ChapterPDF Available

Helmut Schmidt, the ‘Renewal’ of European Social Democracy, and the Roots of Neoliberal Globalization

Part II
ConCeptual transition in
(state) regulation from
the 1970s to the 1980s
Notes for this section begin on page 122.
Helmut Schmidt, the ‘Renewal’ of
European Social Democracy, and the
Roots of Neoliberal Globalization
G B
The Free World has been lucky to enjoy the benet of your
leadership and advice during the recent times of economic recession.
I can assure you that I am storing away all the economic experience
that I have been absorbing from you. Who knows, it might be
useful some day.
—Henri Kissinger to Helmut Schmidt1
Between Crisis and Revolution
A large part of Western historiography portrays the 1970s as the decade when
‘thirty glorious years’ of unprecedented economic growth came to an end.
The ensuing crisis did not bring capitalism to an end, as some had forecast at
that time; instead, a series of unpredictable events and deliberate acts brought
about the decline of one historically determined form, and by a shared urge
for increasing the control of the state over market mechanisms, culminated
in what was later called ‘embedded liberalism’.2 Illustrious intellectuals such
as John M. Keynes came up with this solution in order to consolidate the
capitalist economy and to avoid the disruptive eects of its cyclical crises. As
a result, Western economies witnessed a rapid recovery characterized by the
112 Giovanni Bernardini
constant introduction of new investments and technologies, substantial full
employment, and a dramatic rise in productivity that ensured prots grew
at a faster pace than wages. A democratically elected political power was
charged to manage the excesses by investing in a welfare state, and granting
social rights on a universal base. In short, sustained economic growth and the
solidity of democratic institutions guaranteed each other.
During the 1970s, the simultaneous manifestation of recessionary ten-
dencies, falling investment and productivity, as well as widespread ination,
challenged the Fordist–Keynesian paradigm. It became apparent that the
system was facing a whole new situation, without the theoretical tools to
nd a solution. However, if one looks at the new course of the interna-
tional economy from the 1980s onwards, the world economic crisis assumes
the character of a typical process of ‘creative destruction’. The 1980s were
the years of the ‘great leap backward’ to laissez-faire and to the credo of the
hidden hand of the market as the sole solution for the problems of economic
redistribution. Interventions by governments and international institutions
were deemed responsible for ineciency, whereas only the free ow of
goods and capital could provide an ecient allocation of resources.3 This
was not a novelty of the 1970s: economists such as Friedrich von Hayek had
been supportive of such approaches since the foundation of the post-war
system.4 However, the relative success of ‘embedded capitalism’ had pushed
the radical liberal approach into the background of history for a quarter of a
century. By contrast, after the crisis of the 1970s it was adopted progressively
by the government of the United States and the other most inuential econ-
omies around the world, with dierent degrees and timing, and then spread
quickly through free adoption or imposition by international institutions.
Was the neoliberal approach the only viable one for coping with the
crisis? The Reagan administration and Margaret Thatcher’s cabinet were
skilful in introducing public opinion to the acronym ‘TINA’ (There Is No
Alternative). Nevertheless, the 1970s witnessed a bourgeoning of claims of
a New International Economic Order (NIEO) in order to promote a more
equitable wealth distribution, fairer conditions for international trade and
new democratic rules for international economic institutions.5 The sharp and
largely unforeseen rise in oil and raw material prices partially reected the
increased awareness of some countries that they had contributed to boosting
the development of the West with cheap energy sources, without adequate
compensation for the development of their national economy.6 Thus, the
eventual victory of neoliberalism did not come about as a result of com-
petitors, but by its deliberate adoption in the most important countries of
the industrialized world, and by the reorganization of a social block keen
to obtain a bigger prot margin compared to the one allowed by ‘embed-
ded capitalism’.7 According to an authoritative analysis by Michael Cox,
The Roots of Neoliberal Globalization 113
during the 1970s ‘[t]he bourgeoisie overall abandoned Fordist industrial
strategies designed to incorporate workers by guaranteeing full employment
and welfare, and adopted scally tight policies whose purpose was to impose
political and economic discipline’.8
German Social Democracy and the Crisis
The third quarter of the twentieth century also witnessed the progressive
ideological and political identication of social democracy with the ‘embed-
ded capitalism’ model. Social democracy faced post-war reconstruction with
a strong commitment to maintain its prole distinct from both liberalism
and Soviet communism, and to ‘shift from the phase of propaganda to the
phase of achievement’ of socialism linked with democratic freedoms. Even
if a large number of social democratic parties did not gain control of their
national governments until the 1960s, a large part of the original ‘short-term’
programme of the Second International became reality after the Second
World War in a great part of Western Europe: universal surage, eight-hour
working days and free participation in political life were granted by law,
as well as the regulation of the labour market.9 However, these advance-
ments were not the products of social democracy alone. As an example,
full employment during the 1950s and 1960s could not be credited to one
political family alone, although its ‘inclusive nature’ (women, less qualied
and non-unionized workers) was something towards which social democ-
racy strove. Besides, concerning the limits of the welfare state, Andrew Glyn
says that ‘the Left has traditionally argued for much more than a minimal
safety net for those incapable of looking after themselves and, by extension,
for redistribution to oset the disadvantages of those who, even with equal
opportunity, suer from a weak position in the market’.10
Even conservative parties were keen to reach compromise solutions in
order to avoid fuelling social conict: as an example, in 1951 the moder-
ate parliamentary majority in West Germany approved a law for the joint
supervision of companies between employers and employees – so-called
Mitbestimmung – after a huge trade union mobilization.11 However, the crisis
of the 1970s was bound to jeopardize the post-war consensus: while the
confrontation between conservatives and social democrats had been centred
on the redistribution of surplus over the previous thirty years, the 1970s saw
a more radical conict concerning the reorganization of capitalist relations
and a revision of the balance between the state and the market.12
What role did social democratic parties play during the crisis? Looking
at later periods when they were in government simultaneously in the most
important West European countries (for example, during the late 1990s), it
114 Giovanni Bernardini
becomes apparent how they had absorbed some of the precepts of the neolib-
eral ‘counterrevolution’ because very modest shifts in economic policy could
be noted in comparison with their political opponent. Although a com-
plete overview of this subject goes beyond the scope of this chapter, archival
sources allow the examination of the conduct of the major social democratic
party in Europe, the Sozialdemokratische Partei Deutschlands (SPD), which
ruled the Federal Republic of Germany uninterruptedly before and during
the 1970s economic crisis.
The rst systematic attempt to cope with the new economic chal-
lenges was the ‘Orientierungsrahmen 85’ (Orientation Framework 85), a
report adopted by the SPD national congress in 1975 and described by Willy
Brandt as ‘a middle way between everyday politics and a fundamental pro-
gramme’. Although the document would eventually exert inuence over
other European socialist parties, it fell short in both of Brandt’s categories:
it could not be compared with the Bad Godesberg resolutions of 1959,
because it lacked elaboration of the basic concepts of ‘democratic social-
ism’ and ‘reformist party’; furthermore, it was limited to the rearmation
of the fundamental values of freedom, equality and solidarity, which could
no longer give the party a distinctive personality. Nor did the document
represent a guide for everyday politics, because it ignored the symptoms of
the failure of traditional Keynesian recipes. Consequently the ‘Orientation
Framework’ proved outdated at the very time of its publication.13 For all
these reasons, it was strongly criticized by Chancellor Helmut Schmidt, the
main representative of the SPD’s moderate wing. Although not the only
expert on international economics in the German Social Democratic leader-
ship at that time, Schmidt’s prestige in this eld increased dramatically both
at home and abroad from 1972, when he was appointed minister of nance.
After that and until his designation as chancellor in 1974, Schmidt played an
important role in international accommodation to the demise of the Bretton
Wood system, and developed strong personal contacts with his American,
French and British colleagues in the so-called ‘Library Group’, which paved
the way for the establishment of the G5 (later G7) group.14
Subsequently, Schmidt established himself successfully as a pragmatic
leader interested in ‘working further on the German model’ and thus not
prone to substantial experiments with progressive socio-economic reforms.
During a conversation with other SPD leaders, the chancellor heavily criti-
cized ‘Orientation Framework 85’ as it failed to face the completely new
nature of the economic crisis; according to Schmidt, the crisis demanded the
abandonment of Keynesian policies on work and wages, a strong reduction
in the role of the state in the economy, and a commitment to freeing up the
ow of goods and capital.15 On the international level, it was not long before
the chancellor proved himself to be the most reliable partner of Gerald Ford’s
The Roots of Neoliberal Globalization 115
administration; both bilaterally and multilaterally, Schmidt played his part in
directing the capitalist economy towards greater laissez-faire, which had little
in common with previous denitions of social democracy.16
In fact, the vagueness of ‘Orientation Framework 85’ on economic
matters left considerable room for manoeuvre. Furthermore, Schmidt gained
great prestige on the economy within his party because of his experience as
nance minister during the second Brandt government; the relative speed
with which West Germany seemed to overcome the early 1970s ‘economic
storm’ – compared with the hard times of most European partners – paved the
way for his personal management of the international economy.17 Schmidt
was genuinely concerned that the economic crisis of the West could slip into
‘the greatest depression since 1932’, as he confessed to President Ford.18 The
experience of the Weimar Republic proved how economic hardships could
eventually lead to serious social and political disorder. Thus all governments
had to desist from implementing ‘the methods of recent years for a situation
that none of us have lived through’, explicitly referring to the coexistence
of recession, low employment rates and high ination. If Keynes’ methods
worked in the 1930s, they did not seem to work in the 1970s, and there was
‘no new Keynes’. Therefore the rst task was to bring the whole West back
to unity in order to face the new menaces to its welfare. Hence, the chan-
cellor took advantage of his speech at the North Atlantic Council in May
1975 to state that the Atlantic Alliance was not likely to confront geopolitical
threats, ‘but rather the state of the world economy on which the prosperity
of all of us depends. … The present-day situation of the world economy
is unforeseen by any economic textbook, be it printed at the Sorbonne or
at Harvard’.19 As a starting point, Western governments had to adopt two
measures in order to overcome the serious problems that were endangering
the economy: concerted planning of future intervention on an international
scale, and stricter control of the management of national economies.20
The Unity of the West and the Birth of the G7
Schmidt conceived the economic crisis as a political rather than a techni-
cal matter, which only the major Western authorities could confront and
overcome. In this situation, however, from 1974 he seems to have favoured
a restrictive and elitist response: the chancellor was keen to exclude the
involvement of minor partners in Europe and Less Developed Countries
(LDC) from the international programme that would rewrite the rules of
the international economy.21 Although the idea of a summit of the Western
world’s ve (later seven) most industrialized countries came from the
French government in 1975, the German government oered its immediate
116 Giovanni Bernardini
support. Furthermore, Schmidt seemed willing to conne the solution
of the economic problems to a ‘circle’ in which social democratic part-
ners were a minority; due to the seriousness of the British economic situa-
tion, the Labour government was not in a position to make a stand against
the US Republican administration, the moderate French president Giscard
D’Estaing, the Japanese liberal government or the precarious Italian ‘centre-
left’ coalition.
During the rst G6 meeting in Rambouillet, as well as during other
international conferences, Schmidt urged that coping with ination should
be the top priority in order to overcome the crisis. In historical perspective,
the chancellor blamed the US authorities for permitting ination to spread
globally as a result of their uncontrolled military expenditure. Thus, the
subsequent crisis of the system of xed exchange rates among currencies was
‘inevitable’.22 Such an explanation hardly corresponded to reality, because it
overlooked the United States’ responsibility for the eventual demise of the
system.23 On the contrary, the end of xed exchange rates was provoked
intentionally by the Nixon administration’s initiative to suspend indenitely
the conversion of the US dollar into gold in order to solve US balance of
payments problems. This unilateral decision restated Washington’s position
of unimpaired primacy in the international system: without the cornerstone
on which the post-war monetary architecture had been built, its end came as
a consequence, as well as the ultimate transition to exible exchange rates.24
The Federal Republic of Germany refrained from criticizing the US decision
for its own convenience, as it was protected from the relative strength of its
national currency. However, ideology was also a component of Schmidt’s
indulgent analysis, since he had professed to be ‘a staunch supporter’ of ex-
ible changes.25 The German constitutional system assigns to the government
the task of determining the value of the Deutsche Mark, while the inde-
pendent authority of the Bundesbank is charged with assuring its stability.26
After 1971 it became clear that the government had abandoned its preroga-
tive, while the constant apprehension over ination (a feature of German
authorities since the crises of 1923 and 1932) allowed the Bundesbank to
increase its strict control over the monetary liquidity. Schmidt pointed at the
German solution as an example for other countries as well as for the inter-
national system: exchange rates should not be xed by governments, but
by the free market and by the evaluations of investors.27 Countries capable
of ‘putting their houses in order’ would attract international investment: its
increased mobility through the removal of all obstacles was armed as a goal
of the Rambouillet meeting.28 Thus, governments had to renounce their
prerogatives in the monetary eld and to commit its management to ‘tech-
nical’ authorities, such as the central banks. Following this line, an essential
tool of political control over the economy traditionally claimed by social
The Roots of Neoliberal Globalization 117
democrats was progressively abandoned with the consent of the German
Social Democratic chancellor.
Concerning the granting of credits to countries in particularly dramatic
circumstances, such as Italy and the United Kingdom during the 1970s,
Schmidt did not disregard the utility and even the necessity of strong inter-
vention by international authorities. The chancellor favoured the assignment
of this role to the International Monetary Fund (IMF), a decision debated at
the second G7 summit held in Puerto Rico in 1976.29 Although the Federal
Republic had granted credit on a bilateral basis in the past, Schmidt believed
that his country was not willing to become the only ‘global creditor’: nev-
ertheless, the problem was not German unwillingness to contribute, but the
necessity that credit concessions come with the commitment of the recipient
countries to pursue anti-inationary policies and introduce austerity mea-
sures. Only the IMF would have had the necessary authority to impose such
measures and, after the summit held in Puerto Rico, the institution began to
elaborate coherent rules that the Italian government had to follow in order
to obtain the loan it had asked for.30 The 1976 IMF loan to Italy was con-
ditional on the acceptance of the rst prototype ‘structural adjustment plan’,
worked out by the IMF and strongly sponsored by the German govern-
ment. It was aimed not only at providing liquidity to a country experiencing
payment diculties under the guarantee of restitution, but also at changing
by external constraints some features of the country’s domestic economy: the
wage indexation system through which salaries kept up with ination, the
opening of the nancial and trade markets, and the privatization of parts of
the public sector.31 The chancellor, in full agreement with the main support-
ers of the ‘neoliberal revolution’ in the US Treasury Department, appreci-
ated this formula and promoted a further limitation of national government
sovereignty over management of the economy.32
Furthermore, Schmidt approved the application of the same scheme to
Third World countries asking for international help in order to boost their
development: their ‘education towards the market and its rules’ had to be
undertaken by the industrialized countries and the IMF. During a meeting
with Willy Brandt – former chancellor, and recently appointed leader of the
Independent Commission on International Development Issues – Schmidt
expressed his scepticism of every design for a ‘New International Economic
Order’ that did not contemplate a precautionary adhesion on the part of the
‘less developed countries’ (LDC) to the principles of a free market economy,
as well as to their opening up to the ow of international private capital.33
LDCs were called on to acknowledge that only ‘IMF experts’ could under-
line the distortions in every country’s economic management, therefore
‘recommending’ – if not imposing – the correct remedies. Once accepted,
the IMF measures would contribute to the creation of an ideal ‘climate’
118 Giovanni Bernardini
capable of bringing to the country the private capital, thereby avoiding the
need for new credit in the future. Schmidt’s hostility to the demands of
the LDCs and the petroleum producers gathered in the Organization of
the Petroleum Exporting Countries (OPEC), responsible for the 1973 oil
shock, was evident. Unlike other social democratic leaders, such as Brandt,
the chancellor was distrustful of the ideological character of the ‘Group of
77’ LDC itself and of its aim of improving economic self-determination:
it was basically an ‘unholy alliance’ that the West had to break, separat-
ing the OPEC members from the LDCs, who could not rely on consider-
able amounts of raw materials.34 The latter could obtain the support of the
West for development on condition that they abided by the IMF’s rec-
ommendations and renounced the self-determination of their economies,
indiscriminately opening up to private capital. A serious collective dialogue
with OPEC was postponed indenitely until the day industrialized Western
countries recovered their cohesion and made clear to the world that a new
petroleum crisis would rst of all aect the people responsible for it.35
The Future of Social Democracy
The understanding of how traditional measures were ineective in coping
with the crisis, and the elaboration of new solutions, were not exclusive
prerogatives of the German chancellor; because the Keynesian economic
policy of public intervention aimed at ‘stimulating aggregate demand’ did
not seem suitable anymore, several European social democratic parties and
movements envisioned a more forceful public intervention over the supply
side.36 From selective nationalization to the introduction of workers’ control
over ownership, from the containment of international corporations to com-
pulsory planning agreements between state and private actors, during the
1970s the European social democratic and labour family explored new solu-
tions to regain regular economic growth and full employment, while trying
to increase the democratization of the economy. The programme of the
‘Union of the Left’ in France and the Alternative Economic Strategy in
Britain were only the most authoritative examples.37
The German response was the international promotion of the methods
established in the country by the Christian Democratic governments, such as
the aforementioned Mitbestimmung. Schmidt himself publicly and privately
praised the German trade unions’ responsible conduct in accepting a wage
moderation that had saved the country from ination, and he urged both
the other social democratic governments and the European trade unions
to follow this path.38 Thus, regardless of other peculiarities of the German
experience of Mitbestimmung, the chancellor proved its staunch supporter
The Roots of Neoliberal Globalization 119
against more radical projects because it promoted a self-limitation of wage
claims and limited workforce participation in the management of compa-
nies. If, on one hand, the positive results of the German economy were
evident, on the other that model could hardly be applied elsewhere because
of the distinctive features of the Federal Republic labour market: during the
recessionary phase examined here, the high employment rate was somehow
‘disguised’ by the dismissal of half a million foreign workers employed in
industry who did not feature in the ocial statistics.39
However, such considerations did not prevent Schmidt from promoting
wage moderation and workforce discipline as means for achieving the ideal
‘climate’ for attracting the private investment fundamental for a concrete
recovery without state intervention.40 As has been suggested, the economic
policy action inspired by neoliberal doctrines focused on the creation of
‘corporate welfare’ to replace ‘people welfare’. The state was consistently
advised to progressively withdraw from productive activities, in which only
the free market could guarantee an optimal allocation of resources. Within
this context, Schmidt also exhorted governments and trade unions to realize
how unattractive some advanced Western industrial sectors had become for
international investment: the decision to keep them in articial ‘hothouses’
in order to avoid dismissals only prolonged the inevitable agony, imposing
further burdens on the state. The ‘selshness of the few’ – in other words,
the workers involved – had to be put after the general need to create ‘coher-
ent and consistent development plans’ whose prots for investors were the
only economic judgement. The crisis had above all to push social demo-
crats towards a greater ‘economic sense’ to replace their ‘economic rhetoric’.
The prize for such a new orientation was supposed to be a return to eco-
nomic growth capable of solving the unemployment problem.41 However,
a substantial dierence can be noted in the language adopted by Schmidt,
depending on his interlocutors: while ‘the return to full employment’
remained the main theme in his speeches to a Social Democratic audience,
this was replaced by a more modest ‘recuperation of employment’ in his
contributions at G7 summits.42 A further step towards the abandonment of
this social democracy cornerstone was taken in Schmidt’s conversations with
his closest economic collaborators; there they explicitly wondered whether
the moment had come for Western governments to abandon the aim of
full employment in order to accept that in the very near future ‘production
[would be assigned] to a reduced workforce’.43
During the ‘Conference of Social Democratic Parties and European
Trade Unions’ held in Oslo in 1977, the chancellor blamed the crisis on
the cultural backwardness of those Social Democratic governments that
did not manage to ‘tell the truth’: the benets obtained during the ‘Thirty
Glorious [Years]’ were probably a one-o, something that the other leaders
120 Giovanni Bernardini
of the left had to confess to their electors. Schmidt exhorted them to accept
a deliberate and peaceful reduction of the privileges obtained during those
years, in order to secure the return to an economic growth guaranteed
by a system in which public control would be reduced dramatically.44 By
choosing a ‘supply-side oriented’ intervention, Schmidt had opted for a
line that not only resulted in something completely dierent from the
options suggested by many social democratic currents, but also inevitably
verged on neoliberal solutions. This was enough to provoke the reaction
of traditional social democratic leaders, such as the Austrian chancellor,
Bruno Kreisky, who pointed out how the ination problem, ascribed by
Schmidt to the social democratic management of economic policy, had, on
the contrary, a clear origin in the decline of the dollar and of the American
economy in general; besides, many countries ruled by social democratic
governments were overcoming the crisis better than those with moder-
ate leaderships. On the one hand, Kreisky believed that the increasing
pace and extent of global speculation – which endangered the economic
recovery – and the ‘waste of workforce’ were the rst by-products of
the new laissez-faire. On the other hand, he blamed the German chan-
cellor for staunchly supporting this new approach, instead of dedicating
himself to working out new solutions in the direction of a genuinely Social
Democratic economic policy.45 More generally, the presence of Helmut
Schmidt at international socialist meetings during the second half of the
1970s was rewarded with accusations of promoting ‘uncritical capitalism’,
even from those parties (such as the Danish and Dutch) that the SPD strove
to involve in a northern, moderate socialist block against the more extreme
tendencies in the south.
By contrast, Schmidt considered such resistance responsible for hin-
dering acceptance of the new rules necessary for economic recovery: the
responsibility for such a legacy was attributed to that generation of social
democrats (from whom clearly Schmidt excluded himself) that had studied
economics in the period when Keynes and Roosevelt’s New Deal enjoyed
cultural hegemony, as well as National Socialist welfare. This led to obliga-
tory economic development characterized by inationary public nanc-
ing and increasing state intervention in economic management.46 Such a
parallel between traditional social democratic and fascist economic cul-
tures was traditionally dear to the main supporters of a return to the most
extreme forms of liberalism.47 However, Schmidt was still condent in
social democracy, which he saw as already supplied with ‘honest intel-
lectuals’ among the new generations. The latter were already learning the
lessons of the recent past and were ready to implement everywhere the
new rules that the governments of the most industrialized countries were
already writing.48
The Roots of Neoliberal Globalization 121
Federal Chancellor Helmut Schmidt was one of the political characters who
cooperated during the 1970s to overcome both the economic crisis and the
model of ‘embedded capitalism’ that had been predominant in Western
Europe during the third quarter of the twentieth century. Far from being
a passive recipient of solutions from outside, Schmidt leveraged Germany’s
economic and political power to introduce a more laissez-faire-oriented
economic approach on a global scale. Although Schmidt’s record on inter-
nal economic policy was more nuanced, the rhetoric he displayed in inter-
national fora merged into a shifting political discourse that was bound to
become mainstream during the late 1970s, and especially during the fol-
lowing decade. The success of this new ‘economic revolution’ was fostered
by the adoption of principled positions by some of the most powerful and
inuential characters and institutions of international politics, such as Helmut
Schmidt and the G7 summits.
As a leading gure of European social democracy, the chancellor urged
the continental political movement in the same direction, in order to benet
from a cultural renewal that was needed to cope with new and unprec-
edented challenges. At a moment when ‘old measures’ did not seem to work
anymore, Schmidt believed that only the unity of the most industrialized
countries of the West, irrespective of their political dierences, would be
able to steer such a global transition; this policy would have basically led
to an improvement of economic conditions in the LDCs, provided that
they preventively renovated their economies in accordance with the new
doctrine. In the West, although the golden days of the post-war era were
gone forever, the retrenchment of the state and the moderation of work-
ing-class demands would have led to an increase in private investment and,
ultimately, to the revival of stable economic development, as well as the
return to acceptable levels of employment and welfare. Thus, moving away
consistently from the traditional precepts and the goals of social democracy,
Schmidt’s approach ended up promoting a sort of new ‘bipartisan consen-
sus’, although this time in terms of the reborn neoliberal doctrine.
Giovanni Bernardini is researcher at the Italian–German Historical
Institute – FBK in Trento, Italy. He has published extensively on West
German foreign policy, transatlantic relations during the Cold War, European
social democracy after the Second World War, and the history of the South
Tyrol question in international perspective. His most recent publication is
‘Principled Pragmatism: The Eastern Committee of German Economy and
West German–Chinese relations during the early Cold War, 1949–1958’, in
Modern Asian Studies, 1/2017.
122 Giovanni Bernardini
1. Kissinger to Schmidt, 14 January 1977, Helmut Schmidt Archiv-Bundeskanzler
(HSA-BK), Box 6388, Archiv der sozialen Demokratie, Bonn (AdsD).
2. John Gerard Ruggie, ‘International Regimes, Transactions, and Change: Embedded
Liberalism in the Postwar Economic Order’, International Organization 36(2) (1982): 386.
3. Andrew Glyn, Capitalism Unleashed: Finance, Globalization, and Welfare (Oxford, 2006).
4. Serge Halimi, Le grand bond en arrière: Comment l’ordre libéral s’est imposé au monde
(Paris, 2004).
5. The proposal of a New International Economic Order (NIEO) was advanced o-
cially at the United Nations Assembly by Third World countries in 1974. Its main demands
included ‘the creation of a World commodity system to bolster the prices of LDC exports
and the establishment of a “special fund” to support the incomes of the poorest countries’.
Whether interpreted as an outright repudiation of liberalism, or as a reformist project aimed
at improving the Third World’s prospects within the status quo, the NIEO was a constant
intellectual and political challenge to the liberal international economy throughout the 1970s.
Daniel Sargent, ‘The Cold War and the International Political Economy in the 1970s’, Cold
War History 2(13) (2013): 393–425.
6. Giuliano Garavini, ‘The Colonies Strike Back: The Impact of the Third World on
Western Europe 1968–1975’, Contemporary European History 3(16) (2007): 299–319.
7. David Harvey, A Brief History of Neoliberalism (Oxford, 2005), 62.
8. Michael Cox, ‘Interregnum, Prediction, Decline and the Lessons of History –
Reections on the 1970s’. Paper presented at the conference Re-Thinking the 1970s:
Origins of a New Cycle of US Hegemony or Beginning of American Decline?, Bologna,
28 March 2004.
9. Donald Sassoon, One Hundred Years of Socialism: The West European Left in the Twentieth
Century (London, 1996), 133–34.
10. Andrew Glyn, ‘Aspirations, Constraints, and Outcomes’, in Social Democracy in
Neoliberal Times: The Left and Economic Policy since 1980, ed. A. Glyn (Oxford, 2001), 1–20.
11. Enzo Collotti, ‘Il mito della società omogenea’, in La Germania socialdemocratica:
SPD, società e Stato, ed. E. Collotti and L. Castelli (Bari, 1982), 9–28.
12. Sassoon, One Hundred Years, 514.
13. See Heinrich Pottho and Susanne Miller, The Social Democratic Party of Germany,
1848–2005 (Bonn, 2006), 229.
14. Harold James, International Monetary Cooperation since Bretton Woods (Oxford,
1990), 266.
15. An illuminating example of Schmidt’s economic ideas for the future of social-liberal
governments is the so-called ‘Marbella Paper’, a programme for the following years written
by the chancellor. See Helmut Schmidt, ‘Erwägungen für 1977’, 5 January 1977, HSA-BK,
Box 9302, AdsD.
16. Duccio Basosi and Giovanni Bernardini, ‘The Puerto Rico Summit of 1976 and
the End of Eurocommunism’, in The Crisis of Détente in Europe: From Helsinki to Gorbachev,
1975–1985, ed. Leopoldo Nuti (London, 2009), 256–67.
17. Sassoon, One Hundred Years, 590.
18. Memorandum of Conversation between Ford, Kissinger and Schmidt, 29 May 1975,
National Security Assistant (NSA), Box 12, Gerald Ford Library (GFL).
19. Helmut Schmidt’s speech at the North Atlantic Council, 30 May 1975, HSA-BK,
Box 9302, AdsD.
20. ‘Konferenz der Staats- und Regierungschefs aus sechs Industriestaaten auf Schloss
Rambouillet’, 16 November 1975, Document 348, Akten zur Auswärtigen Politik der
Bundesrepublik Deutschland (AAPD), 1975.
The Roots of Neoliberal Globalization 123
21. ‘Gespräch des Bundeskanzlers Schmidt mit Staatspräsident Giscard d’Estaing,
Premierminister Wilson und Präsident Ford in Helsinki, 31 July 1975’, AAPD, 1975.
22. Document 348, cit., AAPD, 1975.
23. For Bonn reactions to the 15 August 1971 Nixon decision, see William G. Gray,
‘Floating the System: Germany, the United States, and the Breakdown of Bretton Woods,
1969–1973’, Diplomatic History 31(2) (2007): 295–323.
24. Duccio Basosi, Il governo del dollaro: Interdipendenza economica e potere statunitense negli
anni di Richard Nixon (Florence, 2007).
25. Memorandum of Conversation between President Ford and Chancellor Schmidt, 5
December 1974, NSA, Box 7, GFL.
26. Gray, ‘Floating the System’. For an assessment of monetarist theories and practice,
see Kevin Hickson, The IMF Crisis of 1976 and British Politics (London, 2005).
27. Robert Hormats, ‘Notes on the Economic Summit. Second Session, Monetary
Issues, 16 November 1975’, secret/NODIS, attached to Hormats to Scowcroft, ‘Copy of the
Notes’, 2 December 1975, Memcons, Rambouillet, Box 16, NSA, GFL.
28. Helmut Schmidt’s speech at the North Atlantic Council, 30 May 1975.
29. For a memorandum of the ocial conversations in Puerto Rico, see ‘Konferenz
der Staats- und Regierungschefs aus sieben Industriestaaten in San Juan, 27/28 June 1976’,
Document 208, AAPD, 1976.
30. Memorandum of Conversation between Chancellor Schmidt and Prime Minister
Andreotti of Italy, 18 January 1977, HSA, Box 7251, AdsD.
31. Margaret Garritsen De Vries, The International Monetary Fund, 1972–1978
(Washington DC, 1985), 446.
32. ‘The best institutional arrangement for producing conditional nancing is the IMF.
It … cloaks the conditionality in a multinational mantle that dilutes opposition within a bor-
rowing country to conditions imposed by the US or other outsiders.’ Undersecretary of the
Treasury Yeo to Ford, 24 June 1976, Declassied Documents Reference System (DDRS).
33. Memorandum of Conversation between Schmidt and Brandt, 27 September 1979,
HSA, Box 9417, AdsD.
34. ‘Konferenz der Staats- und Regierungschefs aus sechs Industriestaaten auf Schloss
Rambouillet, 16 November 1975’, Document 349, AAPD, 1975.
35. David E. Spiro, The Hidden Hand of American Hegemony (Ithaca, NY, 1999).
36. Glyn, ‘Aspirations, Constraints, and Outcomes’, 5.
37. For a stimulating analysis of the Labour AES, see Hickson, The IMF Crisis, Chapter 7.
38. Speech of Chancellor Schmidt at the ‘Conference of Social Democratic Parties and
European Trade Unions’ in Oslo, 1 April 1977, Parteivorstand (PV), Box 285, AdsD.
39. Sassoon, One Hundred Years, 602.
40. Helmut Schmidt’s speech at the North Atlantic Council, 30 May 1975.
41. As Note 38 above.
42. Meeting between Kissinger and Schmidt, 21 May 1975, Digital National Security
Archive (DNSA).
43. Talking point for Chancellor Schmidt in preparation for the Conference of the
Socialist International in Copenhagen, 19 January 1976, FES, Box 6669, AdsD.
44. As Note 38 above.
45. Report on Oslo conference for Chancellor Schmidt, 2 April 1977, Nachlass Bruno
Friedrich (NBF), Box 441, AdSD.
46. Schmidt, ‘Erwägungen für 1977’.
47. See, for instance, the comparison with the totalitarian regimes of the Scandinavian
social democratic governments expressed by the US Treasury Secretary, William Simon, in his
autobiography. William E. Simon, A Time for Truth (New York, 1978).
48. Schmidt, ‘Erwägungen für 1977’.
124 Giovanni Bernardini
Basosi, Duccio, Il governo del dollaro: Interdipendenza economica e potere statunitense negli anni di
Richard Nixon (Florence, 2007).
Basosi, Duccio, and Giovanni Bernardini, ‘The Puerto Rico Summit of 1976 and the End of
Eurocommunism’, in The Crisis of Détente in Europe: From Helsinki to Gorbachev, 1975–
1985, ed. Leopoldo Nuti (London, 2009), 256–67.
Collotti, Enzo, ‘Il mito della società omogenea’, in La Germania socialdemocratica: SPD, società e
Stato, ed. E. Collotti and L. Castelli (Bari, 1982), 9–28.
Cox, Michael, ‘Interregnum, Prediction, Decline and the Lessons of History – Reections on
the 1970s’. Paper presented at the conference Re-Thinking the 1970s: Origins of a New
Cycle of US Hegemony or Beginning of American Decline?, Bologna, 28 March 2004.
Garavini, Giuliano, ‘The Colonies Strike Back: The Impact of the Third World on Western
Europe 1968–1975’, Contemporary European History 3(16) (2007): 299–319.
Garritsen De Vries, Margaret, The International Monetary Fund, 1972–1978 (Washington, DC,
Glyn, Andrew, ‘Aspirations, Constraints, and Outcomes’, in Social Democracy in Neoliberal
Times: The Left and Economic Policy since 1980, ed. A. Glyn (Oxford, 2001), 1–20.
, Capitalism Unleashed: Finance, Globalization, and Welfare (Oxford, 2006).
Gray, William G., ‘Floating the System: Germany, the United States, and the Breakdown of
Bretton Woods, 1969–1973’, Diplomatic History 31(2) (2007): 295–323.
Halimi, Serge, Le grand bond en arrière: Comment l’ordre libéral s’est imposé au monde (Paris, 2004).
Harvey, David, A Brief History of Neoliberalism (Oxford, 2005).
Hickson, Kevin, The IMF Crisis of 1976 and British Politics (London, 2005).
James, Harold, International Monetary Cooperation since Bretton Woods (Oxford, 1990).
Pottho, Heinrich, and Susanne Miller, The Social Democratic Party of Germany, 1848–2005
(Bonn, 2006).
Ruggie, John Gerard, ‘International Regimes, Transactions, and Change: Embedded
Liberalism in the Postwar Economic Order’, International Organization 36(2) (1982): 386.
Sargent, Daniel, ‘The Cold War and the International Political Economy in the 1970s’, Cold
War History 2(13) (2013): 393–425.
Sassoon, Donald, One Hundred Years of Socialism: The West European Left in the Twentieth
Century (London, 1996).
Simon, William E., A Time for Truth (New York, 1978).
Spiro, David E., The Hidden Hand of American Hegemony (Ithaca, NY, 1999).
ResearchGate has not been able to resolve any citations for this publication.
Full-text available
The prevailing model of international economic regimes is strictly positivistic in its epistemological orientation and stresses the distribution of material power capabilities in its explanatory logic. It is inadequate to account for the current set of international economic regimes and for the differences between past and present regimes. The model elaborated here departs from the prevailing view in two respects, while adhering to it in a third. First, it argues that regimes comprise not simply what actors say and do, but also what they understand and find acceptable within an intersubjective framework of meaning. Second, it argues that in the economic realm such a framework of meaning cannot be deduced from the distribution of material power capabilities, but must be sought in the configuration of state-society relations that is characteristic of the regime-making states. Third, in incorporating these notions into our understanding of the formation and transformation of international economic regimes, the formulation self-consciously strives to remain at the systemic level and to avoid becoming reductionist in attributing cause and effect relations. The article can therefore argue that the prevailing view is deficient on its own terms and must be expanded and modified. Addressing the world of actual international economic regimes, the article argues that the pax Britannica and the pax Americana cannot be equated in any meaningful sense, and that the postwar regimes for money and trade live on notwithstanding premature announcements of their demise.
This book is a reassessment of the international monetary crises of the post-World War I period that led to the Great Depression of the 1930s. It also analyses the responses of the world economic powers to the Depression and how new monetary policies set the stage for the watershed post-World War II system established at Bretton Woods. It offers new theories of what effect the Great Depression had on the collapse of the world monetary system, and what effect the collapse had on deepening and prolonging the Depression, by exploring the link between global economic crisis and the the gold standard (the framework for international monetary affairs until 1931). The events described had a profound effect upon twentieth-century history: the Depression abetted the rise of Hitler and the demise of the gold standard is a historical cause of inflation.
More than sixteen years have elapsed since the IMF commenced operating in March 1947. This has been a period during which most of its members have had to apply exceptional regulations to deal with the post-war transition. It may be said, therefore, that the IMF has had to face situations that those who drafted the Agreement did not at all expect and that it has displayed flexibility in doing so. Although some reference has already been made to these questions in Chapter VI, we shall now discuss them more fully.
This article reviews the scholarly literature on the international political economy (IPE) in the 1970s and considers the connections between the Cold War and the transformations of the liberal (or capitalist) international political economy. It presents the 1970s as a transitional decade that brought the ascent of globalisation and financial deregulation, the reorientation of advanced capitalist economies towards services and post-industrial production, and the end of the extensive growth patterns of the 1950s and 1960s. While the liberal IPE underwent dramatic changes during the 1970s, the Communist bloc experienced diminished rates of growth but not the kinds of dramatic economic restructuring that occurred in the West. These developments in the 1970s prefigured the Cold War's resolution in the 1980s. Situated in comparative context, the transformations of the liberal world economy during the 1970s exposed – and in some ways exacerbated – the relative backwardness of the Soviet Union's command economy, with decisive consequences for the legitimacy of the Communist regime. International economic change, in this view, precipitated the ideological and geopolitical developments that would bring the Cold War to its end.
The history of western Europe and of European integration has been explained primarily with reference to internal political and economic factors, or to its relations with the United States. This article argues that decolonisation and the emergence of the Third World as a political and economic actor had a profound influence on western Europe, mainly contributing to a further weakening of the role of the nation-state. The impact of the Third World was particularly strong in the period from the global revolution of 1968 to the high point of détente in 1975.
  • Kissinger
  • Schmidt
Kissinger to Schmidt, 14 January 1977, Helmut Schmidt Archiv-Bundeskanzler (HSA-BK), Box 6388, Archiv der sozialen Demokratie, Bonn (AdsD).
Interregnum, Prediction, Decline and the Lessons of History -Reflections on the 1970s'. Paper presented at the conference Re-Thinking the 1970s: Origins of a New Cycle of US Hegemony or Beginning of American Decline?
  • Michael Cox
Michael Cox, 'Interregnum, Prediction, Decline and the Lessons of History -Reflections on the 1970s'. Paper presented at the conference Re-Thinking the 1970s: Origins of a New Cycle of US Hegemony or Beginning of American Decline?, Bologna, 28 March 2004.