Defending Europe and the dollar: The politics of the United States balance of payments, 1958--1968

Between 1958 and 1968, the primary objective of U.S. foreign economic policy was to find a way to control the American balance of payments deficit and stem the loss of gold from the American Treasury. Many of the policies which were enacted or considered in order to solve the payments problem and ease the gold drain conflicted with the larger goals of American foreign policy and domestic economic policy. This clash created enormous tensions within both the U.S. government and the Western Alliance, and impacted a whole range of policies, from American troop deployments overseas to American investment in Europe. Despite these political tensions, American policy-makers feared an economic catastrophe if the balance of payments deficit was not reduced and the gold outflow ended. Many policy-makers, correctly or not, drew parallels with the international monetary conditions of the 1930's, and feared that a failure to correct the problem could unleash an international economic collapse and political disaster.; Three successive administrations were obsessed with trying to end the U.S payments imbalance and gold outflow without jeopardizing America's vast political and military commitments around the world. Each administration produced controversial programs to limit or end the deficit, all to no avail. These plans had an enormous impact on American foreign economic policy and a no less important influence on American grand strategy during a crucial period of the cold war. Yet despite the obvious importance of this subject, there has never been a full-scale diplomatic or economic history of the attempt by American policy-makers to understand and solve the vexing problem of the balance of payments deficit. This study fills that void.