Gold, Dollars, and Power: The Politics of International Monetary Relations, 1958-1971 (review)

This book addresses the intersection of monetary and security issues from the late 1950s through 1971 in the United States's relations with Western Europe. The overall deterioration of America's balance of payments over this time and its effects on Washington's foreign economic and security policies are the main focus of the book. During this period, the United States was increasingly concerned with this trend. The author tries to evaluate how this concern influenced American choices within the broader and multilateral framework of the North Atlantic Treaty Organization (NATO). Unlike other recent studies that focus on the interweaving of money and security, this book does not deal with bilateral relations between the United States and a single Western European NATO partner. Rather, it is framed within the Western bloc as a whole, which is regarded as a multilateral economic and military system.

In 1958 the Eisenhower administration was concerned with the payments imbalance and the subsequent outflow of gold from the U.S. Treasury as determined by the structure of the Bretton Woods system, where a gold exchange standard based on the dollar was the main reserve asset. Since that time, four successive administrations were obsessed with this ever-growing problem: a trend which was sharply worsened by the sterling devaluation of late 1967. In five successive chapters (2–6) the author demonstrates how and to what extent the American payments deficit became crucial to the Eisenhower, Kennedy, and Johnson administrations, all of whom planned to redeploy out of Europe their conventional forces stationed there as a way to cope with this problem. These concerns, Gavin tells us, were put on the top of American policymakers' agenda and debates before the Vietnam War: as proved in chapter 3, the balance of payments problem was clearly a first-order issue in Washington as early as the Kennedy administration, whose international monetary policy was underpinned by these worries. The American policymakers regarded the six army divisions in West Germany as the main cause for this ever-increasing payments imbalance.

As in other works that focus on the Anglo-American monetary disequilibrium and its effects on the international relations within NATO, even Gavin's book identifies the American military expenditures to defend and protect West Germany from the Soviet orbit as the main link between power politics, strategic issues, and economic policy decisions in Washington's foreign policy during this decade. If the American troops in Central Europe were the main cause for these monetary problems, a redeployment from there could both let the Soviet Union become more aggressive toward the West and enable the Germans to become more independent from NATO. The alternative was between monetary stability and strategic achievements.

A second argument stemming from this thesis, and extensively dealt with in chapters 3, 4 and 6, is that in the 1960s there was a gap between a rhetoric that insisted on the need to increase the American conventional capabilities in Western Europe to take control over the military crisis and the Kennedy administration's purpose to improve the U.S. balance of payments through redeployment. A third theme that the author points out is the fundamentally weak nature of the Bretton Woods system throughout the 1960s, reviewed by Gavin as highly unstable, inefficient, marked by lasting nonconvertibility, and seldom loved by the Americans: the American proposals and plans to reform it which came up in Washington at this time would demonstrate these problems.

For at least a decade most studies and schools of research on the economic dimension of the Cold War have begun to work on the economic Cold War in NATO Europe through either the perspective of defense financing within the Atlantic alliance context or the problems and questions arising out of the East-West trade between Western Europe and the Eastern bloc. If other works highlight the Anglo-American concerns with a military involvement...