US Economic Policy in the 1970s
6th Floor Boardroom
Woodrow Wilson Center
1300 Pennsylvania Ave NW
Washington, DC 20009
with Duccio Basosi, University of Florence, Italy and author, Il governo del dollaro. Interdipendenza economica e potere statunitense negli anni di Richard Nixon, 1969-73
The end of the Bretton Woods monetary system in the years between 1971 and 1973 was an historic event that changed the economic landscape of the entire non-soviet world. It has often been argued that the crisis of Bretton Woods was a somewhat linear process, where the inner weaknesses of the arrangements devised in 1944 - fixed exchange rates, gold-dollar standard - ultimately overwhelmed the ability of the participants to keep the system alive. Some scholars have attributed particular responsibilities for the breakdown of Bretton Woods to the Nixon administration in the US, often seen as not sufficiently interested in international economic affairs to avoid the system's collapse, thereby creating the conditions for the economic disorder of the early 1970s.
The records of the three secretaries that served in the US Treasury under the Nixon administration (Kennedy, Connally and Shultz) and on the files of their undersecretary for Monetary Affairs (Volcker), on which Basosi's research is based (as well as on White House, NSC, Federal Reserve and State Department records), allow us to see things in a different light.
From the very beginning of its term in office, the Nixon administration included the need for a different international monetary system in the broad process of reshaping of US foreign policy that would take the forms of the Nixon Doctrine, Détente, and the opening to China. US economic and political exigencies called for a "flexible" system based on the dollar, intended to serve the trends toward growing transnational investments by US companies and banks, as well as the perceived need of a diminished financial constraint on overseas military commitments. However implicitly, and with a trial and error process concerning implementation, this entailed a de facto new conception of US hegemony globally, as well as a serious clash of interests with the European
allies in particular. As European plans, to create their own shield against monetary instability, took on growing credibility throughout 1970 with the launching of the EMU and the Werner plan, US policymakers moved towards the unilateral suspension of their commitment to Bretton Woods. This came on 15 August 1971, after months of deep internal debate within the administration, involving both economic and geopolitical reflections. The second half of 1971, as well as the year 1972, marked the beginning of a different phase. The US administration proceeded quite ruthlessly in the dismantling of the Bretton Woods system, sometimes actually using global financial instability to secure its objectives. A new conception of global American power was taking shape, and, for what concerns the Transatlantic relationship, a clearer definition of western hierarchies de facto replaced the idealistic visions of the "partnership" of the 1960s.