Technofeudalism: What Killed Capitalism

by Yanis Varoufakis

As long as America was the major surplus nation, Bretton Woods was safe as houses. And that’s why, by the late 1960s, the Bretton Woods system was dead in the water. The reason? Three developments which caused America to lose its trade surplus and become a chronically deficit economy. The first was the escalating Vietnam War which forced the US government to spend billions in South East Asia on supplies and services for its military. The second was President Lyndon Johnson’s attempt to make amends for the ill effects of conscription on working-class America, its black communities in particular. His valiant but expensive Great Society programme substantially reduced poverty but, at once, sucked lots of imported goods from Japan and Europe into the United States. Lastly, Japan’s and Germany’s factories surpassed America’s both in terms of quality and efficiency, partly due to the support successive US governments had extended to Japan’s and Germany’s manufacturing sectors – the car industry being an obvious example. Never too slow to accept reality, Washington killed off its finest creation: on 15 August 1971 President Nixon announced the ejection of Europe and Japan from the dollar zone. Bretton Woods was dead.