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“Please Better Shut Their Mouths”: German Influence on U.S. Macroeconomic Policy under the Carter Administration

GPS, Vol. 4 No. 3, (2008)

Over the late 1970s, U.S. macroeconomic policy underwent a
major shift, rejecting incomes policies and accepting
macroeconomic restraint as the primary means to holding
down inflation and strengthening the dollar. In conventional
narratives, this shift is cast as a response to the diminishing
effectiveness of incomes policies and the fundamental
importance of macroeconomic restraint in maintaining
monetary stability. However, such accounts obscure the
interpretive context in which these shifts occurred, as beliefs
regarding the limits of incomes policies and the need for
restraint took on “lives of their own.” In this paper, I
examine the intersubjective context of these policy shifts,
addressing not only the domestic context of debates over
wage-price trends, but also German pressure on U.S. policy,
and the key influence of Chancellor Helmut Schmidt in
urging U.S. oil deregulation and monetary restraint. I
specifically highlight interactions in the context of the 1977
London and 1978 Bonn summits and the 1979 World Bank-
IMF meetings. Taken as a whole, this effort highlights the
intersubjective context of domestic-systemic debates, as
liberalizing pressures reflected not only domestic pressures
from within U.S. society but also external German
influences, as together mediated by key U.S. policymakers.

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