but by the late 1950s he had shown a more moderate cast in his fiscal policy preferences. He had once declared “we are all Keynesians now, ” but he was the president who effectively ended the Bretton Woods fixed currency system. Nixon acquiesced to the elimination of capital controls but also imposed an import surcharge on foreign goods entering the United States as well as wage and price controls on the domestic economy.
The Nixon administration was conflicted by foreign direct investors who wanted free movement of capital, business nationalists who feared foreign competition, and U.S. commodity exporters whose access to foreign markets was frustrated by the overvalued dollar. The balance-of-payments deficit reached $9.8 billion in 1970 and would mushroom to $29.7 billion in 1971. 90 On August 15, 1971, Nixon announced the New Economic Policy (NEP), which ended dollar-gold convertibility at the $35 an ounce rate established under the Bretton Woods framework and imposed the import surcharge at the temporary rate of 10 percent. The import surcharge was lifted in December and a devaluation of the dollar was accomplished for the first time after World War II as a new rate of $38 per ounce was negotiated. 91
By the early 1970s the U.S. was no longer in trade surplus, however. In fact, the trade deficit increased from $2.7 billion in 1971 to $6.9 billion in 1972. By the beginning of 1973 the dollar was again under devaluatory pressure and the balance-of-payments deficit remained comparatively high at $10.1 billion. On February 12, 1973, Nixon called for a further 10 percent devaluation of the dollar. Any further efforts to retain the fixed currency framework were doomed to failure. In the next decade the globalization of a free market in money would take hold as crises of stagflation, stagnant productivity, oil shocks, further devaluations, and falling profits would reverberate through the U.S. political system. The Carter administration would attempt to reconstitute a liberal coalition, but ultimately a neoconservative internationalist bloc would emerge by decade's end.