The End of Bretton Woods System, Fifty Years Later
Commentaries by university and financial economists are appearing on the approaching 50th anniversary of the August 15, 1971, “Nixon Shock”, the end of the post-War gold reserve Bretton Woods system which has produced half a century of industrial decline, speculative riot, gigantic debt bubbles and crashes, steadily worsening real wages and living conditions, collapsing public health capacities and now a deadly global pandemic.
The commentators have little conception of what happened on that Aug. 15, aside from listing Nixon’s tariff, wage and price controls, dollar devaluation and attacks on “speculators”. They won’t see what it has done to U.S. and European economies and to prospects of development for Asian, African, and South American nations; they certainly could not have understood what was happening at the time. The extraordinary economist and statesman Lyndon LaRouche could see both, at that time and for several years before Nixon was pushed into his bumbling role in “the shock”.
In these commentaries, there is no mention of the crucial role of actions by Harold Wilson’s British government and the Bank of England, which hammered away at FDR’s Bretton Woods system until they pushed Nixon and his incompetent team of Arthur Burns, George Shultz, and James Baker III into bringing it down. Wilson tried and failed to get Parliament to devalue the pound in 1966. Then, having imposed severe austerity measures, in 1967 his government again recommended a 15% pound devaluation, and Parliament devalued it by 14% in November, without coordination with other major nations through Bretton Woods procedures. In the same period, the Bank of England twice opened a “gold window” at which British financial firms could trade in their dollars for gold and make claims on the U.S. Treasury.
It was those London actions on the basis of which LaRouche made his unique forecasts starting in 1967, that Bretton Woods would be broken up by “about the end of the decade”.
The 50-year commentaries harp on the claim that “the dollar has maintained its primacy” since and despite the Nixon shock, due to markets’ and financial forces’ ability to create dollar obligations themselves! One in Project Syndicate, by a Princeton economist, is most blatant: “Private financial mar kets’ power to generate money — U.S. dollars –made the greenback even more central.”
LaRouche said in “Trade Without Currencies” in 2000 that the U.S. dollar in the 1945–66 period was the world’s reserve based on high U.S. labor productivity and strong capacity for capital goods exports; this in turn was the basis for the relative success of the Bretton Woods arrangements. After that point, he said, the strength of the dollar as reserve currency had steadily declined, making a new international credit system urgent; by 2000 he had for years called for a new Bretton Woods whose objective was credit for “great projects” in developing nations.
In the history of Lyndon LaRouche’s immortal contributions to economic science and human progress, that date in 1971 has an important place. By his unique ability to forecast, several years earlier, the “shock” end of the gold-reserve dollar — recognized then even by average American citizens as a major and ominous change — LaRouche set himself apart, by the force of his ideas, from other economists and political leaders.
Already in 1967, seeing what was coming, LaRouche proposed in a mass-circulation pamphlet a new policy of Third World development through credit to fund capital goods exports, as the higher objective for the growing anti-Vietnam War movement. Within a decade, he had won the Non-Aligned Nations to an International Development Bank to begin to restore Bretton Woods as FDR had intended the role of the World Bank in developing sector projects of new infrastructure development. And within that decade, he had attracted powerful Wall Street and London enemies who concocted wild slanders and formed a “Get-LaRouche Task Force” to see him prosecuted and imprisoned.
Looking forward 50 years from that 1971 event which had proven his method of physical economics, LaRouche was able to see the coming alternatives in the post-Bretton Woods world: Increasingly unbridled speculation ruling over collapsing industries, the imposition of what he called “Schachtian fascism” in economic policy, depression and a potential biological holocaust of pandemics; or, a new international order of credit for capital goods export and development.
Fifty years later LaRouche’s conception of a new Bretton Woods, or a Malthusian depopulation disguised as the “Green New Deal”, are the choices now. The Schiller Institute’s 50-year anniversary conference Aug.14, 2021, will present LaRouche’s method of thinking in action. “So, Are You Finally Willing To Learn Economics?” Register at: https://www.larouchelegacyfoundation.org