UC Berkeley - HIST 186 - 2012 Spring - Sargent - International and Global History Since 1945 - Lecture 13 - The West's Malaise - 01h 20m 09s

The Affluence of the West

[00:00]

Start by sort of recapitulating the accomplishments of the era of extensive growth that came to an end in the 1960s. I'm going to begin with Harold Wilson↗, the Prime Minister of Great Britain, who famously proclaimed in 1959, "you've never had it so good".

[00:18]

And it was the British public who'd never had it so good in Wilson's formula. What Wilson intended to say when he ... I'm sorry it wasn't Harold Wilson it was Macmillan, Harold Macmillan↗, the British Prime Minister. What Macmillan meant to say when he said you never had it so good was that the British public in 1959 had enjoyed an extraordinary period, 15 years, of widespread rising affluence -- of sustained growth.

[00:47]

This was an experience that was replicated broadly. After all real incomes rise substantially throughout the West in the decades after the Second World War. Between 1950 and 1973 German wages triple. Italian wages rise even more than that. They rise more than threefold. Even in Great Britain wages double. And Britain is one of the countries whose economic performance after the Second World War is least impressive when situated in a comparative perspective.

[01:20]

The rising affluence that ordinary citizens in Western Europe, the United States and Japan experience after the Second World War has you know important cultural and social consequences. I mean the economic trend lines are impressive enough. But think about the range of expanded, the expanded range of amenities that consumers are able to purchase with these rising real incomes.

[01:47]

The postwar decades, the 1950s and the 1960s will be a decade of mass affluence. Households will purchase labor saving devices like you know refrigerators and washing machines. Before the Second World War these things, as you've read, were anomalies in ordinary European homes. By the late 1960s most European homes had basic labor saving devices like washing machines.

[02:13]

They also had televisions. You know sources of entertainment which previously had been sort of unavailable even unimaginable. It's not just labor saving household devices and entertainment devices that are becoming sort of widespread in postwar Europe.

[02:30]

It's also source you know mobility devices, automobile ownership becomes fairly commonplace in postwar Europe. Look at how automobile ownership increases in Britain, Italy and France after the 1950s. In 1950 there are very few automobiles on Italian roads. By 1970 there are you know almost 12 million automobiles in Italy. This isn't quite an automobile for every family but it's approaching that level of automobile ownership.

[03:01]

And this is a you know common experience in the West. People who don't you know who are not able to afford automobiles, young people for example, have other you know kinds of mobility device: scooters. Actually a terrific mobility device in Berkeley where the weather is good and it's free to park scooters.

[03:20]

But this is not entirely facetious because the rise of scooter ownership amongst young people in Europe has cultural consequences too. Right insofar as it gives scooter owners a degree of mobility independent from the family it facilitates the development of what you might call sort of an autonomous youth culture once young people are able to you know travel beyond their homes to meet with each other -- something which you know scooters permit. Then it becomes easier for you know young people, the baby boomers, to generate sort of an autonomous youth culture.

[03:56]

So this is you know consequential. Besides the affluence that you know postwar growth produces and the amenities that you know capitalism provides in the form of you know cars, household appliances, entertainment devices and so on the postwar decades, the 1950s and the 1960s, will also be characterized by the expansion of public provision for individual and familial well-being.

[04:25]

These are decades of expanding welfare commitments, of expanding social spending, throughout the Western world economy.

[04:35]

Government mobilizes itself to sustain high levels of employment. This is an era in which government's target, the expansion of employment, as the primary sort of purpose for public economic policy. In the United States even the federal government makes a formal commitment to target full employment as the basic goal of macroeconomic policy.

[04:58]

It's a goal that is somewhat sort of qualified in the United States in its implementation but West European governments do much the same thing. They orchestrate public policy around the production of full employment.

[05:11]

For those who are not employed, for those who are retired, governments provide pensions, Social Security for elderly people. Even health care is provided. We've already talked about how the British government in the aftermath of the Second World War creates a national service of health care -- the National Health Service or NHS.

[05:30]

In the United States there's no public health care, no universal public health care, but important strides are taken by the Johnson administration in the 1960s to provide health care for the elderly and the indigent.

[05:44]

Medicare is established in 1965 to provide guaranteed health care for retired people. Medicaid provides health care for the indigent. The absence of universal public health care in the United States might make the United States look like something of an outlier but you should remember that this is a period when you know many working Americans hold good unionized jobs which provide health care at the...via through an employer rather than through the state.

[06:13]

So the method of providing health care in the United States might be a little different from what it is in Europe. Private employers take on more responsibility in the United States than they do in Western Europe or Japan but the end result is essentially comparable.

[06:30]

Americans have access to sort of affordable high quality health care plans; at least if they're fortunate enough to hold down jobs with Ford or General Motors and so on and so forth.

[06:41]

So in terms of social provision too, the postwar era, the era of the 1950s and the 1960s, will be an era of expanding expectations and expanding commitments. By the late 1960s however strains in this golden age are beginning to show. If we look at the era from sort of 1950 through 1973 in a larger perspective, this is a chart that we've seen before, then it stands out throughout the Western world as an era of high sustained, of sustained high growth rates.

[07:18]

By the late 1970s the end of this era, sorry, by the late 1960s, the end of this era of sustained high growth will be approaching. And this will be a sort of traumatic transition. And it's on this transition, from an era of sustained high growth rates, to an era of diminished growth rates that we will be focusing today.

Opposition to Postwar Abundance and Postwar Prosperity

[07:40]

But it's important to remember that even in the 1960s which in many respects was the heyday of the postwar golden years there were critiques of postwar abundance, postwar prosperity, that manifest themselves on both the left and the right. And these critiques sort of merit sustained attention.

[08:02]

As they you know tell us something about the partial nature of postwar political economic accomplishments as well as sort of illuminating sort of the deep origins of political critiques of economic statism in our own times.

Critique from the Left

[08:22]

So let's start with the sort of left critique of postwar prosperity and abundance. In 1958 the economist John Kenneth Galbraith↗ publishes a book titled The Affluent Society.

[08:35]

It's a very influential and very subtle critique of the postwar culture of economic abundance. And Galbraith argues in this book that policymakers and the general public alike, and this is true not just in the United States but also in Western Europe as Galbraith sees it, have privileged the production of economic growth over a more expansive concept of human development.

[09:00]

He argues that policymakers and publics alike are preoccupied with what he characterizes as a cult of GDP, a cult of gross domestic product. They're concerned with expanding the size of the economy but are overlooking the more qualitative aspects of economic development.

[09:19]

Galbraith argues for example that the breakneck rush to produce growth has led you know Western governments to disregard for example the ecological consequences of growth.

[09:31]

What does growth deliver, Galbraith asks, when it comes at the cost of economic, of ecological pollution that contaminates our rivers, and our you know sort of wilderness areas.

[09:43]

This is a critique that is in some ways ahead of its time. By you know the late 1950s there is still not as yet widespread attention being paid to the ecological consequences of industrial capitalism. But Galbraith sounds themes that will resonate sort of more and more powerfully in the years to come.

[10:06]

When Robert Kennedy runs for the Presidency of the United States for example in 1968 he will talk about the cult of GDP. And will argue that you know the United States should pursue so more holistic, more qualitative measure of economic and human development. He also discusses the sort of ecological consequences of high sustained growth as an issue with which Americans ought to be concerned.

[10:35]

So Galbraith raises questions that will resonate sort of more and more powerfully in the years to come.

[10:42]

Other critics of postwar capitalism discuss the perseverance of economic inequalities amidst abundance and plenty. Here no book is more influential than Michael Harrington's The Other America which is published in 1962.

[11:00]

Have any of you read Harrington's The Other America? Or even heard of the book?

[11:07]

Okay, a few of you have heard of the book. And what Harrington does is to sort of dissemble the economics of plenty that you know represent the mainstream experience of postwar American growth. A typical American family experience the postwar decades as a period of great abundance but Harrington argues that there are many Americans who have been left behind by...the remarkable rates of sustained growth and sustained prosperity that the economy as a whole experiences after the Second World War.

[11:45]

Harrington juxtaposes the perseverance of poverty, rural poverty, in you know Appalachian Tennessee for example, urban poverty in the inner cities of the United States, with the remarkable abundance and plenty that sort of the mainstream experiences during the 1950s.

[12:06]

Harrington makes what might be best characterized as a moral case for public attentiveness to poverty and for its amelioration. This is an argument which will inform federal policy during the 1960s.

[12:22]

Lyndon Johnson as President of the United States declares a war on poverty in 1964. Johnson introduces a series of new programs, aid for families with dependent children for example, Medicaid, is another example. That are intended to redress sort of the worst inequalities that exist in the abundant affluent United States of the 1960s.

[12:47]

That public policy becomes more oriented towards the needs of the marginal, the needs of the impoverished, during the 1960s is in part a reflection of the influence that people like Harrington have. Harrington sort of draws the public's attention to the endurance of poverty amidst a culture of economic abundance and plenty.

[13:11]

There are other kinds of critiques too. Critiques that have less to do with the emissions. What Harrington is really concerned about is those who live on the margins of an affluent society. There are other critics who engage the affluent society itself and argue that the whole you know sort of edifice is misbegotten -- even fatally flawed.

[13:34]

Herbert Marcuse↗ for example, a sort of social theorist on the radical left, argues that capitalism creates a culture of consumption that is ultimately detrimental to more authentic human wants. Marcuse argues that even you know sort of people who seem to be doing relatively well in America in the 1950s and 1960s are you know in a sense being duped by advertising, being duped by the culture of false needs, that capitalism creates into sort of you know prostrating themselves before a culture of mass abundance, a culture of mass consumption.

[14:14]

And Marcuse argues that this is ultimately sort of detrimental to the satisfaction of real human needs. He says that people should not be so concerned with acquisition, with consumerism, and they should be more concerned with satisfying you know sort of more elemental, more basic human needs.

[14:32]

Of course one of the illusive aspects of Marcuse's argument is what these real needs are. He offers a more incisive critique of mass consumer society than he provides a sort of cogent explanation of what the alternatives to it would be.

[14:50]

But Marcuse is nonetheless influential, particularly amongst the young, amongst you know sort of people who have coming, people who are coming of age, in the early 1960s and who rebel against the culture of mass consumption, the culture of mass affluence, to which their you know parents' generation is so closely tethered and associated.

[15:13]

It's not only on the left that thinkers and theorists during the 1960s move to critique and condemn the culture of mass affluence, the culture of mass consumption, that emerges in the West after the Second World War.

Critique from the Right

[15:29]

There's also a conservative critique that merits our attention. In large part because it's the conservative critique that over the next thirty years proves to be the more influential. Our politics today have been far more powerfully shaped by a conservative critique of the mass consumer, mass production society of the 1950s and 1960s, than they have been shaped by the sort of left radical critique that Marcuse offers.

[15:57]

I'm going to show you a you know quick video clip which features Ronald Reagan speaking at the 1964 Republican convention. And it's an interesting speech which we'll sort of view an excerpt of because Reagan launches a sort of frontal assault on the political economy of sort of postwar managed capitalism. Reagan is particularly critical of the role of the state in the management of the macroeconomy.

[16:29]

He's critical of the role of the state in the production of economic abundance and plenty. Little of what Reagan says is truly original. Reagan is in a sense recapitulating and repackaging a critique of political economic statism that Hayek↗ formulated at the sort of moment of departure for the Keynesian welfare state in the mid-1940s.

[16:53]

But Reagan's critique repackaged as it is turns out to be very influential as it inspires sort of a generation of conservatives, young conservatives in particular, to sort of challenge what had been a sort of center-right accommodation with the political economy of the welfare state.

[17:16]

Eisenhower during the 1950s and the Christian Democrats in Europe agree to accept...I'm sorry...the innovations of...I'm sorry I've got something stuck in my throat. I should have brought some water.

[17:35]

Maybe one of the...could one of the GSIs go try to find me some water? That would be great.

[17:40]

Okay, thank you.

[17:42]

Don't infer that there's any political implication to the point in the lecture at which I had something stuck in my throat. (laughter from the class).

[17:53]

There's really not.

[17:55]

So, conservative political leaders in the 1950s, and Eisenhower is a good example but we could also talk about the experience of Christian Democracy in Europe, accommodate themselves to the accomplishments of the postwar welfare state. Eisenhower doesn't try to roll back the New Deal.

[18:16]

On the contrary he sees New Deal programs, New Deal institutions, as a source of stability for American society. You know in the context of the Cold War this makes particular sense.

[18:29]

Similarly in Western Europe Konrad Adenauer↗ presides over, you know, what Germans describe as a social market economy, an economy which will be capitalist, which will be a market economy, but in which the government will also take substantial responsibility for providing for the basic economic needs of the citizenry.

[18:52]

This entails a historical expansion in the fiscal role and responsibilities of the state. Thank you.

[19:02]

Thank you very much.

[19:03]

That's better.

[19:10]

And one of the things that Reagan does in 1964 when he speaks on Barry Goldwater's behalf to the Republican National Convention is to assault sort of the conventional wisdom that politics have converged around a sort of centrist consensus, a consensus in which there will be a you know capitalist market economy, but in which the state will also take on substantial responsibility for meeting the basic needs of citizens.

[19:43]

Reagan argues that the rise of economic statism represents a you know troubling departure in sort of the history of you know the capitalist economy. And he argues that it's time to pull back, it's time to begin to reduce the scale of the state, so as to restore sort of the market freedoms which in his view have been lost or sacrificed amidst the rise of economic statism.

[20:11]

I'm going to play the clip for you and you can make of it what you will.

[20:14]

[20:17]

Alright. The volume's not there. So let's try to raise the volume. Let's see if we can get some...

[20:25]

That's the wrong volume.

[20:28]

[20:33]

Reagan: This is the issue of this election. Whether we believe in our capacity for self-government or whether we abandon the American Revolution and confess that a little intellectual elite in a far distant capital can plan our lives for us better than we can plan them ourselves. You and I are told increasingly we have to choose between a left or right.

[20:54]

Reagan: But I'd like to suggest there is no such thing as a left or right. There is only an up or down. Man's old, old age dream, the ultimate in the individual freedom consistent with law and order, or down to the ant heap of totalitarianism.

[21:11]

In a sense you've heard this all before, right. You can turn on last night's Republican debate and hear much the same themes being thrashed through. Will big government ultimately lead to decline and ruination? Sort of these are you know questions which we continue to debate through to the present and I'm sure that we'll be debating them tomorrow and beyond.

[21:34]

But what's really important about Reagan's 1964 speech to the Republican Convention is that it marks a point of departure for a discourse of anti-statism that has powerfully animated conservative politics through to the present day.

[21:51]

Reagan sort of drawing upon Hayek and other sort of classically liberal economists argues that the postwar welfare state is leading in a sort of direction that will initially be adverse to economic freedom and ultimately adverse to political freedom as well.

[22:14]

Now this move, a move that links economic freedom, economic liberty with political liberty, is not an original one, right. That's the move that Hayek↗ makes in The Road to Serfdom.

[22:24]

Hayek argues that a government that begins by regulating markets will end by regulating people, by regulating society. But it's a move that is you know constituentive of a sustained sort of right-wing critique of the postwar welfare state that remains very influential through to the present day.

[22:49]

During the 1960s however Reagan's critique of sort of postwar economic statism remains a relatively marginal phenomenon. Goldwater who is sort of the first Republican Presidential candidate after the Second World War to embrace the politics of anti-statism loses by a catastrophic margin. Lyndon Johnson wins the 1964 election by a big landslide margin of victory.

[23:23]

And this election result seems to you know sort of demonstrate, at least for the time being, that you know Goldwater's critique, Reagan's critique, lacks sort of wide popular appeal.

[23:35]

By the late 1970s it will be a very different story. But the mid-1960s are a decade in which the postwar sort of centrist consensus, a consensus built around the political management of capitalism by the state, still seems very much to be holding true.

The Narrative of Civil Rights

[23:54]

The more obvious sort of you know narrative which emerges during the 1960s is a narrative of civil rights, a narrative in which groups that have long been sort of marginalized and alienated from mainstream economic prosperity and social acceptance, struggle to achieve you know sort of full, the rights associated with, full membership in and participation in mainstream society.

[24:29]

Here the experience of the United States is exemplary but it's worth thinking about how the experience of the United States in the 1960s might parallel the experience of other countries. What are the sort of overarching themes that we might use to link civil rights in the United States with movements for you know civil rights elsewhere?

[24:50]

At the beginning it would be useful to make a distinction between European welfare projects and the United States because there are important structural differences which it is important to acknowledge.

[25:03]

Right, after the Second World War Europe's nation-states are more ethnically and culturally and linguistically homogeneous than at any point in their past. One of the legacies of the Second World War particularly in sort of Central and Eastern Europe is the... sort of... redistribution of populations, what has euphemistically been called ethnic cleansing in more recent years, with the effect of creating a Europe of relatively homogeneous nation-states.

[25:39]

This will begin to change in places like Great Britain and France as postcolonial populations immigrate to the sort of metropolitan nations but the basic story of postwar Europe is a story in which nation-states are you know relatively homogeneous.

[26:00]

Sweden is a good example. In Sweden through the 1950s and 1960s virtually all voters, virtually all beneficiaries of public largess are Swedes. People who are ethnically Swedish, culturally Swedish, speaking the Swedish language.

[26:14]

Compared to the United States Europe's welfare states are homogeneous entities. And this has implications for the politics of redistribution. It's easier to redistribute wealth, it's easier for the public to take responsibility for its most vulnerable members, in a society that is you know relatively homogeneous.

[26:35]

Where bonds of social and cultural and historical affinity are strongest wealth redistribution will in general be less controversial than in places where you know greater diversity exists. And the experience of the United States you know sort of illustrates this case.

[26:54]

African-Americans are at the beginning of the 1960s by far and away sort of the most obvious marginalized minority in American life. They constitute around 10% of the population. They're a minority that had been excluded from sort of the accomplishments of rising prosperity not just in the 1950s but in the longer duray of American history.

[27:23]

The marginalization and oppression of African-Americans produces as you all know a movement to redress fundamental inequalities, to achieve for African-Americans the full rights and prerogatives of citizenship, that is to say, the full rights and prerogatives of membership in American society.

[27:44]

The Civil Rights Movement, antedates the Second World War but it receives sort of an important boost from wartime mobilizations on behalf of civil rights. A. Philip Randolph↗ who is the leader of the largest African-American trades union in the United States for example pushes Roosevelt to desegregate war industries during the Second World War.

[28:11]

Randolph threatens to lead a march on Washington unless Roosevelt takes some proactive effort to ameliorate the economic disadvantages that African-Americans experience. So the movement for Civil Rights sort of begins to pick up in tempo during the 1940s.

[28:30]

During the 1950s the NAACP, the National Association for the Advancement of Colored People, pursues a sort of legalistic strategy to surmount and overcome the substantial barriers that African-Americans still face particularly in the segregated South.

[28:48]

The most important accomplishment here of course is Brown v. Board of Education, a 1956 ruling of the Supreme Court, that rules the separation of educational facilities for black and white children to be unconstitutional under the terms of the Fourteenth Amendment to the Constitution.

[29:05]

For all of the gains that legalism accomplishes during the 1950s, and Brown is a significant accomplishment, it's not until the late 1950s that civil rights becomes a mass movement. Martin Luther King↗ founds the Southern Churches Leadership Council↗ in 1957. The Student's Nonviolent Coordinating Committee↗, SNCC, is founded in 1960.

[29:30]

These organizations provide, or at least facilitate, the transformation of the African-American freedom struggle into a mass movement. By the beginning of the 1960s, 1961, civil rights activists, both black and white, are orchestrating freedom rides, rides on sort of segregated bus facilities through the South to protest the segregation of interstate transportation.

[29:58]

In 1963 Martin Luther King leads sort of the Birmingham mass marches against segregation and these represent something like an emotional high point for civil rights as a mass movement. Television images of Birmingham police brutalizing African-American protestors are beamed not just around the United States but around the entire world.

[30:25]

Civil rights becomes a sort of global preoccupation. Substantial attention is paid in Europe to the plight of the African-American freedom struggle in the United States.

[30:35]

Pushed by the mass movement Lyndon Johnson, as President of the United States, will embrace reform in the mid-1960s. Johnson in 1964 orchestrates the passage of the Civil Rights Act. The following year the Voting Rights Act is signed into law.

[30:52]

This is a history with which you all should have some familiarity. It's one of the most important sort of episodes in the history of the United States. But what of the larger significance of the civil rights movement? What is civil rights all about? Is civil rights about claiming human rights? Are Martin Luther King and the other leaders of the civil rights movement claiming rights simply by virtue of their humanity?

Civil Rights and Human Rights

[31:19]

Which is which human rights are, right. Rights that we all enjoy by virtue of being human. Or is civil rights distinct as a category from human rights?

[31:32]

I would suggest that civil rights constitutes a distinctive category for action and mobilization. Civil rights presume the existence of a sort of society of which one can be a citizen. There is a profound link between civil rights and citizenship. What segregation did prior to the accomplishments of civil rights was to exclude African-Americans from full membership of the American nation -- of American society.

[32:02]

It established a color bar and said that if you fall on the wrong side of this color bar then you know opportunities will be closed to you. You will not enjoy the full rights and prerogatives of American citizens. It's not to say that African-Americans were not allowed to carry passports, of course they were, but in the states of the former confederacy, formally and informally elsewhere in the United States, African-Americans were excluded from full participation in the social, economic and political life of the nation.

[32:35]

And civil rights seek to overcome this historic exclusion -- this historic injustice. It seeks to win for African-Americans full, the full rights and prerogatives of American citizenship, of membership in the American community.

[32:52]

And this is a project which we can see in some basic respect as having important links to the sort of culture of affluence and prosperity -- to the achievements of postwar economic growth and abundance. After all growth after the Second World War is orchestrated by national governments. Growth represents...sort of the accomplishment of progressive you know Keynesian style economic policies combined with the opportunities that exist after the Second World War for extensive growth --for sort of adopting, sort of existing industrial techniques of production on a mass scale.

[33:40]

Growth will be something which occurs within the sort of paradigm, within the economic paradigm, of the nation-state. Bretton Woods as we've discussed allows nation-states a latitude of autonomy for managing their domestic sort of macroeconomic policies.

[34:01]

The ulterior logic, to use a highfalutin turn of phrase, of postwar capitalism is a logic of national capitalism, right. What Bretton Woods sets up is a sort of political economic system on the world scale in which nation-states will enjoy substantial latitude of autonomy to manage their domestic economies in accord with sort of nationally defined goals.

[34:34]

Nation-states take on new responsibilities for reducing unemployment, for promoting growth, for providing welfare. In Britain you have a National Health Service. In Germany you have a social market economy which is also a national economy. Nations take on expansive new responsibilities for not only the management of their national economies but also for the provision you know basic welfare goods so far as their citizens are concerned.

[35:05]

The postwar decades, the 1950s, and the 1960s, will be characterized by the expansion of government responsibility for society. And this is a move that is orchestrated on a national scale.

[35:22]

And civil rights reflects this logic of nationalization. What civil rights seeks to accomplish is rights for African-Americans as members of an American nation. So it's a logic that parallels the logic of Medicare. It's a logic that parallels the logic of Keynesian macroeconomic management in the United States. Civil rights is concerned with the rights of African-Americans as citizens of an American nation-state. Just as you know sort of Lyndon Johnson's Great Society programs, the economic programs which expand the American welfare state, will be concerned with making sort of poor Americans better off as members of a sort of cohesive national community.

Civil Rights Globally

[36:14]

To what extent is civil rights in the United States paralleled by similar movements elsewhere? Well, we should first point out that civil rights is not just an American movement but it is a movement that has global repercussions. Foreign television audiences tune in to watch you know appalling television coverage of police brutality in the southern states of the United States.

[36:47]

And this has political consequences within the United States. The Kennedy administration and the Johnson administration are concerned that the specter of Southern sheriffs turning fire hoses on unarmed demonstrators doesn't make the United States look very good in the larger world.

[37:03]

In the context of the Cold War the reputational costs of domestic police brutality are in the minds of American policymakers substantial. So concern over what the denial of civil rights to African-Americans might be doing for the reputation of the United States in the larger global community is one of the factors that pushes Lyndon Johnson to act decisively in 1964 and 1965 to meet the demands of the civil rights movement for sort of federal protection of civil and political rights.

[37:39]

So there is a global aspect to civil rights which is really important. You know conversely prominent civil rights leaders like Martin Luther King↗ and Bayard Rustin↗ are influenced by the example of anti-colonial nationalism in other countries.

[37:55]

India is probably the most prominent example. Rustin and King are both careful students of Mahatma Gandhi↗. Martin Luther King visits India in 1959 in order to sort of study Gandhi's teachings and to immerse himself in the political culture of Gandhian nonviolence.

[38:17]

So civil rights though it is a national movement also has a global dimension this is important to sort of comprehend. But to what extent are there parallel movements elsewhere? Well, as I've already mentioned European nation-states for the most part do not have the same kinds of diversity issue with which to deal as the United States has.

[38:43]

Sweden does not have a large minority population that has you know historically been expressed and exploited.

[38:52]

Europe will develop problems resembling the dilemmas of the -- racial dilemmas that the United States has as postcolonial sort of immigrants come to Western European countries, particularly Britain and France, after the Second World War. But in the 1960s Europe is a place in which societies are relatively homogeneous by comparison with the United States.

[39:15]

There simply are not the same kinds of structural inequalities that civil rights moves to overcome in the United States. So there are fewer of these parallels to the civil rights mobilization in the United States in Western Europe at least at this time. In other countries there may be circumstances that are more similar to those that exist in the United States.

[39:36]

India is one possible example. Caste in India is a sort of framework for categorizing difference that is quite distinct from race in the United States. It is not binary like race is. It's something which exists in finer gradations.

[39:55]

But the situation of the so-called Dalits↗ or Untouchables in India, people who exist at the very bottom of the social hierarchy, who are considered to be sort of outsiders to the caste system, is a circumstance that in some ways parallels the plight of civil rights in the United States.

[40:18]

In India leaders of the sort of Dalit Movement↗, the sort of civil rights movement of the Untouchables as it were, pressed from the very beginning of the national project for government protection. Ambedkar↗, Dr. Ambedkar, who is the leading Dalit sort of organizer pressed very hard for specific constitutional protections which are enshrined in the Indian Constitution to protect the rights of Indian Untouchables.

[40:48]

During the 1950s and 1960s the Indian government undertakes sort of important measures to protect and to promote the economic and social and political interests of the so-called Untouchables. And here there are parallels to the experience of civil rights in the United States, right.

[41:08]

Civil rights in the United States calls upon the federal government to intervene, to protect the interests of marginal and vulnerable peoples, of peoples who constitute a racial minority in states like Alabama, Georgia, and Mississippi. And who will require the protection of federal authorities if they are to overcome the hurdles of discrimination and oppression that they have long faced.

[41:32]

And there are similarities here in the Indian case. Insofar as the Untouchables in India, the Dalits, constitute a minority, they're not able to win for themselves expanded sort of acceptance or opportunity simply by dint of their own efforts government power has a vital role to play in redressing longstanding and historic inequalities and grievances.

[41:53]

So what does the government in India do? Well, it will put aside public jobs for members of Untouchable castes. It tries to create affirmative action programs to overcome historic inequalities and grievances. So there are similarities here with civil rights in the United States. The power of a centralized federal state is to be the mechanism by which historic injustices are to be overcome and corrected.

[42:23]

This strikes a contrast with the experience of South Africa in the 1960s.

[42:30]

South Africa as we have discussed is an apartheid society by the 1960s. The apartheid system is constructed in the aftermath of the Second World War as a way of making racial inequality rigid and permanent. At least that's the goal of the white minority that controls South Africa's wealth and controls South Africa's politics.

[42:53]

While South Africa in the 1950s does witness the emergence of a mass civil rights movement, the African National Congress, the 1960s will be a decade of harsh oppression in South Africa. Rather than supporting the integration of the minorities as is the case in India and the United States the South African state aligns itself on the side of discrimination and oppression.

[43:24]

In 1960 ANC demonstrators are massacred at Sharpeville↗. Nelson Mandela↗, the leader, the most prominent leader of the African National Congress, is arrested in 1962. The South African state resorts to methods of oppression in order to maintain and defend a social order that is racist, discriminatory, exploitative, and oppressive.

[43:50]

And during the 1960s the utilization of government power appears to be sort of reasonably successful in maintaining the basic structure of an apartheid society. It's not until the 1970s that the anti-apartheid movement really begins to sort of reassert itself and the possibility of sort of long term change in South Africa sort of reemerges.

[44:15]

(student comment)

[44:22]

Yes.

[44:24]

[44:28]

Absolutely. I think that's the key distinction between the cases, and if you want to explain why cases go differently then I think that is the explanation to which I would point.

[44:39]

South Africa is an unusual case. I mean the South African case bears more resemblance to you know colonial societies than it does to societies like India or the United States that deal sort of with difficult dilemmas involving the integration of minorities to the national project.

[44:58]

In South Africa the possibility of mass politics, the possibility of a democratic nation-state, is inherently threatening to the interests of the minority that control most of the society's wealth and power.

[45:13]

And this will make South Africa's sort of reckoning with injustice belated and difficult by comparison with the experience of most other nation-states.

[45:25]

But in the United States, in India, movements for civil rights, establish claims to citizenship, claims upon the full rights and prerogatives of citizenship on behalf of those who have been excluded historically from its benefits. Civil rights, much like Keynesian macroeconomics, is a project with nationalizing implications.

[45:54]

The nation is to be sort of the basic framework in which justice is to be realized -- in which historic inequities are to be redressed.

Protest and Opposition From the Youth

[46:05]

By the late 1960s however the national projects which are consolidated in the aftermath of the Second World War are coming under widespread assault.

[46:24]

The accomplishments of postwar prosperity, the gains of a consumer society, will be indicted in particular by young people. The legitimacy of postwar capitalism, postwar managed capitalism, postwar progressive capitalism, call it what you will, its legitimacy is nonetheless indicted and sort of held up for ridicule even by student demonstrators in the streets of Paris, London, Berkeley and New York and so on.

[46:55]

So, by the late 1960s a very different kind of movement is developing. Civil rights had been a movement that sought inclusion for the marginalized within the mainstream. By the late 1960s a different kind of movement, a student movement, an anti-establishment movement will be critiquing the mainstream itself.

[47:17]

Will be sort of questioning the legitimacy of sort of postwar managed capitalist affluence. How to understand this insurgency against the mainstream? This insurgency against the accomplishments of postwar welfarism?

[47:37]

The most basic frame of analysis would start with demographics. Growth, population growth, is a startling and impressive phenomenon of the postwar world. Between 1950 and 2000 the world's population grows more than it had done over you know the proceeding millennia.

[48:04]

Growth is a defining characteristic of the postwar world and it's not just growth in economics. It's also growth in population that is striking, novel and consequential. This has major ramifications for the demographic structure of societies. After the Second World War, throughout the West, nations experience so-called baby booms. Soldiers return from the Second World War. They start families, they have children, and by consequence the number of young people increases.

[48:39]

We could measure this for example by looking at the expansion of higher education on a global scale. Between 1950 and 1970 the number of college students enrolled worldwide increases dramatically from around six million in 1950 to 25 million in 1970.

[48:58]

This is a development that has major sort of political consequences. It has social and cultural consequences too.

[49:06]

Youth emerges as a distinct category between childhood and adulthood. People start talking in the 1950s about teenagers. Previously nobody would have known what a teenager was but the... but the Baby Boom creates this new category: teenagers. Teenagers have their own distinctive culture -- their own distinctive fashions. Much of this you are sort of familiar with from other history classes you might have taken or from your own general knowledge.

[49:35]

Now this was your parents' experience. This isn't your experience. You have the experience of being a generation that is demographically smaller than the generation that proceeded it. This is a different kind of burden.

[49:47]

But in the 1950s and 1960s teenagers construe themselves to represent the wave of the future. In a sense they are. But their rise comes with certain associated frictions. Generational friction becomes a you know sort of distinctive characteristic of Western societies in the 1950s and especially in the 1960s.

[50:13]

Consider Frank Sinatra's↗ perspective on rock 'n' roll, right. Rock 'n' roll really begins in the mid-1950s with you know Elvis, from the late 1950s, and Frank Sinatra who made his career as a entertainer for you know responsible sentient adults is appalled by the phenomenon. Sinatra says, this a wonderful quote, "...rock n' roll smells phony and false. It is sung, played and written for by the most part cretinous goons...".

[50:41]

And this is a you know line that's sort of a throwaway line but it captures something of the generational friction that manifests itself in the 1950s and 1960s amidst the rise and the rising assertiveness of youth.

[50:58]

The assertion of youth will initially be cultural. It will be an assertion of consumers. People who buy rock 'n' roll records instead of jazz records, or you know...vocal records of the kind that Sinatra had produced.

[51:14]

But by the late 1960s the rise of youth will manifest itself in increasingly violent and increasingly critical street protests. These protests have to do in part with the Vietnam War. In the United States and in Western Europe student demonstrators lambaste the war that the United States is waging in Vietnam. They are fiercely critical of the war's human consequences particularly its consequences for the Vietnamese civilians who find themselves sort of the victims caught in the crossfire of a confrontation between the United States, the Republic of Vietnam, South Vietnam, and the Vietnamese National Liberation Force, or NLF.

[51:58]

But it's not only the Vietnam War with which student demonstrators are concerned. Rather student demonstrators are eager to assault the entire sort of structure of postwar abundance, prosperity, and as they see it, consumerism and conformity.

[52:17]

Recall that the Free Speech Movement at Berkeley↗ is a phenomenon of the early to mid-1960s. The Vietnam War at this point has barely has gotten going. Most Americans in 1964 still couldn't point to Vietnam on a map. Whether that's true in 1968 may not be the case either. But...but Vietnam is not an especially prominent concern at the movement of departure for free speech on this campus.

[52:45]

What is the Free Speech Movement concerned with? What are the issues that animate it?

[52:50]

[52:53]

Okay. (laughs).

[52:55]

(student response)

[52:58]

Absolutely. It has to do with free speech on campus.

[53:01]

(student response)

[53:05]

Very much. Civil rights is the initial issue which is you know sort of catalytic of the Free Speech Movement which then develops into a sort of larger movement or at least the claims of the movement, a larger, insofar as they have to do with free speech rights on campus.

[53:21]

The students object to sort of the claim of university administration that it should have a prerogative to determine you know sort of what is done on Sproul Plaza↗.

[53:34]

The administration established limits to sort of political mobilization on Sproul and this was the sort of spark that triggered the free speech movement. But the implications of free speech are much larger than you know sort of Berkeley's intramural policies.

[53:51]

Rather free speech has to do with a sort of critique of postwar conformity. What seems to you know students, members of the baby boom generation, to be the excessive rigidity, the excessive conformity, the excessive control, of postwar institutions. The university in this case but by no means limited to the university.

[54:15]

As the student movement develops during the 1960s it develops into something more akin to a sort of wholesale movement against the culture and the politics and the institutional fabric of postwar liberal capitalism.

[54:34]

Students object not only to capitalism but also to the Cold War structure of international relations. Students sort of not all of them, but some of them, sort of revolt against society as it is you know constituted both at the national scale at the world scale and ask whether something better cannot be accomplished.

[54:56]

So there's a powerful utopian streak to the student movement of the late 1960s. It seeks to sort of create some alternative reality. And of course this is chimerical but it is no less compelling for those who participate in the movement for that.

[55:15]

As the goals of the student movement are you know ultimately unsatisfied. They were so utopian that they you know hardly could be the movement degenerates on the far you know radical fringes into a violent movement.

[55:29]

Germany will experience a sort of violent insurgency with the Red Army Faction↗. Italy has its Red Brigades↗ and the United States the Weathermen↗ undertake a campaign of sort of... low level minor key terrorism.

[55:44]

In itself this is you know fairly inconsequential at least in the United States. A tiny handful of people are directly harmed or killed by you know attacks that the Weathermen plant. In Italy sort of the violent left in the 1970s will be more consequential. A Prime Minister of Italy, Aldo Moro↗, is taken hostage and then murdered by the Red Brigades.

[56:08]

So in Italy the sort of consequences of sort of violent anti-establishment politics on the left are more far reaching than they are in the United States. But everywhere the specter of large scale street demonstrations, of casual student violence, of bomb throwing in the case of the you know violent fringe seems to represent an existential challenge to the stability of postwar societies.

[56:36]

Can the center hold? You know this is sort of the question that W. B. Yeats↗ posed in the early 1920s, you know, can the center hold? And by the late 1960s sort of informed commentators, ordinary voters, are questioning the bases of social and economic stability as it has come to be constituted after the Second World War.

[57:00]

Can mainstream society hold out against the widespread mass resistance of youth?

[57:10]

This is a issue that is taken seriously. In retrospect the sort of global revolution as you know one historian has described it of 1968 looks to be a failure. It ultimately didn't change a great deal but at the time the revolts which you know take place in university campuses from Berkeley to Berlin seem to represent a sort of coherent challenge to the status quo, to the constituted social order.

[57:39]

And this is a threat that is taken seriously. The National Security Council of the United States for example, this is the sort of institution within the White House that is responsible for national security and foreign policy, commissions papers on student violence, on the student revolt, it is considered by policymakers to represent a threat to the status quo.

[58:03]

Certainly it marks the beginnings of, or it marks the crumbling of the postwar sort of social and political consensuses that had held societies together.

[58:15]

So, youth, ends up having a sort of disruptive impact in the world of the 1960s at least in the Western capitalist world of the 1960s. Youth aligns itself against the status quo and it is unclear whether the status quo can stand firm or not.

The Collapse of Bretton Woods

[58:33]

Meanwhile, some of the structuring institutions which were established in the mid-1940s to manage and organize the postwar liberal world economy are themselves beginning to crumble. The Bretton Woods framework begins to come undone during the late 1960s

[58:56]

The 1960s of course were a period in which Keynesian macroeconomics enjoyed their heyday. Richard Nixon pronounced in 1971, "We are all Keynesians now"↗. But what he's offering in a sense is an epitaph of an era that has been rather than a you know statement about the likely shape of the future.

[59:17]

In the United States the Johnson administration marked the high point for Keynesian macroeconomics. In 1964 for example Johnson orchestrated a stimulus package that was absolutely Keynesian in its intent. Johnson introduced a tax cut that was intended to stimulate growth and to sort of accelerate the rate of economic expansion.

[59:46]

In the United States Keynesian policies are pursued with the purpose of stimulating growth and full employment and much the is also true in Europe. In Europe governments target full employment and they use the sort of instruments of fiscal and monetary policy to pursue the ends of growth and widespread affluence.

[1:00:10]

There are different varieties of Keynesianism. In the United States military spending has a major stimulative effect on the economy so some economists would sort of characterize the United States as an example of military Keynesianism. In Europe military spending is much less than it is in the United States.

[1:00:27]

In part because the European are able to depend upon the United States to defend them against the Soviet Union. And social spending will be the major you know source of stimulus to the economy. So Keynesianism has different accents depending upon the context in which it's implemented.

[1:00:45]

But throughout the Western capitalist world there is a basic confidence in the 1950s and particularly in the 1960s that governments can through manipulation of fiscal policy and monetary policy manage growth so as to produce socially desirable economic outcomes.

[1:01:03]

There is even believed to be a benign tradeoff between inflation and unemployment. This is a notion that is predicated upon sort of empirical data, upon data from sort of Britain actually, which seemed to demonstrate a sort of positive correlation between inflation and employment.

[1:01:27]

And this becomes known as the Phillips curve↗. And it's something which is sort of worth mentioning even though it's a sort of technical issue which isn't going to be on the exam because it's illustrative of some of the sort of intellectual presumptions that sustain the Keynesian consensus in the 1960s.

[1:01:41]

What the Phillips curve tells us is straightforward enough, right. It tells us that tolerating inflation can have beneficial consequences for employment. That is that high rates of employment, low rates of unemployment, correlate historically with high rates of inflation.

[1:02:04]

And this is important insofar as it legitimates some of the tradeoffs that governments make in pursuit of full employment and growth during the 1960s. Stimulating economies in order to produce growth has inflationary consequences, right. As governments purchase you know whether military supplies or you know welfare goods...government activity has a simulative impact on the economy. So too do loose monetary policies which governments pursue for Keynesian reasons have a stimulative effect on the economy.

[1:02:41]

As governments stimulate growth they also stimulate inflation. And the Phillips curve is really important insofar as it convinces policymakers that they don't have to worry too much about inflation. Insofar as the Phillips curve identifies a benign trade off between employment and inflation policymakers throughout the West persuade themselves that inflation is something that can be tolerated and even disregarded in the name of high employment.

[1:03:10]

And the Phillips curve enjoys sort of widespread influence throughout the West in the 1960s.

[1:03:19]

This will have consequences for the stability of sort of the Western economic system writ large. To understand this we should think about Bretton Woods and think in particular about what happens to Bretton Woods in the late 1960s and early 1970s. But to do that I want to recapitulate for you some of the basic aspects of the Bretton Woods system. It's been a few weeks since we've talked about Bretton Woods so let me just go over the basic you know characteristics of the Bretton Woods system as it constituted you know at the end of the Second World War.

[1:03:53]

You know what is Bretton Woods? Bretton Woods is an institutional framework for organizing the capitalist world economy that operates according to several cardinal principles. And these are first that nation-states should enjoy a degree of macroeconomic autonomy so that governments can manage their own economies in accord with some nationally defined you know vision of prosperity and well-being.

[1:04:19]

So the Bretton Woods settlement tries to create a certain sort of autonomy for nation-states. In doing this it reflects a Keynesian consensus, a consensus that tells us that governments should be responsible for managing their economies so as to correct cyclical downturns and to produce growth.

[1:04:38]

Now Bretton Woods tries to achieve this space for national macroeconomic management by imposing limits on transnational global capitalism. Capital controls are permissible within the Bretton Woods framework. Governments are not required to even make their currency convertible until such a point as they feel ready to do so.

[1:04:59]

This is 1958 for the countries of Western Europe which return to convertibility in 1958. So Bretton Woods then tries to create a sort of global economic system in which fixed exchange rates can exist, mediated via the dollar, which is the central element of the system, the dollar is fixed in value to gold, and other currencies fix in value to the dollar. So there are to be fixed exchange rates but there is also to be a substantial latitude for national policy autonomy.

[1:05:30]

So by combining these two elements, Bretton Woods tries to strike a compromise between globalization as it were and sort of national economic policy. This is a delicate compromise. It works pretty well in the 1950s. During the 1960s it begins to become unstuck.

[1:05:49]

Why is this? Well part of the explanation has to do with the central role of the United States in the system. The US dollar, as you all understand by now, is the central element of the Bretton Woods currency matrix. The US dollar is the numéraire; that is to say the dollar is the unit of value in which other units of value are expressed.

[1:06:11]

Other countries define the values of their currencies in direct relationship to the United States dollar.

[1:06:18]

The US dollar is also a source of reserve assets for the international system writ large. Other currencies maintain the values of their currencies by holding US dollars as reserve assets. But all of this will impose a burden on the United States, right.

[1:06:35]

The United States in 1944, at the moment when Bretton Woods is created, enjoys a disproportionate sort of preeminence in the capitalist world economy. The other countries have been devastated by the Second World War; the United States has been enriched by the Second World War. The US share of the industrial world's total economic output is more than 50% in 1944.

[1:07:02]

And the Bretton Woods system sort of institutionalizes this exceptional margin of American primacy.

[1:07:10]

Indeed the United States will subsidize it allies after the Second World War. It disburses Marshall Aid in the late 1940s and military assistance in the 1950s which has you know beneficial consequences for the Bretton Woods system. Wealth transfers from the United States to Western Europe and Japan are something which helps to enable the system to function as it was intended to do.

[1:07:34]

But during the 1950s, and the 1960s Western Europe and Japan grow faster than the United States does.

[1:07:41]

The margin of relative ascendancy that the United States enjoyed in 1944 narrows. The US share of the capitalist world's total output declines. And as a consequence Bretton Woods, a monetary system that had been predicated upon an exceptional margin of American superiority becomes destabilized.

[1:08:05]

Consider the American balance of payments in the 1960s. Through the 1960s the United States runs small overall deficits on the balance of payments. And what this chart shows you, to sort of unpick the details, is the US balance of payments broken down into four major categories.

[1:08:25]

Current account transactions, which are sort of trading goods for the most part, trading services, are marked in green. Military spending, money that the US government spends on military purposes overseas, is marked in blue.

[1:08:41]

Long term capital flows, foreign investment, FDI, is marked in yellow, short term capital movements, liquid capital movements, are marked in red. This is a simplification of the balance of payments but it's as complex as I want to go today.

[1:08:57]

In the chart balance of payments deficits fall sort of below the x-axis. Everything below the line is a deficit. Everything above the line is a surplus. If you add together the two things, you know, I mean, sorry, if you add together the transactions above the line and below the line the overall balance for most of the 1960s is a little bit below the line.

[1:09:22]

The United States runs a series of trade deficits. But what I'm interested in here is not the overall trade balance but rather the composition of it. Because that's what's interesting and it helps to reveal why Bretton Woods comes to an end at the end of the 1960s.

[1:09:36]

Through most of the 1960s the United States enjoys a substantial trade surplus. American factories are still sufficiently productive that the US exports more to the world than it imports. And it runs a trade surplus. And that's really important because this trade surplus makes possible American military spending overseas.

[1:10:00]

Military spending is a drain on the American balance of payments. But it is paid for in effect by the export surplus that the United States enjoys on the current account. The United States exports enough goods and services to the world that it can well afford to pay for its you know sort of expansive military presence in East Asia and in Western Europe.

[1:10:23]

More than that the United States can afford to sustain large outflows of investment capital overseas. During the 1960s American corporations invest substantial amounts of money outside the United States particularly in Western Europe. This is an outflow of capital that might have been destabilizing on the balance of payments except for the fact that the United States is running a fairly healthy trade surplus during the 1960s.

[1:10:52]

So earnings from you know the trade account, earrings on the export of goods, offset outflows of investment capital from the United States ensuring that the balance of payments remains in an overall sort of equilibrium of sorts.

[1:11:09]

The situation will change quite dramatically from the late 1960s. And what happens from the late 1960s is that American industry is losing its competitive edge. The United States runs its first trade deficit since 1893 in 1971. This is a historical watershed.

[1:11:27]

Since the 1970s the United States has run trade deficit after trade deficit after trade deficit. The trade deficit becomes very, very big in the 1980s and 1990s but prior to 1971 trade surpluses are in essence what pays for the expansive military role of the United States in the Cold War world and for American outflows of investment capital to Western Europe and elsewhere.

[1:11:54]

That trade surplus collapses after sort of the late 1960s, and its collapse will have destabilizing effects for the Bretton Woods system.

[1:12:04]

Let's think a little bit about the role of the dollar as a system wide reserve asset because this is intimately related to the problem of America's waning balance of payments. The United States during the 1950s and the 1960s exports dollars to Western Europe and Japan. We've already talked about this to some extent. This is useful from the point of view of the Bretton Woods system.

[1:12:31]

The United States pays for its deficits insofar as it runs small deficits with dollars. But this is beneficial enough for countries that receive dollars because dollars are reserve assets. Right, if you're Germany or France or Great Britain, then it's no hardship in the 1950s to hold dollars in your central bank because these dollars are a vital source of liquidity.

[1:12:54]

Insofar as the Deutsche Mark, the franc, and the British pound sterling are based upon the dollar, that is to say the dollar in the unit of value which you know the Bundesbank↗ holds as a reserve asset, holding more dollars in your central bank means that you can circulate more currency. Your monetary, your money supply, can grow accordingly.

[1:13:14]

So in the 1950s and into the mid-1960s dollar deficits, the expanding circulation of dollars outside the United States, has some beneficial impact for the monetary system writ large -- it underwrites the expansion of global liquidity.

[1:13:31]

But there are problems. Under the Bretton Woods rules the United States is formally obligated to exchange dollars for gold at $35 dollars per ounce. The value of the dollar is fixed in relation to gold. Now this is a problem insofar as the expansion of dollar liabilities over time creates uncertainty as to whether the United States is capable of making good on its formal obligation to convert dollars into gold on the demand of the dollar holder.

[1:14:03]

When there are more dollars circulating outside the United States in value than the United States possesses gold reserves in Fort Knox then the United States is technically no longer able to convert all of the dollars that it is obliged to convert in theory into gold before gold should the demand to do so present itself.

[1:14:26]

And this you know is known in sort of technical economics as the point of gold dollar overhang. The point where the total dollar obligations of the United States exceed the reserve assets which the United States has to meet those obligations. That point is passed in 1965. Or thereabouts.

[1:14:46]

Eventually the system collapses in 1971. And it collapses because the United States government fears a rush on the dollar. It fears a dollar crisis in which foreign countries will come to the treasury and they will demand conversion of their paper dollars into gold -- into precious metal.

[1:15:07]

And they would do that because they would be fearful of a dollar crisis that might slash the value of the dollar assets which they're holding in their central banks.

[1:15:17]

Nixon, who's President of the United States in 1971, acts preemptively to forestall a dollar crisis. He acts preemptively to forestall a run on the dollar. And he does so by slamming the gold window closed. The gold window is sort of the euphemism which is used, or the metaphor, which describes the obligation of the United States to convert dollars for gold upon demand of the dollar holder.

[1:15:41]

And Nixon in 1971, in August 1971, unilaterally reneges upon this commitment. He declares that the United States will no longer convert dollars into gold. Indeed he, by doing this, he marks the beginning of the end of the Bretton Woods system. That American commitment to convert dollars for gold had been sort of a vital component of the Bretton Woods order. It was in essence what underwrote the legitimacy of the system -- writ large.

[1:16:10]

After closing the gold window Nixon tries very hard to secure a dollar devaluation. He wants to reduce the value of the dollar in relation to foreign currencies because doing so will help to sort of restore the competitive edge of American industry in the world.

[1:16:24]

Insofar as the dollar by the late 1960s is overpriced it is pricing American exports out of world markets. Nixon wants to remedy an overvalued dollar so he slams the gold window closed and initiates a very harried round of negotiations with American trade partners in order to secure a negotiated devaluation. This is achieved in December 1971. The Smithsonian Agreement↗ produces a sort of multilateral agreement to devalue the dollar against rival currencies.

[1:16:57]

But ultimately this devaluation does not hold. There is a second dollar crisis in February 1973 in which sort of private money holders, private holders of dollars, dump the currency because they fear that despite the Smithsonian devaluation the dollar is still overvalued.

[1:17:15]

In this moment of second crisis, in February 1973, the United States and its allies agree to abandon fixed exchange rates entirely. They agree that trying to uphold and maintain a system of fixed exchange rates has become far too difficult.

[1:17:31]

That it is sort of beyond their basic capacities as governments to maintain a fixed exchange rate regime. This marks a really important transition in the sort of international political economy of postwar sort of international history.

[1:17:49]

The shift marks a transition from an era in which capitalism had been fairly carefully and closely regulated by nation-states to an era in which capital will flow much more freely across borders. Indeed free flowing international capital had a really important role to play in the transition itself.

[1:18:10]

During the late 1960s short term capital had been attracted to the United States by interest rates that were relatively high by comparison with European ones. There was an influx of short term capital as this you know graph suggests. Movements of capital map fairly closely onto interest rates.

[1:18:31]

Ultimately it's a reduction in US interest rates and an exodus of capital that triggered the end of the Bretton Woods system, and this is something which you can also see in this chart when you come back to it. Short term capital flees the dollar in 1970 and 1971 prompting Nixon to devalue the dollar and to end gold dollar convertibility.

[1:18:55]

This demonstrates the rising importance of financial capital -- of global free flowing capital in the world economy. And it signifies that a transition from a world of relatively compartmentalized managed capitalism to a world of increasingly globalized capitalism has already begun.

[1:19:13]

And we're going to talk much more about the consequences of that transition next -- the week after next -- but you can see in the death throes of Bretton Woods the emergence of a new kind of international financial system already taking shape.

[1:19:28]

Is there a quick question?

[1:19:29]

(student question)

[1:19:34]

Yes, it is. But it doesn't hold over the long term.

[1:19:38]

So, this in is a sense is the moment of crisis. The moment in which a political economic concept, the Bretton Woods Keynesian concept, comes apart and the future is as of yet still to be determined but in the crisis itself the role of sort of transnational capital, of short term international flows of money, can already be discerned.

[1:20:03]

And we'll talk in I think two weeks time about where the capitalist world economy goes next.