Ideology and the International Economy : The Decline and Fall of Bretton Woods

Ideology and International Economy is the first major study of the intellectual and institutional forces which combined to undermine the Bretton Woods system of fixed exchange rates. In two decades, Milton Friedman's "case for flexible exchange rates" was transformed from a minority academic viewpoint to the operational framework for the international monetary system. In the process, the International Monetary Fund was defeated, sidelined and in danger of becoming an irrelevant organization. Cover......Page 1 Contents......Page 6 Acknowledgements......Page 8 1. Introduction......Page 10 Part I: The Intellectual and Institutional Framework......Page 14 2. The Combatants......Page 16 3. Full Employment, Free Trade and Fixed Exchange Rates......Page 25 4. Friedman’s Case for Flexible Exchange Rates......Page 34 5. The Bretton Woods Establishment......Page 38 Part II: The Academic Process: from the 1940s to the Friedman and Nixon Presidencies......Page 48 6. The Early History of the Case for Floating Exchange Rates......Page 50 7. An Emerging Academic Consensus......Page 56 8.1 Princeton......Page 59 8.2 Chicago......Page 60 8.3 Princeton......Page 61 8.4 Chicago......Page 62 9. 1967: the AEA President versus the AFA President......Page 64 Part III: The Policy Process: 1968–71......Page 70 10. From Academia to Washington......Page 72 11. Flexible Exchange Rates as a Vehicle for Nixon’s Re-election......Page 75 12. The Cross of Gold......Page 81 13. Price and Wage Regulation, Exchange Rate Deregulation......Page 85 Part IV: Friedman and the Policy Revolution......Page 98 14. The Nature and Origins of Friedman’s Influence......Page 100 15.1 Lionel Robbins......Page 112 15.2 Enoch Powell......Page 117 15.3 John Kenneth Galbraith......Page 119 15.4 Paul Samuelson......Page 121 15.5 Charles Kindleberger......Page 123 16.1 Paul Douglas......Page 126 16.2 Barry Goldwater......Page 127 17. The International Policemen......Page 134 18.1 David Kennedy......Page 139 18.2 John Connally......Page 140 18.3 George Shultz......Page 150 18.4 William Simon......Page 154 19.1 William McChesney Martin......Page 157 19.2 Arthur Burns......Page 158 20.1 Pierre Rinfret......Page 169 20.2 Richard Nixon......Page 171 Part V: End Game......Page 174 21. Secretary Shultz......Page 176 22. Secretary Simon......Page 190 23. Conclusion......Page 193 Notes......Page 198 Bibliography......Page 222 Index......Page 243 In This Book Robert Leeson Examines The Process By Which Friedman's Case For Flexible Exchange Rates Was Transformed From Heresy To Academic Consensus To Become The Linchpin Of Post- 1973 International Monetary Order. The Primary Focus Is On The Organisation And Dissemination Of The Intellectual And Political Forces That Undermined The Authority Of The Imf And The Bretton Woods System.--book Jacket. 1. Introduction -- Pt. I. The Intellectual And Institutional Framework -- 2. The Combatants -- 3. Full Employment, Free Trade And Fixed Exchange Rates -- 4. Friedman's Case For Flexible Exchange Rates -- 5. The Bretton Woods Establishment -- Pt. Ii. The Academic Process: From The 1940s To The Friedman And Nixon Presidencies -- 6. The Early History Of The Case For Floating Exchange Rates -- 7. An Emerging Academic Consensus -- 8. 1966: Four Conferences -- 9. 1967: The Aea President Versus The Afa President -- Pt. Iii. The Policy Process: 1968-71 -- 10. From Academia To Washington -- 11. Flexible Exchange Rates As A Vehicle For Nixon's Re-election -- 12. The Cross Of Gold -- 13. Price And Wage Regulation, Exchange Rate Deregulation -- Pt. Iv. Friedman And The Policy Revolution -- 14. The Nature And Origins Of Friedman's Influence -- 15. Intellectuals -- 16. Us Senators -- 17. The International Policemen -- 18. Us Treasury Secretaries -- 19. Chairmen Of The Federal Reserve System -- 20. Within The White House -- Pt. V. End Game -- 21. Secretary Shultz -- 22. Secretary Simon -- 23. Conclusion. Robert Leeson. Includes Bibliographical References (p. 213-233) And Index. In 1975, US Treasury Secretary William Simon informed the IMF annual meeting that "We strongly believe that countries must be free to choose their own exchange rate system". As flexible exchange rates were legitimised, several leading countries began to experiment with monetary targeting. These two revolutionary policy changes were inter-related: a flexible exchange rate is a precondition for an independent national monetary policy. Having lost one 'sacred' symbol or anchor (fixed exchange rates), central bankers began to experiment with another. Both these developments were the culmination of campaigns led by Milton Friedman during the previous quarter of a century. Robert Leeson examines the process by which Friedman's case for flexible exchange rates was transformed from heresy to academic consensus and lynchpin of the post-1973 international monetary order. The primary focus of this study of political economy is on the organisation and the dissemination of the intellectual and political forces that undermined the Bretton Woods system For twenty-five years, the International Monetary Fund administered a worldwide system of fixed exchange rates until their system was destroyed by a combination of market forces and those who advocated market forces. The first destructive element has been extensively analyzed; the second has hitherto been almost completely ignored. Robert Leeson examines the process by which the case for flexible exchange rates was transformed from an academic exercise to become the organizing principle for international monetary relations.