The US and globalization in the 1970s –

Daniel Sargent

1973-74 oil crisis shifted the balance of power in the world economy away from the importing nations and
toward oil exports

American leaders had failed to perceive the power of petroleum as a political weapon, despite the warnings
of oil economists

Global problems required global solutions

- Kissinger: Realities of interdependence made the diplomacy of nationalistic rivalry almost suicidal
o It would provoke a desperate rush for bilateral barter deals with oil exporters
- In private: how could the US lead in a world in which economics was stronger than military force?
o Use economics to build a world political structure

1973, new limits to US => vulnerability to external economic shocks because of interdependence

- The greater level of international economic activity restrict the capacity for autonomous national
policies
o Reciprocal effects among countries
o The distinction between foreign and domestic policy, between economics and politics was
blurred
- Resurgence of long-term globalizing patterns among the nations of the advanced capitalist world

The position of the US as the international system’s leading power imposed on it special responsibilities for
managing globalization

- From the mid-1970s, American policymakers struggled to master the implications of the decade’s
integrative upheaval
o Managing structural change =/= being architects of it

1. Extent, scope and nature of globalization as the US experienced it during the 1970s
2. US officials did not pursue interdependence as a coherent objective
a. Result of exogenous structural changes
3. US as an object of globalization in the 1970s
a. National policy autonomy became circumscribed by global integration

Globalization as useful lens to look at American relations with the larger world in the 1970s

Globalization = integration of markets, convergence of cultures, societies and aspirations

 - It involves changes in territories and institutions, as policies are oriented towards global agendas
and systems

For the US = diminished autonomy and demands of leadership in a globalizing arena

- 1930-1960s: political engagement and economic disengagement

o Kennedy administration = shift towards openness
o Destabilization of BW system => Johnson administration = attempt to restore capital
controls but Americans continued to import from overseas
 1971, first year of US trade deficit

Early 1970s, financial globalization

- Euromarkets, uncertainty
- Speculation and currency crises. Nixon administration
o 1971, Suspension of dollar convertibility in 1971
o 1973, abandonment of fixed exchange rates in 1973.
o 1974, abolition of capital controls

Trilateral commission: government in its classically territorial form was no longer competent to address
economic, social and political problems of transnational scale. Suggestion: Super-government

Interdependence as an opportunity or a threat. US increasingly entwined with a larger global community.

How did the US contribute to these integrative changes?

Globalization = purposeful recasting of American hegemony

 Radical restructuring of international capitalism

US foreign policy makers worried for geopolitical decline

Without having been set in motion by American leaders, globalization transformed the context for public
policy in the 1970. However, US choices defined the terms of global integration.

1973, Oil Shock. How to finance the deficit of consumer country? Loans from the exporters to the
importers. How to proceed?

- US preferred a market-based solution, blocking the IMF solution.

o Attempt to regain control

US government promoted the infrastructure of globalization after 1945 but because of Cold War security
imperatives

- Dollars, weapons and manufactured goods flooded from the US to the rest of the world
o Empire of production

After the rebirth of globalization in the 1970s, the US became an importer of foreign capital

- US imported more than it produced

o Empire of consumption
External factors influenced decisively US domestic policy in the 1970s. Macroeconomic policymaking
became internationalized.

- Carter administration worked to develop a multilateral solution to the stagflation crisis that
wracked the West.
o Foreign growth as an essential counterpart for domestic growth
 US permitted the domestic prices for oil to rise towards world levels
 Dollar depreciation

1979, Volcker became the chairman of the Federal Reserve Bank

- Rise of interest rates, US into recession

- IMF attachment of policy conditionality to loans
o Economic
o Human rights

Process of globalization as the projection of American influence => simplistic

US coming to terms with globalization had consequences not only for its autonomy but also for its role as a
superpower

- Increased American structural power

- Increased permeability and vulnerability to exterior world
o Public authority over the economy eroded
o Outsourcing of industrial labour