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Ending a role: International monetary reform and the retirement of sterling, 1967-1977

John, Edward 2019. Ending a role: International monetary reform and the retirement of sterling, 1967-1977. PhD Thesis, Cardiff University.
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The thesis traces the retirement of sterling as a reserve currency amid the profound transformation in the international monetary system that occurred between the 1967 devaluation and the 1977 Third Group Arrangement. Despite contemporary concern that sterling’s reserve role acted as a constraint on the domestic economy, paradoxically the period prior to the 1976 IMF crisis witnessed a renewed accumulation in sterling balances. The thesis explains this process using a constructivist approach to monetary relations, arguing the nature of the external constraint and strategies for resolving sterling’s reserve role were constituted by Britain’s normative commitments to the international monetary system. The sterling balances were of continued use to British policymakers in securing their traditional objectives of stability in external exchange and autonomy in domestic policy. Despite nominal commitments to retire sterling’s reserve role, this was expected to take place as part of wider international monetary reform. The external constraint was in a constant process of reconfiguration as Britain adjusted to the evolution of the monetary system, while international support helped negotiate the impact of policies that preserved the sterling balances. Only in 1976 in response to the culmination of the reform process and growing ideological divergence with the crucial American source of support did resolving sterling’s reserve role take priority in policy. The thesis reconstructs the process of policy formation and economic diplomacy to trace the strategy of retiring sterling via monetary reform. Between 1967 and 1970, the external constraint was constituted by adherence to Bretton Woods, in which defence and reform of the system took priority over retiring sterling. Defending the post-devaluation rate required economic retrenchment, excessive borrowing and expensive inducements to sterling holders that facilitated a renewed build up in the balances. The greater flexibility of the system following the 1971 Nixon Shock allowed Britain to expand domestic autonomy, prioritising domestic growth over sterling stability and refusing any new obligations for sterling. A further accumulation in the balances followed the 1973 oil crisis as Britain prioritised maintaining output and employment. However by 1976 Britain’s traditional recourse of the IMF to provide liquidity amid a shift in market confidence was threatened by the neo-liberal prescriptions of the US Treasury and American frustration that Britain’s ability to defer adjustment through drawing on the sterling balances was undermining calls for a common front against the oil producers. Amid a conflict over the nature of the crisis and the role played by the balances, Labour finally prioritised resolving the reserve role, accepting agreement with the IMF as the price of securing American backing of a wider support package. The true significance of the IMF crisis is reinterpreted as the reduction of sterling held abroad to working balances.

Item Type: Thesis (PhD)
Status: Unpublished
Schools: History, Archaeology and Religion
Subjects: D History General and Old World > D History (General) > D204 Modern History
D History General and Old World > D History (General) > D839 Post-war History, 1945 on
Date of First Compliant Deposit: 7 April 2020
Last Modified: 13 Mar 2021 02:24

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