THE POLITICAL ECONOMY OF POSTWAR AMERICA
THE DEATH of the Bretton Woods system has been proclaimed many times since 1971, when President Richard M. Nixon formally decoupled the dollar from gold. But the spirit of the system and its offspring institutions survive, and its goals--a higher volume of world trade and growing international interdependence--have been largely realized.
In 1981, the United States exported about one-fifth of its industrial goods and two-fifths of its agricultural products, compared with about one-tenth for both indices during the 1930s. One-sixth of American employment in that year depended upon export markets while one- third of corporate profit derived from foreign trade and investment. The United States also imported more than half of its supplies of twenty-four of the forty-two most important raw materials. External developments now influence the domestic economy in many important ways. Fluctuations in the exchange rate of the dollar, for instance, can significantly affect the U.S. inflation rate, in addition to the balance of payments and domestic production. 1
Yet for the first time since the 1930s, economic issues have emerged as a major source of discord in the West. Conflict over commercial discrimination, interest rates, and sanctions against the Soviet Union threaten the unity and resolve of the Western alliance as never before. To Americans accustomed to the steady growth and relative stability of the postwar era, moreover, the sudden vulnerability of the United States to oil embargoes, import competition, and volatile exchange and interest rates has come as a rude shock.
Many Americans have reacted by calling for the erection of steep trade barriers to protect industry and jobs in this country, but the probability of foreign retaliation has deterred Washington from de-