“The advantage of being inside the wall when it is built.” US multinationals’ direct investments in the Common Market, the balance of payments deficit and Bretton Woods (1958-74)

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ABSTRACT From 1958 onward, two parallel developments took place: the United States entered a balance of payments crisis that would ultimately lead to the end of Bretton Woods in 1971, and US-based companies massively increased their foreign direct investments (FDI), particularly in the European Common Market. This article shows how Washington dealt with these capital outflows in its effort to preserve the dollar convertibility to gold. While the option of limiting the deficit by scaling back the vast Cold War military and aid expenditures was discarded by the White House during this entire period, the Kennedy and Johnson administrations tried to curb the US multinationals’ operations in Europe. Based on new archival research, the author shows how organized business stopped these attempts in 1962, and after capital controls were introduced in 1968, succeeded with the Nixon administration to significantly limit their impact in 1969, five years before they were entirely lifted.