The 1970s: Lost Control

Abstract

At the turn of the decade the strains in the international monetary system had become very pronounced. The large balance-of-payments deficits of the United States had cast doubts on the sustainability of the fixed exchange rates and engendered vast speculative capital outflows out of the US dollar. But the European economic and political situation, too, was full of uncertainties. The political troubles in France in 1968 — ‘les événements de mai’ — had been followed by repeated speculative attacks on the intra-European exchange rate relationships. Following a defeat in the referendum held in April 1969 General de Gaulle had resigned. The new administration under president Pompidou was defining a new, less intransigent course for French external policies, including the possible lifting of the French veto on EEC membership of the United Kingdom. The continued upward pressure on the Deutsche mark, both vis-á-vis the US dollar and most other European currencies, had provoked a crisis atmosphere in Germany. There was widespread reluctance to let the currency appreciate out of fear of a deterioration of the competitive position of German industry. When in the face of continuous capital inflows such appreciation could not be avoided in the end — the Deutsche mark was revalued by 9% in October 1969 — the ‘great coalition’ (christian-democrats and socialists) headed by chancellor Kiesinger had already been forced to step down, reflecting the serious differences of opinion within the administration as to how to handle the crisis situation.

All diese Fortschritte in Richtung auf gröβere Freiheit in der Weltwirtschaft, die uns heute so selbstverständlich erscheinen, erforderten jahrelang eine unendliche Kleinarbeit.

Otmar Emminger, 1986