by Norman Stone
It affected language. The bestselling weekly journal in Germany was Der Spiegel, which had been set up in British-occupied Hamburg after the war, with advice from the British (along with the left-liberal Die Zeit, modelled on the Observer in London, owned and run by David Astor). It did not express itself in the standard German literary style, lengthy verbs-at-the-end-sentences and all: it aimed for English brevity, and in time Spiegeldeutsch was such that the magazine could only be understood if you knew American English quite well. There was a bestselling book in France at this time, Étiemble’s Parlez-vous franglais? It is a long book, giving many examples of the corruption of French, not just by Anglo-American words, but even by Anglo-American usages — for instance, the translation of the World Bank’s formal title to include développement, whereas mise en valeur gives a better understanding of the English original. There was some justice in the French campaign. After all, up until very recent times French had indeed been a dominant language, and when de Gaulle appeared at a state visit in London in 1962, and was accompanied by the Comédie-Française and the great Racine actress and director Marie Bell, the London theatre was enthusiastically full up for her productions of Bérénice and Britannicus, austere alexandrines in a language that, today, even most of the French would find testing. As it happened, Étiemble (who was of peasant origin) had spent seven years in Chicago and had hated much about it. A French West Indian academic colleague had come to see him at home, and the landlord had nearly thrown him out; he remarks, of ‘the American way of not living’, ‘how can you not deplore the great sexual misery of a people with frigid, obsessive, puritanical and bossy women for whom the men stupifiedly kill themselves with work and alcohol?’ and asks what might be done with ‘the infantile cuisine to which the Yankees are reduced and which they take such joy in’. He adds that he would never be attracted by a woman wearing jeans. Étiemble (who lived to an immense age) had no illusions as to what might be done: he recognized that French writers were simply not as interesting as they had been even in the recent past, when French theatre had had worldwide resonance, and he would soon have had to admit as well that the great French cinema was producing mainly clichés. Such campaigns were all too easy to ridicule. At least Luther in the sixteenth century had been robust and not long-winded, but in the 1880s there had been an absurdly pompous effort to prevent words such as ‘telephone’ entering the German language directly: ‘far-speaker’ (Fernsprecher) was substituted, and ‘round-spark’ (Rundfunk) for ‘radio’ (an even more absurd Croat effort to avoid that word came up with krugoval, ‘round-spark’ in South Slavonic). This was a hopeless business, and Étiemble had the humiliation of seeing ambitious Frenchmen and Frenchwomen of a sort he detested make the standard trot to Harvard or Stanford business school, there to be deracinated into unmemorable miniature Jean Monnets.
There was another famous French book at this time, another of those silly-clever sixties bestsellers, Jean-Jacques Servan-Schreiber’s Le Défi américain. He, in a later work, suffered from strange notions, that, to stop Indian textiles from competing with their own, the British in India had cut off the little fingers of Hindu girls’ hands. However, the earlier title made at length the point that the Americans were buying up Europe: multinationals such as IBM were moving in; they were taking advantage of cheap labour, and yet by setting up in France they could duck under the French protectionist walls and thereby keep French industry from developing. However, they could do this because they could quite literally just print off dollars on paper which everyone else had to accept as if it were real gold. As had been feared from the start of the new system devised at Bretton Woods, in 1944, American paper money was international legal tender because two thirds of trade was conducted with the dollar (the pound sterling accounting for most of the remainder). In theory it could be converted into gold, at the famous formula of $35 per ounce, but even in 1960 the American gold reserve at Fort Knox was less in value than the number of dollars kept abroad and especially in Europe. What was to stop the Americans from just printing pieces of paper and buying up Europe? This was a fraudulent point, because the same system, triumphantly and perhaps perversely in the case of the British, enabled Europeans to invest in the USA. ‘S-S’, as he was called (he produced a would-be French version of Time magazine, became an internet-is-the-answer bore, and had his children brought up in Pittsburgh, generally at the business school), also failed to notice that French industry, far from languishing, was doing better than it had done since the 1890s, when the arrival of electrical energy had enabled it to bypass the coal in which France was poor. Quite soon France was going to overtake England, for the first time since the French Revolution itself.
All of this allowed de Gaulle to appear as a world statesman, to put France back on the map. Now, he, many Frenchmen and many Europeans in general resented the American domination. There was not just the unreliability, the way in which the USA, every four years, became paralysed by a prospective presidential election. France’s defence was largely dependent upon the USA, and, here, there were fears in Paris and Bonn. They did not find Washington easy. The more the Americans became bogged down in Vietnam, the more there was head-shaking in Europe. They alone had the nuclear capacity to stop a Russian advance, but the Berlin crisis had already shown that the Americans’ willingness to come to Germany’s defence was quite limited, and they had not even stood up for their own treaty rights. Now, in 1964, they were involved in a guerrilla war in south-east Asia and were demonstrably making a mess of it: would Europe have any priority? Perhaps, if West Germany had been allowed to have nuclear weaponry, the Europeans could have built up a real deterrent of their own, but that was hardly in anyone’s mind. The bomb was to be Anglo-American.
At the turn of 1962-3 the British Prime Minister, Harold Macmillan, had met Kennedy (at Nassau) and agreed to depend upon a little American technology on condition that the French got even less. There would be no Franco-British nuclear link and as far as de Gaulle was concerned, France would have to make her own way forward. He got his own back. The Americans were trying to manoeuvre Great Britain into the EEC, and, conscious now of their comparative decline, the British reluctantly agreed to be manoeuvred. At a press conference in January 1963, de Gaulle showed them the door. Europe was to be a Franco-German affair, and de Gaulle was its leader. France could not go alone. If she had seriously to offer a way forward between the world powers, she had to have allies, and Germany was the obvious candidate. Adenauer, too, needed the votes of what, in a more robust age, had been called ‘the brutal rurals’, and the Common Agricultural Policy bribed them. In return for protection and price support, they would vote for Adenauer, even if they only had some small plot that they worked at weekends.
France, with a seat on the Security Council and the capacity to make trouble for the USA with the dollar and much else, mattered; the Communists were a useful tool, and they were told not to destabilize de Gaulle. He was being helpful to Moscow. In the first instance, starting in 1964, the French had made problems as regards support for the dollar. They built up gold reserves, and then sold dollars for more gold, on the grounds that the dollar was just paper, and inflationary paper at that. There was of course more to it, in that there was no financial centre in France to rival that of London, and the French lost because they had to use London for financial transactions; by 1966 they were formally refusing to support the dollar any more, and this (an equivalent of French behaviour in the early stages of the great Slump of 1929-32) was a pillar knocked from under the entire Atlantic financial system.
De Gaulle had persuaded himself that the Sino-Soviet split would make the USSR more amenable, that it might even become once more France’s ideal eastern partner. There were also signs, he could see, of a new independence in eastern Europe. The new Romanian leader, Ceauşescu, looked with envy on next-door Tito, cultivated and admired by everybody. Romania had been set up by France a century before, and French had been the second, or even, for the upper classes, the firs
t language until recently. Now, de Gaulle took up links with her, and also revisited a Poland that he had not seen since 1920, as a young officer. In March 1966 he announced that France would leave the NATO joint command structure, and the body’s headquarters were shifted to Brussels, among much irritation at French ingratitude. In June the General visited the USSR itself, and unfolded his schemes to Brezhnev: there should be a new European security system, a nuclear France and a nuclear USSR in partnership, the Americans removed, and a French-dominated Europe balancing between the two sides. He had already made sure of Europe’s not having an American component, in that he had vetoed British membership of the Community. Now he would try to persuade Brezhnev that the time had come to get rid of East Germany, to loosen the iron bonds that kept the satellite countries tied to Moscow, and to prepare for serious change in the post-war arrangements. Brezhnev was not particularly interested, and certainly not in the disappearance of East Germany; in any case, although France was unquestionably of interest, it was West Germany that chiefly concerned Moscow, and there were constant problems over Berlin. De Gaulle was useful because, as Brezhnev said, ‘thanks to him we have made a breach, without the slightest risk, in American capitalism. De Gaulle is of course an enemy, we know, and the French Party, narrow-minded and seeing only its own interests, has been trying to work us up against him. But look at what we have achieved: the American position in Europe has been weakened, and we have not finished yet.’
Europeans, and Germans especially, had built up a trade surplus, storing their dollars as reserves; they, this time mainly British, had also invested in the USA. What would happen if their holdings of dollars were so large that they outnumbered the Americans’ own reserves? And then they sold, as de Gaulle was to do? There was a free market in gold, partly in London, and the Swiss were also not bound by the rules. What would happen if dollars were sold for gold, at a price different from the official one? It would weaken the dollar, make it unstable, and less useful as the medium for world trade, upon which the prosperity of the Western world depended. And if the producers of oil especially, but also other essential raw materials, realized that their dollars were just paper, would they not react by raising their prices? In the sixties there were moments of trouble, as dollars built up in private hands, and the dollar’s junior partner, the pound sterling, looked weaker and weaker as the British economy lagged behind the German and then the French.
However, there were still too many important interests involved in the existing system for it to be easily abandoned. In the very first place there was defence — largely American, but with a not insignificant British contribution, whether in central Europe or ‘east of Suez’, where a British presence guaranteed important areas in the Arabian peninsula and South-East Asia. The drain of dollars and pounds was partly accounted for by the military spending that went on abroad, a problem that the Germans themselves did not now have to face. One answer to the particular difficulties of the dollar might have been just to increase the value of the Mark, to take account of the Germans’ export surplus. There was resistance in Germany, where the Bundesbank and exporters feared what might happen if exports became more expensive, though with much heaving and puffing, small increases (revaluations) of the Mark were agreed in 1961 and at the end of the decade. Meanwhile, if speculators sold dollars, Germans bought them up at the fixed and increasingly artificial price. This did not address the fundamental problem, that more and more dollars were held outside the system, and the problem kept coming back. In the early 1970s, the dry and technical debates of ten, or even twenty-five, years before suddenly took on a hectic life. There always was a central problem, that the dollar was in the end just paper, and would appear to be such if the Americans produced too much of it. That was what happened. Vietnam had to be paid for, but so also did the expense of Johnson’s vast public spending programme.
Nixon, though supported, electorally, by opponents or at least critics of Johnson’s spending, carried on with and for that matter increased it: when a new chairman of the Federal Reserve System was introduced in July 1970, Nixon said he wanted ‘low interest rates and more money… I have very strong views and… hope that he will independently conclude that my views are the right ones.’ Whether he did or did not, he allowed Nixon to continue the Johnson programmes and to expand them. The result was a rising budget deficit and a rising national debt.
The national debt had reached $271bn in 1946. It fell in proportion to the GNP until 1965 and then boomed. Under Johnson deficit financing became the rule, and in 1968 his Treasury Secretary, Henry Fowler, protested because of the strain for the dollar. A successor, John Connally, dismissed arguments of this sort: the dollar is our currency and it’s their problem. The Great Society programmes were greedy, and by 1975 federal spending had reached $332bn, the deficit being $53.2bn. By then, federal spending had reached almost 25 per cent of gross domestic product (in 1950, it had been 16 per cent). The dollar had a tenfold inflation after 1956. At the time the sixties economists were still confident enough of their ideas and in any case the Western world’s most prosperous elements almost had to support the dollar, and so the deficits marched on and there were regular meetings of international experts to supply funds with which to buy up the excess dollars. Wise heads shook, though they shook in the wrong direction, absurdly conjuring up a ‘liquidity crisis’, and deflation, in which they were quite wrong, because the problem was that there was a glut of money, and an inflation that rocked the entire system. At any rate, tinkering happened. A G10 group of the industrial nations was formed to defend the dollar (and a Basle one for the pound) and they could lend to the IMF, which allowed special drawing rights of immediate credit to defend a currency under threat. The IMF thereby, at last, acquired a role. NATO members were encouraged to spend dollars in the USA and to deposit cash there; American citizens were forbidden to own gold coins (1965) and the GATT round of 1958-62 even allowed countries with threatened currencies to impose an import surcharge of 10 per cent (as happened with the British in 1961 and 1964). American visas were made easier, to encourage tourism in the USA; Germany and Switzerland refused to pay interest on foreign bank holdings (though that was very difficult to arrange and anyway only encouraged countries such as Luxemburg to take them instead). It was all small beer in comparison with the two great problems — the German surplus and US government spending, with a deficit in 1971 of $10bn.
The dollar itself was badly weakened by all of this, and after making constant noises, with suggestions that a form of the old gold standard might be reintroduced, in 1966 de Gaulle stated that the French bank would henceforth want gold instead. This was not just anti — Americanism. At the time, Paris did not much count as a financial centre, so this was easier for France to do than for, say, London, where credit functioned more efficiently (the French banks had been nationalized in 1945). But the pound itself came under constant pressure in the 1960s as speculators based in Switzerland appreciated that it was overvalued, while British spending overseas (partly for military purposes) put it under strain. In the autumn of 1967 there was a threat that the Suez Canal would be closed and therefore unusable for British oil imports. At the existing rate, the British could not exchange harder currencies without seeing their reserves wiped out and the pound was at last devalued, from $2.80 to $2.40. That shifted pressure onto the dollar, and the oil producers sat up.
The Germans also had their reasons for complaint. The Bundesbank had as a primary aim the control of inflation. One cause of that would be an inflow of dollars, swapped for Marks. The exporters liked their undervalued Mark; the savers, as represented by the Bundesbank, their stable currency. The temper of international meetings as to the future became acrimonious and everyone blamed everyone else — Americans, Germans for saving too much; Germans, British and Americans for not saving enough; Swiss, the others for having crooked tax systems; the others, the Swiss, for receiving stolen goods. Japan was now emerging as a large and fast-growing economy, and she like Ge
rmany saved: there was not, as in the Anglo-Saxon countries, the sort of consumer boom that sucked in imports. In 1970 there was a brief respite, as the British and Americans balanced their budgets, but the tidal-wave overhang of paper dollars was too great, and was being added to with every breath that Americans took.
Bad news from Vietnam no doubt did not help, but in 1971 a great inflow of dollars into Switzerland, Germany and Holland occurred. The German government decided it would have to float (followed by the Dutch) in order to make Marks more expensive for the speculators. There were rumours that other governments, including even the British, would buy gold at the now giveaway price of $35 per ounce. Fort Knox would be drained dry. What would Nixon do? He retired to Camp David with his advisers and announced, on 15 August 1971, at the end of the weekend, that the dollar’s formal gold link was ended. He even imposed a 10 per cent import charge, and did not even tell the IMF what he was doing. Maybe he did not even know himself. But this was the end of the Bretton Woods system. It was also the end of much else.
One of the bases of Western prosperity after 1947 had been cheap oil. It cost a dollar a barrel in the early fifties and then crept up to two. Transport in the past had been one of the great obstacles to progress, since horses ate 26 pounds of grain every day, and were frequently sick as well as temperamental; wooden wheels needed constant maintenance (hence in all countries ‘Wheeler’, ‘Raeder’, ‘Charron’ is a common surname) and roads were maintained by convict gangs or serf (corvée) labour. The internal-combustion engine, using very cheap petrol, was revolutionary, and even before the First World War the cities of the West knew all too well the meaning of ‘traffic jam’. In the 1950s the ownership of cars spread, and, with international competition, they became cheaper. The Volkswagen was the symbol of Germany’s economic recovery, quite soon putting even the great British makers almost out of business. Cheap transport of course allowed manufacturers to drop their costs, at least relative to other goods, and at the same time allowed ordinary consumers to spend on something else the money that they saved on travel. Besides, an automobile industry was very productive of other jobs — maintenance, spare parts, garages, roadside restaurants and hairdressers, and on and on.
