Lauchlin Currie

Lauchlin Bernard Currie (8 October 1902 – 23 December 1993) was a Canadian economist best known for being President Franklin Roosevelt's chief economic advisor during World War II.

After Roosevelt's death, he led the first World Bank survey mission to Colombia and eventually settled there, becoming an economic advisor to the Colombian government.

Currie was born on 8 October 1902 in West Dublin, Nova Scotia, to Lauchlin Bernard Currie, an operator of a fleet of merchant ships, and Alice Eisenhauer Currie, a schoolteacher.

After his father died in 1906, his family moved to nearby Bridgewater, Nova Scotia, where most of his schooling took place.

Currie had begun to demonstrate studious habits (like reading late into the night) by the time his family moved to Massachusetts, but he drove automobiles "with his foot on the floor board" for relaxation.

He also attended school in California, where he had relatives.

From 1920-1922, Currie attended St. Francis Xavier University before transferring to the London School of Economics to study under Edwin Cannan, Hugh Dalton, Arthur Lyon Bowley, and Harold Laski.

After graduating with a BSc in 1925, he enrolled at Harvard University to study under Allyn Abbott Young, who ironically left in 1927 for the LSE (then died from influenza in 1928).

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.

Instead, he advocated control of the money supply to stabilize income and expenditures.

He cited his colleague and covert Soviet agent Abraham George Silverman for his "many helpful suggestions and criticisms" in the formation of this line of thinking.

Currie graduated with a PhD in 1931, and his dissertation on banking theory was supervised by John H. Williams.

In a January 1932 memorandum on anti-Depression policy, Currie and fellow instructors Harry Dexter White and Paul Theodore 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.

Currie remained at Harvard until 1934 as a teaching assistant to John H. Williams, Ralph George Hawtrey, and Joseph Schumpeter, and one of his students was Paul Sweezy.

In 1934, Currie constructed the first money supply and income velocity series for the United States.

In 1934, Currie became a naturalized U.S. citizen and joined Jacob Viner's "freshman brain trust" at the Treasury Department, where he outlined an ideal monetary system for the U.S. that included a 100-percent reserve banking plan to strengthen central bank control and prevent bank panics in the future 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 S. Eccles left the Treasury to become Chair of the Federal Reserve and took Currie with him as his personal assistant.

Harry White was another "freshman brain trust" recruit who became a top advisor to Treasury Secretary Henry Morgenthau Jr., and White and Currie worked closely in their respective roles for some years after.

Alan Meltzer wrote in his history of the Federal Reserve that "Lauchlin Currie wrote a remarkable memo for a Treasury committee in 1934 emphasizing the role of money in cyclical fluctuations, at a time when virtually no one thought that money mattered."

In his role as Deputy Director of the Department of Investigation, Currie drafted what became 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 exceptionally acute, persisting depression.

Currie's preferred 100-percent reserve banking idea, however, was not one of the reforms implemented.

In 1937, the economy declined sharply after four years of recovery.

In a four-hour interview with President Roosevelt, Currie was able to explain 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" between the cautious Morgenthau and the expansionist Eccles.

In April 1938, President Roosevelt 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 deficits in the recovery process.

Currie was appointed special advisor on economic affairs to the White House in July 1939 and gave counsel on taxation, social security, and the speeding up of peacetime and wartime production plans until the end of the Roosevelt administration.

In January 1941, he was sent to China for discussions with Generalissimo Chiang Kai-shek (representing the Kuomintang) and Zhou Enlai (representing the Chinese Communist Party) in the Chinese wartime capital of Chongqing.

In an effort to preserve the appearance of American neutrality in the Second Sino-Japanese War, the Chinese government paid Currie's expenses and government salary.

He recommended that China be added to Lend-Lease upon his return in March, and he was put in charge of this program's administration under the overall direction of President's Roosevelt's chief foreign policy advisor Harry Hopkins.

Currie was also assigned to expedite the Flying Tigers, a voluntary unit of American military pilots released for combat duty on behalf of China against Japan and technically part of the Chinese Air Force under the command of Claire Lee Chennault (Currie also organized a large training program in the U.S. for Chinese pilots).

In May 1941, he presented a paper on Chinese aircraft requirements to General George C. Marshall and the Joint Board, which they accepted.

This paper stressed the role that an air force in China could play in defending Singapore, the Burma Road, and the Philippines against Japanese attack, as well as the potential for strategic bombing of targets in Japan.

These activities, together with his efforts to tighten economic sanctions against Japan, are said to have been partially responsible for provoking Japan's attack on Pearl Harbor.

Currie returned to Chongqing in July 1942 to try to ease strained relations between Kai-shek and General Joseph Stilwell, commander of American military forces in China.

Currie was one of several presidential envoys who recommended Stilwell's recall, but General Marshall refused to do so until October 1944.

This permanent relocation, however, was not entirely voluntarily, as the U.S. had refused to renew his passport in 1954.

It is possible that this occurred because he had been named by two Soviet defectors and in nine partially decrypted cables sent by Soviet agents, but he was never charged with a crime and debate remains around if he knowingly collaborated.

Young remained an influence, however, and Currie's final paper--on Youngian endogenous growth theory--was posthumously published in 1997.