In lieu of an abstract, here is a brief excerpt of the content:

1 At the end of World War II, the United States possessed more than twothirds of the world’s gold and most of its functioning manufacturing capacity; however, the US had a significant vulnerability. Its demand for oil was outpacing domestic production, and foreign oil was much less expensive than domestic oil. Access to foreign oil had become central in the country’s strategy to maintain its position of global hegemony. The sale of oil and other commodities in dollars, the backing of the dollar with the country’s huge gold reserves, and the use of military power to control oil supplies ensured that the American dollar was the world’s leading reserve currency.1 American dominance of global manufacturing and control of foreign oil via neocolonial relationships could not last forever. Almost as soon as World War II ended, oil-exporting countries began to demand a higher share of oil profits. Although the nationalization of Iranian oil in 1950 primarily affected Britain, the United States began to offer its oil partners a higher percentage of profits from oil revenue. Concern with dependence on foreign oil was high enough in the United States that President Dwight Eisenhower launched the first of many government programs aimed at energy independence. In 1958, the Mandatory Oil Import Program imposed import quotas and preferences for Western sources. In some ways, the policy might be viewed as the first step toward developmentalism in the federal government during the postwar period, because it pursued a path of import substitution for the crucial energy source. However, the resulting program drained domestic sources of oil more quickly, increased the country’s long-term dependency on oil, and goaded oil producers into organizing the forerunner of the Organization of Petroleum Exporting Countries.The disastrous first energy-independence program was finally ended in 1973, and by that time the US was even more dependent on foreign oil.2 Energy, Manufacturing, and the Changing Global Economy 32 Chapter 1 The second long-term change that contributed to the decline of postwar American hegemony occurred during the 1960s, when military spending abroad and deficit spending at home contributed to a balanceof -payments deficit and inflation, which in turn led to a decline in the country’s gold stock. Rather than cut spending programs, the United States told foreign creditors to hold their balance-of-payment surpluses in treasury bills. American prosperity came to rest on its status as banker to the world; it could pay for foreign goods with treasuries that other countries held as foreign reserves. Even when the US went off the gold standard, in 1971, the dollar didn’t collapse. Countries that held dollars as their reserve currency had an interest in maintaining the greenback’s value, and they also needed to buy oil and other commodities that cleared in dollars. Likewise, the rise of oil prices during the 1973 OPEC embargo didn’t threaten the dollar regime, because the US government would allow OPEC countries to make only limited purchases of American companies with their new wealth. Instead, their oil wealth recirculated through the banks of the US and Europe to less developed countries as petrodollar loans. It was not until the launch of the euro, in 1999, that a credible, large alternative reserve currency emerged. However, with few exceptions, oil remained denominated in dollars even after the launch of the euro. One exception was Saddam Hussein, who shifted the sale of Iraqi oil to euros in 2000, but the sale of oil in dollars was restored after the United States invaded Iraq. Subsequently, Iran and Venezuela successfully shifted to the sale of oil to currencies other than dollars, but the dollar-oil system remained intact for other countries.3 The third major feature of the slow decline in the relative hegemony of the American economy also became apparent during the 1970s, when the United States faced increased manufacturing competition from foreign countries in industries such as textiles, shoes, televisions, and steel. In response, a crucial element of developmentalism began to emerge: new protections for selected domestic industries. The Trade Act of 1974 allowed the US to impose import quotas when foreign competition threatened American jobs and industries, and President Gerald Ford, while on a 1975 campaign tour stop at a steel-manufacturing plant in Ohio, approved the first protectionist measure under the act by establishing quotas for specialty steel.4 Japan became a central target of American negotiations involving imports of steel, consumer electronics, and automobiles. Under...

Share