Norman Stone - The Atlantic and Its Enemies

There was another great symbol of this period — ‘Watergate’, and the fall of Richard Nixon. It was as if the gods had wanted to take a revenge, in black humour, for Nixon’s weaselly behaviour over Vietnam, for the original offence was comic, and we might even apply Hegel’s remark as to ‘the terrifying infinity of the particular’. Nixon’s staff were caricature business school types, sandwich lunches, work-out sessions, confusing efficiency with efficacy: no imagination at all. John Ehrlichman was a Christian Scientist lawyer who objected to Nixon’s drinking and refused to work with him unless it stopped. The drinking did in fact stop, more or less, and Nixon’s judgement did not improve: without a drink he became charmless and gauche. The Chief of Staff, John Mitchell, exuded silent strength, misleadingly, but he had a first-class record that made Nixon feel inferior, and brought out the nasty, frustrated and unscrupulous side of the President. Junior staff, tails wagging, organized a break-in at Democrat headquarters in the Watergate office building, in the hope of finding discreditable papers. The affair was bungled, lies were told, and Nixon, his head in Chinese clouds, did not follow the trivialities. Then he lied as well. Then the lies were recorded, as well as his reactions to the revelation of this. Then the people who tried to find out about the recordings were harassed, and then more lies were told.

Lying about (and obsession with) trivialities, and subjecting opponents to this or that survivable illegality, were not new in American politics, or for that matter the politics of most other countries. Roosevelt himself had been guilty. The Watergate break-in had even occurred in a defensible context, because secret documents had been ‘leaked’ to The New York Times (about Vietnam) and national security was threatened. But Nixon depended upon a wooden, two-dimensional staff, and National Security people who might have understood something about proportion had been cold-shouldered. The Republican establishment’s candidate had been Nelson Rockefeller (who lost, because he had divorced a wife of thirty years’ standing, and discovered the sixties in his own sixties) and they did not like Nixon: ‘such a common little man’, said Theodore Roosevelt’s daughter. Over Watergate, they may even have stabbed Nixon in the back. At any rate, a huge fuss in the media, preoccupying them as the internal and external affairs of the United States went from bad to worse, led to a threat to Nixon of impeachment, a formal condemnation by Congress which might have led to bankruptcy and imprisonment. On 9 August 1974 Nixon resigned. He was given a formal pardon in exchange, by his unchosen successor, Gerald Ford, who was next in line, mainly because he was not a thief, like the previous Vice-President, or an alcoholic, like the other alternative. Not America’s brightest moment.

There was far, far more in the background. The October crisis of 1973 introduced a period of terrible instability, when quite sober commentators could assume that the End was Nigh. OPEC now appeared to be almost a villainous operation from James Bond, with a palace headquarters on the Vienna Ringstrasse. The earnings of oil exporters rose from $23bn in 1972 to $140bn in 1977. There was a fourfold inflation of oil prices, and then an eightfold one; stock exchanges collapsed, banks failed, and a tidal wave of petro-dollars engulfed the world, enriching by far the least worthy recipients. Golda Meir, in Israel, remarked that Moses had wandered in the desert for forty years, leading his people to the only place in the Middle East that had no oil. But it was on the whole America’s own doing. The oil producers, left to themselves, would have been far too disunited for common action, and their common strategy at OPEC did not in fact last for very long. But the fall of the dollar in 1971 pushed them together: why accept valueless paper dollars? The same was true, though not to the same extent, for producers of other raw materials — coffee, tobacco, copper, rubber, iron ore, meat as well — and prices shot up, even in 1971, two years before the oil shock. The problem was symbolized by the Brazilian city of Manaos, deep in the jungle. There, once upon a time, rubber had appeared, and the place became opulent: famously Dame Adeline Patti, the great opera singer of the 1890s, appeared there. Then rubber was produced elsewhere, and Manaos relapsed back into semi-jungle. Now, the Middle East was becoming a huge Manaos.

At least in the epoch of Manaos, there was one commodity that ruled everything else, including money: gold. International prices were stable, or even inclined to go down gently, because the main trading countries’ currencies were based on the Gold Standard. If more gold had been produced then no doubt prices would have risen, but there was a very limited supply of it — roughly what could have been stored in a house (silver was far more plentiful, and therefore unreliable). Up to 1914, and in most ways even 1931, most currencies could be exchanged into gold on demand. In practice it was of course inconvenient and unsafe for gold to be carried around in any quantity, but paper money based on it was trusted, and there were few openings for the manufacture of paper money on the scale that occurred in the 1960s. If you had a profit, you might keep it safely in paper — and very handsome, dignified paper at that. Now, the inflation of the paper dollar meant that, on top of low prices, the producers were getting money of questionable value, itself declining in purchasing power (and looking more and more crumpled and grubby). The only answer was for them to combine and to create scarcities, as the oil producers in 1973 elected to do.

But the volume of paper-money purchasing power in the Atlantic countries meant that an increasing amount of money chased goods, with the inflationary results that would follow. Primary produce of all sorts, including food, now rose in price: in the USA even in 1971 wheat went up by 50 per cent. As an instance of what happened, there is the index of prices paid for ‘Omaha Choice Steer’ of roughly one ton in weight. In 1951, at a time of rising prices in the Korean War, the price was $35. In the 1960s it varied around $25. Then in 1969, 1970 and 1971 it started to rise — $30 and above — reaching $36 in 1972 and $45 in 1973, where it stabilized until 1978, when it reached $50, and then in 1979 almost $70 (the figure then stuck for almost a quarter-century). Inflation was telling and prices since 1956 have risen ten times: a Florida bungalow in the early 1960s cost $35,000 with interest at 5 per cent, but a decade later stood at four times as much with a higher rate of interest, and there was more to come. Inflation on this scale was general, and when it affected oil prices, it threatened the existing order at its base. From August 1972 to August 1973 meat and fish rose by 40 per cent and Business Week feared that the USA would become another Brazil, a place with endless zeros on the torn and smudgy banknotes. An ounce of gold reached $875 in 1980 (as against $35 in 1970) and the dollar, having stood at four Marks, fell close to two, with a somewhat lesser fall against the yen. In August 1971 it had finally come off gold, and had gone down. Sharp-sighted foreigners could see the dimensions of the problem to come, though Nixon and the advisers at Camp David ‘closed the gold window’ apparently quite casually, the Secretary of the Treasury dismissing complaints: the dollar is our currency but it’s your problem. American exports then flourished at the expense of other countries’. Weaselling protection against them then set in, and unemployment increased all round. Late in 1972, in the library of the White House, the German chancellor, Helmut Schmidt, tried to sort things out, and for a time the foreign exchange desk officer of the Federal Reserve, Paul Volcker, even flew around in a windowless aircraft from place to place, with a view to fixing things. It was no good: there was a tidal wave of money moving against the dollar, and lines in the sand were engulfed. By now there was so much money held in places quite beyond the West’s control that nothing much could be done, and the speculators were just given their heads. Currencies now, in March 1973, floated against each other, the values yo-yo-ing; in June the dollar fell to 2.28 Marks from 2.83, then rose again because the Americans had oil, then fell again in 1975, and fell drastically when the Shah of Iran ran into trouble at the turn of 1978-9. With such uncertainty as regards money, trade suffered, and unemployment grew. But so did prices.