The Cold War and the international political economy in the 1970s

Abstract This article reviews the scholarly literature on the international political economy (IPE) in the 1970s and considers the connections between the Cold War and the transformations of the liberal (or capitalist) international political economy. It presents the 1970s as a transitional decade that brought the ascent of globalisation and financial deregulation, the reorientation of advanced capitalist economies towards services and post-industrial production, and the end of the extensive growth patterns of the 1950s and 1960s. While the liberal IPE underwent dramatic changes during the 1970s, the Communist bloc experienced diminished rates of growth but not the kinds of dramatic economic restructuring that occurred in the West. These developments in the 1970s prefigured the Cold War's resolution in the 1980s. Situated in comparative context, the transformations of the liberal world economy during the 1970s exposed – and in some ways exacerbated – the relative backwardness of the Soviet Union's command economy, with decisive consequences for the legitimacy of the Communist regime. International economic change, in this view, precipitated the ideological and geopolitical developments that would bring the Cold War to its end. Notes 1 The Cambridge History of the Cold War, in three field-defining volumes, includes just three essays on economic themes. See Melvyn Leffler and Odd Arne Westad, eds., The Cambridge History of the Cold War, 3 vols. (New York: Cambridge University Press, 2010). There are exceptions, including Odd Arne Westad's The Global Cold War (New York: Cambridge, 2005), which makes the conflict between economic systems a central theme. 2 For an introduction to the genre, see Benjamin Cohen, International Political Economy: An Intellectual History (Princeton, New Jersey: Princeton University Press, 2008). 3 Connoting membership of the Organisation for Economic Cooperation and Development. A list of member countries is available from the OECD at < http://www.oecd.or/general/listofoecdmembercountries-ratificationoftheconventionontheoecd.htm>. 4 A note on terminology may be in order. I use 'liberal', 'market', and 'capitalist' to describe the economic systems of the West: 'liberal' and 'market' when referring to exchange, and 'capitalist' when referring to production. I use the term 'communist' to identify political regimes but 'socialist' or 'non-market' to describe their economic arrangements, in deference to the fact that the USSR and other communist regimes called their economic systems 'socialist', the achievement of 'communism', according to the Marxist dogma, being a task for the future. 5 For a useful elucidation of the distinction between extensive and intensive growth, see Barry Eichengreen, The European Economy Since 1945: Coordinated Capitalism and Beyond (Princeton: Princeton University Press, 2008). 6 Derived from Angus Maddison, 'Statistics on World Population, GDP, and Per Capita GDP, 1-2008AD.' Available online at < http://www.ggdc.net/MADDISON/oriindex.htm>. 7 For the debate on convergence, see John Kenneth Galbraith, The New Industrial State (Boston: Houghton Mifflin, 1967); Marion Levy, Jr., Modernization and the Structure of Societies: A Setting for International Affairs (Princeton, NJ: Princeton University Press, 1966); and Ian Weinberg, 'The Problem of the Convergence of Industrial Societies: A Critical Look at the State of a Theory', Comparative Studies in Society and History 11, no. 1 (1969): 1–15. For a review of convergence theory from the Soviet perspective, see Donald R. Kelley, 'The Soviet Debate on the Convergence of the American & Soviet Systems', Polity 6, no. 2 (1973): 174–196. 8 For a useful analysis of American material advantages, see Donald White, 'The Nature of World Power in American History: An Evaluation at the End of World War II.' Diplomatic History 11, no. 3 (1987): 181–202. 9 William Appleman Williams, The Tragedy of American Diplomacy (New York: 1972). 10 Thomas McCormick, America's Half-Century: United States Foreign Policy in the Cold War and After (Baltimore, Md.: 1995); and Franz Schurmann, The Logic of World Power: An Inquiry Into the Origins, Currents, and Contradictions of World Politics (New York: Pantheon, 1974). 11 Ronald Steel, Pax Americana (New York: Viking, 1967). 12 Elizabeth Borgwardt, A New Deal for the World: America's Vision for Human Rights (Cambridge, MA: Harvard University Press, 2005). G. John Ikenberry, After Victory: Institutions, Strategic Restraint, and the Rebuilding of Order After Major Wars (Princeton, NJ: 2001); Robert Latham, The Liberal Moment: Modernity, Security, and the Making of Postwar International Order (New York: 1997); Geir Lundestad, 'Empire by Invitation? The United States and Western Europe, 1945–1952', SHAFR Newsletter 15, (Sept. 1984): 1–21; and Charles S. Maier, Among Empires: American Ascendancy and Its Predecessors (Cambridge, MA: Harvard University Press, 2006). 13 John Maynard Keynes, The General Theory of Employment, Interest, and Money (San Diego, CA: Harcourt, 1964); and Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Time (Boston, MA: Beacon Press, 2001). 14 Barry Eichengreen, Golden Fetters: The Gold Standard and the Great Depression (New York: Oxford University Press 1992). Also see Peter Temin, Lessons From the Great Depression (Cambridge, MA: MIT Press, 1989); and Barry Eichengreen, and Peter Temin, 'The Gold Standard and the Great Depression', Contemporary European History 9, no. 2 (2000): 183–207. 15 John G. Ruggie, 'International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order', International Organization 36, no. 2 (1982): 379–415. The IPE literature today largely follows Ruggie's (and Polayni's) view of the postwar settlement. See, for example, Jeffry A. Frieden, Global Capitalism: Its Fall and Rise in the Twentieth Century (New York: W.W. Norton, 2006), chaps. 9–12. 16 Alfred Eckes, A Search for Solvency: Bretton Woods and the International Monetary System, 1941–1971 (Austin: University of Texas Press 1975). 17 Francis J. Gavin, Gold, Dollars, and Power: The Politics of International Monetary Relations, 1958–1971 (Chapel Hill: University of North Carolina Press, 2004). 18 Harold James, International Monetary Cooperation Since Bretton Woods (Washington, DC: New York: 1996). 19 For a sense of the debate, see David Andrews, ed. Orderly Change: International Monetary Relations Since Bretton Woods (Ithaca, NY: Cornell University Press, 2008); Michael Bordo and Barry Eichengreen, eds. A Retrospective on the Bretton Woods System: Lessons for International Monetary Reform (Chicago: University of Chicago Press, 1993). 20 For accounts of this history, see Gavin, Gold, Dollars, and Power, chap. 8; James, International Monetary Cooperation; Allen Matusow, Nixon's Economy: Booms, Busts, Dollars, and Votes (Lawrence: University of Kansas Press, 1998), 117–81; Susan Strange, International Monetary Relations (New York: Oxford University Press, 1976). Documentation of Nixon's decision to end gold-dollar convertibility is scarce, but the first-hand accounts include H. Robert Haldeman, The Haldeman Diaries: Inside the Nixon White House (New York: G.P. Putnam, 1994); William Safire, Before the Fall: An Inside View of the Pre-Watergate Whitehouse (New York: Bellentine Books, 1977); and Paul Volcker and Toyoo Gyohten, Changing Fortunes: The World's Money and the Threat to American Leadership (New York: Times Books, 1992), chap. 3. 21 Especially useful is the relevant volume of the Foreign Relations of the United States series. See US Department of State, Foreign Relations of the United States 1969–1976, Vol. III (Washington DC: United States GPO, 1999). 22 Fred Block, The Origins of International Economic Disorder: A Study of United States International Monetary Policy From World War II to the Present (Berkeley: University of California Press, 1977). 23 Fred Block, The Origins of International Economic Disorder: A Study of United States International Monetary Policy From World War II to the Present (Berkeley: University of California Press, 1977), 163. 24 Angus Maddison, 'Statistics on World Population, GDP, and Per Capita GDP'. 25 Charles Kindleberger, The World in Depression, 1929–1939 (Berkeley: University of California Press, 1973). 26 Kindleberger, The World in Depression, 288–305. 27 William L. Silber, Volcker: The Triumph of Persistence (New York: Bloomsbury Press, 2012). 28 Joanne Gowa, Closing the Gold Window: Domestic Politics and the End of Bretton Woods (Ithaca, NY: Cornell University Press, 1983); and John S. Odell, U.S. International Monetary Policy: Markets, Power, and Ideas As Sources of Change (Princeton, NJ: Princeton University Press, 1982). 29 Scholars besides Gowa have emphasised the tensions between nationalist and internationalist purposes in US foreign economic policy. On this theme, see C. Fred Bergsten, The Dilemmas of the Dollar: The Economics and Politics of United States International Monetary Policy (New York: NYU Press, 1975); and David P. Calleo, The Imperious Economy (Cambridge, MA: Harvard University Press, 1982). 30 Maurice Obstfeld, Jay Shambaugh, and Alan M. Taylor, 'The Trilemma in History: Tradeoffs Among Exchange Rates, Monetary Policies, and Capital Mobility', Review of Economics and Statistics 87, no. 3 (2005): 423–438. The classic statement is Robert Mundell, 'Capital Mobility and Stabilization Policy Under Fixed and Flexible Exchange Rates', The Canadian Journal of Economics and Political Science 29, no. 4 (1963): 475–485. 31 Robert Leeson, Ideology and the International Economy the Decline and Fall of Bretton Woods (New York: Palgrave Macmillan, 2003). 32 William Gray, 'Floating the System: Germany, the United States, and the Breakdown of Bretton Woods, 1969–1973', Diplomatic History 31, no. 2 (2007). 33 On the transformations of finance in the 1970s, see Jeffry A. Frieden, Banking on the World: The Politics of American International Finance (New York: Harper & Row, 1987); Martin Mayer, The Bankers: The Next Generation (New York: Penguin, 1997); Michael Moffitt, The World's Money: International Banking, From Bretton Woods to the Brink of Insolvency (New York: Simon and Schuster, 1984); and Philip Zweig, Wriston: Walter Wriston, Citibank, and the Rise and Fall of American Financial Supremacy (New York: Crown, 1995). 34 'Arab Oil Has Gone Up 470$ In a Year,' NYT, 97. 35 In 1973, GDP for the OECD countries increased by 6.32% from the previous year. Since then, their fastest annual growth was 4.87% in 1984, coming off the sharp recession of the early 1980s, and annual GDP growth has averaged just 2.54%. See OECD Stat, available at < http://stats.OECD.org>. 36 See, for example, US Department of State, Foreign Relations of the United States: 1969–1976, Vol. 31, Energy Crisis, 1969–1974 (Washington, DC: US GPO, 2011); and Foreign and Commonwealth Office, Series III, Vol. IV, The Year of Europe: America, Europe, and the Energy Crisis (London: Routledge, 2006). 37 Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power (New York: 1993); Fiona Venn, The Oil Crisis (London: 2002). Also see Venn's broader history of international oil politics: Oil Diplomacy in the Twentieth Century (New York: Macmillan, 1986). 38 John Blair, The Control of Oil (New York: Vintage Books, 1978). 39 See Dankwart Rustow and John Mugno, OPEC: Success and Prospects (New York: NYU Press, 1976); Ian Seymour, OPEC: Instrument of Change (New York: Macmillan, 1980); and Pierre Terzian, OPEC: The Inside Story (Avon, United Kingdom: Zed Books). Also is the 6-volume book of primary sources, drawn from the British National Archives: A.L.P. Burdett, OPEC: Origins and Strategy, 6 vols. (Cambridge: Cambridge University Press). 40 Henry Kissinger, Years of Upheaval (Boston: Little Brown, 1982), chap. 19. 41 James Akins, 'The Oil Crisis: This Time the Wolf Is Here', Foreign Affairs 51, no. 3 (1973): 462–490. 42 Andrew Scott Cooper, The Oil Kings: How the U.S., Iran, and Saudi Arabia Changed the Balance of Power in the Middle East (New York: 2011). 43 George Philip, The Political Economy of International Oil (Edinburgh: Edinburgh University Press, 1994). 44 Robert Lieber, The Oil Decade: Conflict and Cooperation in the West (New York, NY: Praeger, 1983); and Raymond Vernon, The Oil Crisis in Perspective (New York: W.W. Norton, 1976). 45 International Monetary Cooperation. 46 For contemporary efforts to grapple with inflation as a complex social, political, and psychological – as well as economic – phenomenon, see Fred Hirsch and John H Goldthorpe, eds., The Political Economy of Inflation (Cambridge, MA: Harvard University Press, 1978); and Leon Lindberg, Charles S Maier, and Brian Barry, eds., The Politics of Inflation and Economic Stagnation: Theoretical Approaches and International Case Studies (Washington, DC: Brookings Institution, 1985). In retrospect, the Great Inflation of the 1970s has become a parable, warning against fiscal laxity and monetary indiscipline. For example, Robert J. Samuelson, The Great Inflation and Its Aftermath: The Past and Future of American Affluence (New York: Random House, 2008). 47 Ethan Kapstein, Governing the Global Economy (Cambridge, MA: Harvard University Press, 1994); and David Spiro, The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets (Ithaca, NY: Cornell University Press, 1999). 48 Simon Bromley, American Hegemony and World Oil: The Industry, the State System, and the World Economy (University Park: Pennsylvania State University Press, 1991). 49 Geoffrey Barraclough, 'Wealth and Power: The Politics of Food and Oil', The New York Review of Books, 7 August 1975. 50 United Nations, 'Charter of Economic Rights and Duties of States', 12 December 1974. A/RES/29/3281. 51 Stephen Krasner, Structural Conflict: The Third World Against Global Liberalism (Berkeley: University of California Press, 1985). 52 Michael Hudson, Global Fracture: The New International Economic Order, reprint, (London: Pluto, 2005). 53 These included the Club of Rome, the Trilateral Commission, and the Brandt Commission. See Jan Tinbergen, Reshaping the International Order: A Report to the Club of Rome (London: Hutchinson & Co., 1977); Richard Gardner, Saburo Okita, and B.J. Udink, A Turning Point in North-South Economic Relations (New York: Trilateral Commission); and Willy Brandt and Abdlatif Y al-Hamad. North-South: A Programme for Survival (London: Pan Books, 1980). For an analysis of the North-South dialogue that the NIEO proposal initiated, see Robert Rothstein, Global Bargaining: UNCTAD and the Quest for a New International Economic Order 1979. 54 Mahbub ul Haq, The Poverty Curtain: Choices for the Third World (New York: Columbia University Press, 1976). 55 Emphasising the political aspects, the historian Mark Mazower sees US opposition as a primary cause of the NIEO's failure. See Governing the World: The History of an Idea (New York: Penguin, 2012), esp. 311–7. Robert Olson, a US diplomat, gives a more positive gloss in US Foreign Policy and the New International Economic Order: Negotiating Global Problems, 1974–1981 (Boulder, CO: Westview, 1981). Historians should consult the official documents of the NIEO, compiled in Mourad Ahmia, ed. The Group of 77 at the United Nations, 4 vols., (New York: Oxford University Press, 2006). Introductions to the contemporary literature include Robert Cox, 'Ideologies and the New International Economic Order', International Organization 33, no. 2 (1979); and Tawfique Nawaz, The New International Economic Order: A Bibliography (Westport, CT: 1980). 56 For example, Helmut Schmidt, 'The Struggle for the World Product', Foreign Affairs 52, no. 3 (1974): 437–451. On Schmidt, see Johannes von Karczewski, 'Weltwirtschaft Ist Unser Schicksal': Helmut Schmidt Und Die Schaffung Der Weltwirtschaftsgipfel (Bonn: J.H.W. Dietz, 2008); Matthias Waechter, Helmut Schmidt Und Valéry Giscard D'Estaing: Auf Der Suche Nach Stabilität in Der Krise Der 70er Jahre (Bremen: Edition Temmen, 2011). There is less scholarship on Henry Kissinger's reaction to the West's economic disarray in the mid-1970s, despite his attentiveness to the theme in Years of Renewal (New York, Simon & Schuster, 1999). 57 James, International Monetary Cooperation, 228–259. 58 Alfred Eckes and Thomas W. Zeiler, Globalization and the American Century (New York: Cambridge University Press, esp. chaps. James, International Monetary Cooperation. Susan Strange, Capitalism 1986). States and the of Global From Bretton Woods to the (Ithaca, NY: Cornell University Press, 1994); and Kapstein, Governing the Global Michael The Political Economy of Policy International Since (Ithaca, NY: Cornell University Press, 1995). Capital The of Global Finance (Cambridge, MA: Harvard University Press, International Monetary of the of (Washington, DC: and The International Monetary Cooperation on 3 vols. (Washington DC: 1985). John The of World Monetary (New York: NYU Press, 1977). 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Paul The Rise and Fall of the Great Economic Change and Conflict From to (New York: Random House, For a on the debate, see Michael Cox, to American International Relations and the New United States New Political Economy 6, no. 3 Donald White, The American The Rise and Decline of the United States As a World Power (New CT: University Press, 1996). Robert The Economics of Global The From to (New York: 2006). The Twentieth Money, Power, and the Origins of Our Times (New York: 1994). and Susan Strange, 'The of International Organization no. 4 (1987): 77 Henry The of America's the World Economy Into the (New York: Oxford University Press, 1992). David A History of (New York: Oxford University Press, 2005). at for this is The New (New York: Oxford University Press, which the conflict between and 'capitalist' of Stephen American Hegemony and the Trilateral (New York: Cambridge University Press, should consult Michael and (Cambridge, MA: a of that the United On the of to international economic change, see W. Michael 'The World Economy and Foreign Affairs (1987): The Rise of the Society MA: and The and the of International Politics (Princeton, NJ: Princeton University Press, esp. The of world increased from in to in See available online at < The of the international increased from of world GDP in to in See World Report (New York: United Nations, Richard Cooper, The Economics of Economic Policy in the (New York: on Foreign Relations, Richard J. and Ronald Global The Power of the (New York: Simon & Schuster, and Raymond Vernon, at (New York: Books, Robert and Power and World Politics in (Boston, MA: Brown, 1977). This book an volume that and the of which are the of a to the of See Robert and Relations and World Politics (Cambridge, MA: Harvard University Press, 1972). The Trilateral the primary for the are available < the end of the 1970s, the some 20 on from monetary to to and On the that for The of A View (New York: on Foreign Relations, 1974). See, for example, Eckes and Zeiler, and and A History (Princeton, NJ: Princeton University Press, 2005). on the political, social, and but for of economic globalisation is Global The of International in the Making of the Contemporary World (Berkeley: University of California Press, 2002). History Journal no. esp. Thomas The A New Global History From Rights to Economic (Princeton, NJ: Princeton University Press, 2012), A. and The 1970s and the of the in The of the For a broader view, see Alfred the The Epic Story of the and (Cambridge, MA: Harvard University Press, 2005). 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Inside the Soviet The Cold War's End and the Soviet Union's Fall State University Charles S. Maier, The Crisis of and the End of East (Princeton, NJ: Princeton University Press, On the distinction between extensive and intensive growth, see Barry Eichengreen, The European Economy Since 1945: Coordinated Capitalism and Beyond (Princeton: Princeton University Press, 2008). Philip The Rise and Fall of the Soviet Economy: An Economic History of the USSR from (New York: 2003). From the Soviet to the European The Economic and of and Since (New York: Cambridge University Press, On see Michael Economic and the Politics of (Ithaca, NY: Cornell University Press, 1992). Stephen The Soviet (New York: Oxford University Press, 2001). David The of the Soviet A Study in Globalization (New York: Press, For this see and the Cold War After in The Cambridge History of the Cold War, eds. Melvyn Leffler and Odd Arne Westad, and the of (Cambridge, MA: Harvard University Press, 2011). that at the include Reform After (Washington, DC: Brookings Press, 1987); and Susan How Its The Political Success of the Foreign and (Washington, DC: Brookings Press, 1994). Odd Arne Westad, 'The Great Transformation: in the in The of the eds. (Cambridge, MA: Harvard University Press, and the Cold War After 'The World Economy and the Cold in The Cambridge History of the Cold War, eds. Melvyn Leffler and Odd Arne (New York: Cambridge University Also see Fred The Making of the Cold War (London: 1986). Maier, Among esp. chaps. For example, Philip S. Power, and A History of American (New York: Press, 2010). See, for example, 'The of the West Is the of the In The End of the Cold War, ed. Michael (New York: Cambridge University The and Its A History of the Cold War (New York: Books, 2010). Jeffry and The Making of America's Crisis and the (New York: W. W. Norton, 2011). that the of in the of the 1970s The Twentieth The Economics of Global and The Crisis of (Cambridge, MA: Harvard University Press, 2011); and and The Making of Global Capitalism: The Political Economy of American (New York: 2012), esp. chaps.

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