• Abstract and Figures
• Public Full-text

The London School of Economics and Political Science , , Economic Power and Political Leadership: The Federal Republic, the West and the Re-shaping o/the International Economic System, 1972-1976 Elizabeth Jane Benning A thesis submitted to the Department of Intemational History of the London School of Economics for the degree of Doctor of Philosophy, London, January 2011 1 Declaration I certify that the thesis I have presented for examination for the PhD degree of the London School of Economics and Political Science is solely my own work other than where I have clearly indicated that it is the work of others (in which case the extent of any work carried out jointly by me and any other person is clearly identified in it). The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without the prior written consent of the author. I warrant that this authorization does not, to the best of my belief, infringe the rights of any third party. 2 Abstract This thesis explores the role the Federal Republic of Germany played in the transformation of the Western international economic system between 1972 and 1976. It has two main aims: first, it examines Bonn's activities in the shaping of the Western response to the collapse of the Bretton Woods monetary system, the first oil crisis 1973174 and the 1975 world recession; and second, it studies the effect of these actions on West Germany's political position in the Western alliance. As will be shown, Bonn was able to have a significant impact via four means: an ability to manage its economic and political goals; clever use of its economic strength; the adoption of a mediating role among its Western allies, above all the United States and France; and the strong political leadership of Helmut Schmidt (as finance minister, then chancellor). As a final consequence, the Federal Republic through a combination of its actions, the waning of American, French and British economic and political power, the transformation of the institutional setting and the advancement of economic issues to the fore of political debates achieved the permanent enhancement of its political status within the Western alliance. 3 Acknowledgements Writing this PhD has been one of the most challenging undertakings of my life. I could not have completed it without the encouragement, guidance, financial and research assistance and love of others. Among those I am most indebted to are my family and friends. My mother and grandmother were a constant source of strength throughout the PhD experience, believing in me through all the ups and downs of the past few years. To them this thesis is dedicated. Thanks belong too to my father, grandfather, Aunt Nancy, Ted, Amy and Tim for all their support. To my mother-in-law and father-in-law, Helga Sapelza Ladurner and Hellmuth Ladurner, I am also very grateful for their steady encouragement. There is now another Ladurner PhD to add to the bookshelfl Finally, I am greatly indebted to my friends in London who have stood by me and helped me throughout the entire PhD process, in particular Dayna Barnes, Artemy Kalinovsky, Daniel Furby, Emmanuel Mourlon-Droul, Louisa Zanoun, Lisa Aronsson and Rima Gudka. Also important were those who offered me academic support. I am especially grateful to Dr. N. Piers Ludlow and Dr. Kristina Spohr Readman. Their patience and guidance throughout the PhD process have been crucial to the completion of this work. Despite me missing every deadline and boring them with way too much technical detail, they never gave up on me. For that, they deserve great thanks. A further educator to whom thanks is owed is Jane DeBacco. From early on she fostered my interest in the German language and culture and gave me the tools necessary to go as far as I have in my exploration of both. I am also very appreciative of the opportunity to work at LSE IDEAS. It was an honor to work with and learn from the brilliant scholars there. Also deserving of my thanks is the German Historical Institute London, the Gerald R. Ford Presidential Library, the LSE International History Department and the Royal Historical Society for their generous research funding as well as the archivists and staff at the Deutsche Bundesbank, the Gerald R. Ford Presidential Library and the Helmut Schmidt Archives for their kind and helpful service to me while I was conducting research at the respective archives. 4 Finally, thank you to my husband, Michael Ladumer. He is the light of my life and without him this PhD would hardly have been possible. I could never thank him enough for his support (in every sense of the word!) throughout this process. May this PhD make him proud! Elizabeth J. Benning London, 31 January 2011 5 Table of Contents Introduction 7 1. The Breakdown of Bretton Woods 22 January 1972-March 1973 2. International Monetary Reform in the C-20 65 July 1972-June 1974 3. The Shaping of the Western Response to the Oil Crisis lO2 October 1973-December 1974 4. Unresolved Crises: The Failure of the Martinique Agreement 148 and Deadlocked Monetary Reform January 1974-June 1974 5. Steps to Overcome the Economic Crises: 184 The Road to Rambouillet, Jamaica and Paris June 1975-November 1975 6. Summitry, Overcoming and Re-shaping 231 November 1975-January 1976 7. Conclusions 267 List of Interviews 285 Bibliography 286 6 Introduction In the early 1970s, the Western alliance was in the midst of a transition. 1 The two pillars of the alliance, the military security dimension on the one hand and the economic dimension on the other, were fundamentally changing. With the introduction of detente, the tensions between East and West eased and security related issues became less acute. In the improved relations, West Germany's Ostpolitik was essential. At the same time, however, the economic pillar came under tremendous strain when the West was struck with three economic crises between 1972 and 1976. Troubles in the international monetary system had been progressively mounting through the 1960s as a result of the gold problem, the growth of the Euromarkets and increasingly large balance of payments disequilibria. Western leaders attempted to mend these problems first through the creation of the Standard Drawing Rights (SDRs) and the first amendment of the Articles of Agreement of the International Monetary Fund (IMF) in 1968. A second try came a few years later with the completion of the Smithsonian Agreement in December 1971 and the start of an overhaul of the international monetary system through the Committee of Twenty (C-20) in September 1972. Their efforts though did not suffice. Instead, only fifteen months after the signing of the Smithsonian Agreement, the Bretton Woods international monetary system collapsed in March 1973. Before the C-20 could reach an agreement on reform of the international monetary order, a second crisis struck the West in autumn 1973. Angered by the pricing policies of the multinational oil companies and even more so by Western actions during the October War, Arab oil producers embargoed oil supplies to the United States and the Netherlands and the Organization of Petroleum Exporting Countries (OPEC) quadrupled the price of oil within a three month period, unleashing the oil crisis. By 1975, the economic fallout of the oil crisis coupled with the inflationary policies of several Western states in the early 1970s and the continued uncertainty 1 The Western alliance in this thesis is understood to mean the United States, Western Europe­ both those states in the European Community (EC) and those outside the EC but aligned with the West - Japan, Canada and Australia. 7 surrounding the monetary system as well as oil and raw material pnces combined to create the worst global recession since the Great Depression with macroeconomic conditions never before experienced. Economic conditions deteriorated to such a degree that many Western leaders began to fear social and political unrest. Yet, in the midst of this economic chaos, the West slowly came together. In the final months of 1975, Western leaders took steps to reverse the downward spiral of the world economy, established new international economic fora, adopted new approaches to influencing oil prices and to relations with the oil producers and completed international monetary reform. By spring 1976, through their efforts not only had the industrialized states overcome the economic crises, but also the international economic system of the West had been re-shaped. As the economic crises began to unfold, West Germany was in a unique position to play a crucial role in altering the international economic system. Bonn possessed the greatest economic strength in Europe. It rested on large balance of payments and trade surpluses, low inflation and unemployment rates, steady growth and the Federal Republic's leading trading nation status alongside America. Although the United States remained the Western economic hegemon, in the early 1970s the American economy was in decline, as balance of payments and trade deficits, rising inflation and slowing growth began to undermine its economic power. Increasingly America's economic and political authority was under question as a result of President Richard Nixon's economic policies. Moreover, given the scale and nature of the crises coupled with the interdependence of the Western economies by the 1970s, Bonn perhaps more so than any other Western state had motivation to act: highly dependent on the international economy for its abovementioned export-driven economic strength and the Western alliance for its political and security shield, the Federal Republic had much to lose from the economic turmoil and potential political upheaval.

Load more

  296

Copy Link