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The European Origins of the Collapse of Bretton Woods

  • Gerald Larkin Building, Room 200 15 Devonshire Place Toronto, ON, M5S 2C8 Canada (map)


Featuring Michael de Groot (University of Virginia) 

This talk examines the Western European contributions to the collapse of the Bretton Woods international monetary system in the late 1960s and early 1970s. Highlighting Washington’s inability to control inflation and rectify its deficits, scholars have assigned blame to the Nixon administration for the unraveling of the fixed-exchange rate system. Drawing on archival evidence in Britain, Germany, the Netherlands, and the United States, this research challenges this scholarly consensus. The weakness of the U.S. dollar was only part of the story; the weakness of the British pound and the strength of the West German mark and Dutch guilder undermined the system as well. Michael De Groot will illuminate how decisions in London, Bonn, and The Hague to float their respective currencies at various points from 1967 to 1973 betrayed the rigidity of Bretton Woods, making it easier for the Nixon administration to advocate floating exchange rates. Financial globalization and the explosion of the Euromarket in the 1960s created highly-mobile capital that could be used to speculate against the future values of under- or overvalued currencies, a development that spread inflation across borders. Speculators feared that currencies such as the dollar and the pound were overvalued, and they transferred their money into stronger currencies such as the mark and the guilder in anticipation of a revaluation. This placed upward pressure on prices in countries such as West Germany and the Netherlands, forcing them to untether their currencies from the system in an effort to stem the inflationary tide of capital. Despite the widespread desire among Western European policymakers to maintain Bretton Woods, their decisions to float ironically reinforced speculators’ inclinations to anticipate revaluations and devaluations. This development crippled Bretton Woods, providing the necessary ammunition for the Nixon administration to end the system by spring 1973.

About Michael De Groot

Michael De Groot is a PhD candidate in international history at the University of Virginia. He is currently in residence at Yale University as the Henry A. Kissinger predoctoral fellow at the Johnson Center for the Study of American Diplomacy, and a National Dissertation Completion Fellow at the University of Virginia’s Jefferson Scholars Program. Drawing on archival research in Austria, Britain, France, Germany, the Netherlands, Russia, and the United States, his dissertation examines the effects of accelerating economic globalization on the foreign policies of the great powers during the 1970s. By recasting the decade in terms of globalization rather than the Cold War, his research demonstrates how the socialist East and capitalist West – often depicted in terms of their stark ideological differences – had to reshape their strategic priorities to account for disruption in the global economy. His research has been supported by the Society for Historians of American Foreign Relations, the Gerald R. Ford Presidential Foundation, and the Thomas Jefferson Memorial Foundation, among others. He received a B.A. in history with departmental honors from Stanford University.