Currie (October 8, 1902 – December 23, 1993) was a Canadian-born economist from New Dublin, Nova Scotia, Canada, a U.S. economist, and an alleged Soviet Agent.

As a naturalized American citizen, Currie served as White House economic adviser to President Franklin Roosevelt during World War II (from 1939 to 1945). From 1949 to 1953, he directed a major World Bank mission to Colombia and related studies, and became a Colombian citizen after the United States refused to renew his passport in 1954. Information from the VENONA project indicates that he passed information to Soviet intelligence while serving as Roosevelt's assistant.

Contents 1 Early life 2 New Deal 2.1 Freshman Brain Trust 2.2 White House 3 Allegations of Soviet Intelligence Activity 4 Death 5 Bibliography 6 References 7 Further reading 8 External links

[edit] Early life

He was born to Lauchlin Bernard Currie, an operator of a fleet of merchant ships, and Alice Eisenhauer Currie, a schoolteacher. In 1906, at the age of four, Currie's father died, causing his family to move to nearby Bridgewater where most of his schooling was done. He also attended schools in Massachusetts and California, where he had relatives. In 1922, after two years at Saint Francis Xavier University in Nova Scotia, the young Currie moved to the United Kingdom to study at the London School of Economics under Edwin Cannan, Hugh Dalton, A. L. Bowley, and Harold Laski.

From the LSE, Currie moved to Harvard, where his chief inspiration was Allyn Abbott Young, then president of the American Economic Association. It was at this school where he would earn his Ph.D. for a dissertation on banking theory. He remained at Harvard until 1934 as assistant to, successively, Ralph Hawtrey, John H. Williams, and Joseph Schumpeter. Paul Sweezy was one of his students of money and banking at Harvard.

In 1934, Currie constructed the first money supply and income velocity series for the United States. He blamed the government's "commercial loan theory" of banking for monetary tightening in mid-1929, when the economy was already declining, and then for its passivity during the next four years in the face of mass liquidations and bank failures. In a January 1932 Harvard memorandum on antidepression policy, Currie and fellow instructors Harry Dexter White and Paul T. Ellsworth urged large fiscal deficits coupled with open market operations to expand bank reserves, as well as the lifting of tariffs and the relief of interallied debts.

[edit] New Deal

[edit] Freshman Brain Trust

In 1934, Currie became an American citizen and joined Jacob Viner's "freshman brain trust" at the U.S. Treasury. He outlined an ideal monetary system for the United States, which included a 100-percent reserve banking plan to strengthen central bank control by preventing member banks from lending out their demand deposit liabilities, while removing reserve requirements on savings deposits with low turnover. Later that year, Marriner Eccles moved from the Treasury to become governor of the Federal Reserve Board. He took Currie with him as his personal assistant. Harry Dexter White, another "freshman brain trust" recruit, became a top adviser to Secretary of the Treasury Henry Morgenthau, and for some years he and Currie worked closely in their respective roles at the Treasury and the Federal Reserve.

Soon after, Currie drafted the Banking Act of 1935 which reorganized the Federal Reserve and strengthened its powers. He also constructed a "net federal income-creating expenditure series" to show the strategic role of fiscal policy in complementing monetary policy to revive an economy in acute, persisting depression. After four years of recovery, the economy declined sharply in 1937. In a four-hour interview, he was able to explain to President Roosevelt that the declared aim of balancing the budget "to restore business confidence" had damaged the economy. This was part of the "struggle for the soul of FDR" (Stein, 1969) between the cautious Morgenthau and the expansionist Eccles. At first, FDR sided with Morgenthau and disaster shortly followed. In April 1938, the president asked Congress for major appropriations for spending on relief and public works. In May 1939, the rationale was explained in theoretical and statistical detail by Currie ("Mr. Inside") and by Harvard's Alvin Hansen ("Mr. Outside") in testimony before the Temporary National Economic Committee to highlight the role of government budgets in the recovery process.

[edit] White House

Named FDR's White House economist in July 1939, Currie advised on taxation, social security, and the speeding up of peacetime and wartime production plans. In January 1941, he was sent on a mission to China for discussions with Generalissimo Chiang Kai-shek and Chou En-lai, the Communist representative in the Chinese wartime capital of Chungking. On his return in March, he recommended that China be added to the lend-lease program. He was put in charge of its administration under the overall direction of FDR's special assistant Harry Hopkins.

Currie was also assigned to expedite the American Volunteer Group (Flying Tigers), in which U.S. military pilots were released for combat under Claire Chennault, an adviser to the Chinese Air Force against Japan. Currie also organized a large training program in the United States for Chinese pilots. In May 1941, he presented a paper on Chinese aircraft requirements to General George C. Marshall and the Joint War Board. The document, accepted by the Board, stressed the role of an air force in China could play in defending Singapore, the Burma Road, and the Philippines against Japanese attack. It also pointed to its potential for strategic bombing of targets in Japan itself. These activities, together with Currie's work in helping to tighten sanctions against Japan, are said to have played a part in provoking Japan's attack on Pearl Harbor.

Currie returned to Chungking in July 1942 to try to patch up the strained relations between Chiang and General Joseph W. Stilwell, commander of U.S. forces in China. Currie was one of several of FDR's envoys who recommended Stilwell's recall and reassignment. Back in Washington, Roosevelt asked Currie to put this case to General Marshall, but the General dismissed the idea. Only much later did Marshall concede that his protégé's continued presence in China was indeed a mistake. Stilwell was recalled in October 1944.

Currie appears to have been involved in carrying out orders from Roosevelt to get U.S. intelligence services to return Soviet cryptographic documents to the Soviet Union and to cease decoding operations.

From 1943 to 1944, Currie ran the Foreign Economic Administration where he played a major role in recruiting or recommending economists and others throughout the Washington administration, prominent examples are John Kenneth Galbraith, Richard Gilbert, Adlai Stevenson, and William O'Dwyer. In early 1945, Currie headed a tripartite (U.S., British, and French) mission to Berne to persuade the Swiss to freeze Nazi bank balances and stop further shipments of German supplies through Switzerland to the Italian front. He was also involved in loan negotiations with the British and the Russians, and in preparations for the 1944 Bretton Woods conference (staged mainly by Harry Dexter White), which led to the creation of the International Monetary Fund and the World Bank.

[edit] Allegations of Soviet Intelligence Activity

After the war, Currie was one of those blamed for "losing" China. Elizabeth Bentley, a Soviet espionage agent, claimed that Currie and Harry Dexter White had been part of the Silvermaster ring.^[1] Though she had never met Currie and White personally, she testified to receiving information through cutouts (couriers) who were other Washington economists (later determined also to be Soviet agents).^[2][3] White and Currie appeared before the House Committee on Un-American Activities in August 1948 to rebut her charges. White, who was also implicated as a source of Soviet intelligence (later confirmed in VENONA intercepts and review of Soviet KGB notes of NKVD official Gaik Ovakimian) had a serious heart problem, and died three days after his appearance at the hearings.

Currie was not prosecuted, and in 1949, he was appointed to head the first of the World Bank's comprehensive country surveys to Colombia. After his report was published in Washington in September 1950, he was invited by the Colombian government to return to Bogotá as adviser to a commission established to implement the report's recommendations. In December 1952, Currie gave evidence in New York to a grand jury investigating Owen Lattimore's role in the publication of secret State Department documents in Amerasia magazine.

However, when Currie, as a naturalized U.S. citizen, tried to renew his passport in 1954, he was refused, ostensibly on the grounds that he was now residing abroad and married to a Colombian. However, he may have in fact been identified with the then-secret VENONA project, which had decrypted wartime Soviet cables where Currie was identified as a source of Soviet intelligence. He appears in the VENONA cables under the cover name PAGE, and in Soviet intelligence archives as 'VIM' and a member of both the Golos and Bentley spy networks.^[4][5]

After a military coup in Colombia in 1953, he retired from economic advisory work and devoted himself to raising Holstein cattle on a farm outside Bogotá, and developed the highest-yielding dairy herd in the country. With the return of civilian government in 1958, President Alberto Lleras personally conferred Colombian citizenship upon him and he returned to advisory work for a succession of presidents. However, between 1966 and 1971, he was abroad as a visiting professor in North American and British universities: Michigan State (1966), Simon Fraser (1967-1968 and 1969-1971), Glasgow (1968-1969) and Oxford (1969). He returned permanently to Colombia in May 1971 at the behest of President Misael Pastrana Borrero to continue economic planning, the "Plan of the Four Strategies", with focus on urban housing and export diversification. The plan was implemented, with new institutions playing a major role in accelerating Colombia's urbanization.

Currie was chief economist at the National Planning Department from 1971 to 1981, followed by twelve years at the Colombian Institute of Savings and Housing until his death in 1993. There he doggedly defended the unique housing finance system (based on "units of constant purchasing power" for both savers and borrowers) established in 1972. The system significantly boosted Colombia's growth. He also advised on urban planning and played a major part in the first United Nations Habitat conference in Vancouver in 1976. His "cities-within-the-city" urban design and financing proposals (including the public recapture of land's socially created "valorización" or "unearned land value increments" as cities grow) were explained in Taming the Megalopolis (1976). He was also a professor at the National University of Colombia, the Javeriana University, and the University of the Andes. His writings were heavily influenced by his Harvard mentor Allyn Young. An important paper on Youngian endogenous growth theory was published posthumously in History of Political Economy (1997). On the day before he died, President Cesar Gaviria awarded him Colombia's highest honor, the Cruz de Boyaca, for services to his adopted country.

[edit] Death

He died on December 23, 1993 of a heart attack in Bogota, Colombia.^[6]

[edit] Bibliography

Primary literature:

• 1934. The Supply and Control of Money in the United States. Harvard Univ. Press. His influential early work on monetary theory and policy.
• 2002, History of Political Economy 32. His 1932 Harvard memorandum on antidepression policy. With a foreword by David Laidler and Roger Sandilands explaining its influence on the Chicago School monetary tradition.
• Currie's papers:
  • General: Duke University's Special Collections Library [1].
  • China: Hoover Institution, Stanford University.

Secondary literature:

• Roger Sandilands, 1990. The Life and Political Economy of Lauchlin Currie: New Dealer, Presidential Adviser, and Development Economist. Duke University Press. ISBN 0-8223-1030-9.

On Currie and the New Deal, see:

• Herbert Stein, 1969. The Fiscal Revolution in America.
• Ronnie J. Phillips, 1995. The Chicago Plan and New Deal Banking Reform.
• 2004. Special issue of the Journal of Economic Studies 31. Contains some of his hitherto unpublished FRB and White House memoranda.

Obituaries:

• The New York Times 30 December 1993;
• The Times of London, 10 January 1994.

On the allegation that Currie was a Soviet spy:

• John Earl Haynes and Harvey Klehr, 1999. Venona: Soviet Espionage in America in the Stalin Era.
• Roger Sandilands, 2000, "Guilt by Association? Lauchlin Currie's Alleged Involvement with Washington Economists in Soviet Espionage," History of Political Economy 32:
• James Boughton and Roger Sandilands, 2003, "Politics and the Attack on FDR's Economists: From Grand Alliance to Cold War," Intelligence and National Security 17.

[edit] References

[edit] Further reading

• Haynes, John E. and Klehr, Harvey, 2000. Venona: Decoding Soviet Espionage in America. Yale University Press.
• Haynes, John E. and Klehr, Harvey, 2003. In Denial: Historians, Communism, & Espionage. Encounter Press.
• Schecter, Jerrold and Leona, 2002. Sacred Secrets: How Soviet Intelligence Operations Changed American History. Potomac Press.
• Weinstein, Allen, and Vassiliev, Alexander, 2000. The Haunted Wood: Soviet Espionage in America--The Stalin Era. Modern Library Press.
• Alexander Vassiliev, "Notes on Soviet SVR archives."
• Robert J. Hanyok, Eavesdropping on Hell: Historical Guide to Western Communications Intelligence and the Holocaust, 1939-1945. Ft. Meade, MD: National Security Agency, Center for Cryptologic History, 2005; "Currie, known as PAZh (Page) and White, whose cover names were YuRIST (Jurist) and changed later to LAJER (Lawyer), had been Soviet agents since the 1930s. They had been identified as Soviet agents in Venona translations and by other agents turned witnesses or informants for the FBI and Justice Department. From the Venona translations, both were known to pass intelligence to their handlers, notably the Silvermaster network."
• United States. National Counterintelligence Center. A Counterintelligence Reader. NACIC, no date. vol. 3, chap. 1, pg. 31.
• File card of Patterson contacts in regard Silvermaster, box 203, Robert P. Patterson papers, Library of Congress
• General Bissell to General Strong, 3 June 1942, Silvermaster reply to Bissell memo, 9 June 1942, Robert P. Patterson to Milo Perkins of Board of Economic Warfare, 3 July 1942, all reprinted in Interlocking Subversion in Government Departments, 30 August 1955, 84th Cong., 1st sess., part 30, 2562–2567.
• Lauchlin Currie testimony, 13 August 1948, U.S. Congress, House of Representatives, Committee on Un-American Activities, 80th Cong., 2d sess., 851–877.
• Underground Soviet Espionage Organization (NKVD) in Agencies of the United States Government, 21 February 1946, FBI Silvermaster file, serial 573.
• Report on Currie interview, 31 July 1947, FBI Silvermaster file, serial 2794.
• Michael Warner and Robert Louis Benson, Venona and Beyond: Thoughts on Work Undone, Intelligence and National Security 12, no. 3 (July 1997), 10–11.
• Anonymous Russian letter to Hoover, 7 August 1943, reproduced in Robert Louis Benson and Michael Warner, eds., Venona: Soviet Espionage and the American Response, 1939–1957 (Washington, D.C.: National Security Agency, Central Intelligence Agency, 1996), 51–54. [2]

[edit] External links

• Venona: Soviet Espionage and the American Response, 1939-1957
• Politics and the Attack on FDR's Economists
• Annals of the Flying Tigers