The USA led the post-war economy by supplying money, markets and rules. Its dominance declined after the 1960s.
In 1945 the USA produced about half of the world's manufactured goods and held most of the world's gold reserves. It was the only power able to pay for recovery.
The USA shaped the rules. At Bretton Woods in 1944 it backed fixed exchange rates, with the dollar tied to gold at 35 dollars an ounce. It pushed for lower tariffs through GATT.
It supplied dollars through aid, investment and military spending abroad. It also kept its large market open to imports from Europe, Japan and later East Asia. This mattered because exports drove growth in these economies.
Cold War aims shaped this generosity. American leaders saw a prosperous Western Europe and Japan as the best defence against communism.
US dominance declined. Spending on Vietnam and at home caused inflation and trade deficits. In August 1971 Nixon ended the link between the dollar and gold, and fixed exchange rates collapsed by 1973. The USA still mattered. Its market absorbed Asian exports in the 1980s, and its technology firms led the 1990s boom.
- Bretton Woods
- 1944: dollar tied to gold at 35 dollars an ounce.
- Nixon shock
- August 1971: dollar no longer convertible into gold.
- Floating rates
- From 1973.
Worked example: Tracing the US role over time
How did the US role change from 1945 to 2000?
- 1945 to the 1960s: leader, financier and rule-maker.
- 1971-1973: the end of dollar-gold convertibility shows its relative decline.
- 1980s: its market absorbs exports; it leads the Plaza Accord.
- 1990s: technology boom and push for the WTO.
Watch out for this
The USA helped other economies only out of generosity.
US aid and open markets served US interests. They contained communism and created markets for American goods and investment.
Check your understanding
What did Nixon do in August 1971?
- Ended the conversion of dollars into gold
- Created the IMF
- Launched the Marshall Plan