In the 1950s and 1960s, there was much support among academic
economists for abandoning the Bretton Woods System in favour of a system
of flexible exchange rates. Such proposals had their opponents, of
course, some of whom, for example Robert Triffin (l960), believed that,
if anything. the Bretton Woods System granted too much, rather than too
little, scope to individual national governments to vary their exchange
rates. Nevertheless, at that time, the weight of professional opinion
was against them, and when exchange rate flexibility was adopted in the
1970s, economists by and large welcomed it. This change in policy regime
was not, however, the outcome of reforms undertaken in the light of
academic arguments; although these did have some influence in some
places, not least the United Kingdom.' Nevertheless, the single most
important factor leading to the demise of the Bretton Woods System was
not the acceptance of any academic arguments about how to make the
international monetary system function more’ smoothly. It was something
much more down to earth, namely the unwillingness of certain
governments, notably that of West Germany, to accept the balance of
payments and hence domestic inflationary consequences of United States
fiscal and monetary policies associated with the Vietnam War.
Still tied by golden fetters: the global response to the US recession of 1937–1938