Nixon’s War with the International Economy

Abstract

‘The P said…The country needs a purpose. Maybe we have to demagogue it. We’ve been program-oriented, now we need to be purpose-oriented.’¹ So recorded Chief of Staff H. R. Haldeman in his diary entry of 23 July 1971, regarding a White House conversation with (the ‘P’) President Richard Nixon about challenges facing the United States and the world in maintaining peace and prosperity. The statement indicates Nixon’s overall approach to the international economy in a crucial period, just three weeks before the second ‘Nixon Shock’ (the first being the opening to China) that rocked the international economy and political structure. As a result, the administration gutted the Bretton Woods dollars-for-gold exchange system that had existed for decades and imposed a temporary 10 per cent surcharge on imports. In this private moment, the president determined to do something about the American trade and payments imbalance that imperilled USA commitments abroad and hurt the domestic economy (and his political standing at home before the 1972 election campaign), but not go too far down the road of protectionism and beggar-thy-neighbour policies that could upset allies and undermine America’s record of liberal trade leadership. It was a tricky balancing act, one that included quite frank and brutal words and actions towards friends abroad. It was aggressively unilateral and motivated by domestic politics, and certainly a blow to the ethic of multilateralism, at first glance.