Quantcast
Channel: LGF Pages
Viewing all articles
Browse latest Browse all 21015

Economics of Goldfinger: Bond, Bretton-Woods, and Harold Wilson's Austerity Policies.

$
0
0

Direct link to article... [littlegreenfootballs.com]

Matthew Yglesias, Slate: Economics of Goldfinger: Bond, Bretton-Woods, and Harold Wilson's Austerity Policies.

Taking office in 1964, Wilson inherited a country running a large trade deficit and desperately in need of a currency depreciation to bring its balance of payments back into balance and boost domestic employment. But back in 1949 a previous Labour government had devalued the pound, and Wilson and his team felt that a second Labour devaluation would give his party a reputation for economic mismanagement (ironically, previous Labour Prime Minister Ramsay MacDonald's refusal to devalue nearly destroyed the party during the Great Depression). As an alternative to devaluation, he tried to rebalance the current account with a program of fiscal austerity. This merely put more pressure on the domestic economy and did not stop Britain from running a trade deficit that continued to leech the country's gold reserves and eventually forced a devaluation in 1967.

With the benefit of hindsight, we know that Wilson's policies failed thanks to the economic fundamentals and that the years-long struggle against currency depreciation was pointless. But back in 1964 when the film was released, Wilson's austerity drive was just getting under way. Blaming the payments imbalance on gold smugglers and promising an MI-6 crackdown on their nefarious activities would set things straight was a perfect flim-flam companion to the austerity drive. Think of it as the mid-sixties version of eurozone leaders trying to restrict speculation on credit default swaps rather than confronting the imbalances built into the system. James Bond is sent on what's basically a "wag the dog" mission.

But Goldfinger turns out to be something quite a bit bigger. He wants to break into the federal gold depository at Fort Knox and irradiate the American gold supply. With the American gold unusable, the Bretton-Woods system will collapse and the dollar price of gold will skyrocket. This is of course roughly what happened in the real world a few years later. Richard Nixon abandoned the dollar-gold peg in 1972 and the price of gold quintupled over the next three years. Thus the era of floating exchange rates and free trade in gold was born. But had Goldfinger gotten his way, it would have arrived eight years earlier in 1964 and the United Kingdom could have avoided some needless austerity under Wilson and the United States could probably have avoided the recession of 1970. The point being, you don't need to approve of Goldfinger's violent and illegal methods to recognize that he's an economic visionary. Bond, by contrast, is an unwitting pawn being used to try to maintain some deeply misguided economic policies.


Viewing all articles
Browse latest Browse all 21015

Trending Articles