By Dan Sally
In the aftermath of World War II, the world’s industrialized democracies were focused on preventing the hyperinflation that exacerbated the effects of the Great Depression, as well as countering the military threat posed by the Soviet Union.
The monetary system implemented by that world order was centered around the United States’ dollar and military. The United States, at the time, comprised 25% of global GDP, owned 75% of the world’s gold, and had emerged as a leading military power. Under the Bretton Woods agreement, these nations agreed to base their currency around the US Dollar which, in turn, was redeemable for gold. Under NATO, member countries had protection from the Soviets in a collective defense agreement largely supported by America’s massive military.
By the time RIchard Nixon took office in 1968, this order was beginning to creak. America’s military might was being tested in an unwinnable war in Vietnam. Nixon’s predecessor, Lyndon Johnson, had launched a series of massive social programs with equally massive price tags. International creditors, leery of America’s ability to pay future obligations, began to redeem their dollars for gold.
Along with an increasingly unpopular foreign war and declining economic prospects, Nixon took office at a time of immense social upheaval, with the Anti-War and Civil Rights movements as focal points.
The decisions Nixon made during his time in office fundamentally changed the political landscape of the United States that set the stage for a number of issues America is grappling with to this day. In examining them, we gain an understanding of why America in 2021 is the way it is and—more broadly—the kind of decision-making America’s system encourages.
Nixon in Context
Before getting into what Nixon did while in office, it’s important to understand what the world looked like at the time.
The Soviet Union represented a meaningful military threat against the United States and its allies. Nixon took office six years after the world teetered on the brink of nuclear war during the Cuban Missile Crisis. All the while, the Soviets had shown an appetite for expanding their sphere of influence by converting neighboring countries into satellite communist autocracies.
In this respect, every decision Nixon made needed to be weighed against how this would be perceived by the Russians and how this would work to the advantage of the United States in the ongoing Cold War.
The second overarching theme was Nixon’s desire to turn America from a center-left country to a center-right one. Since the Great Depression, US domestic policy had largely been a reflection of the big government ideals espoused by FDR in the New Deal, and the Republican Party was almost perpetually in the minority.
Keeping those two things in mind makes it easier to frame the logic behind his decisions and the ideological foundation he laid that would guide future policy.
In the late 1960s, the major fault lines in American society were around the US involvement in the Vietnam War, the Civil Rights Movement, and—somewhat related—rising crime in US cities that were often discussed with heavily racialized overtones.
Nixon understood these fault lines and used them to polarize the electorate around the concepts of “Peace with Honor” in Vietnam and “Law and Order” in American cities. Both resonated among those with antipathy towards the antiwar movement and the counter-cultural ideas they espoused, while also playing off of white anxiety over racial unrest.
This was especially beneficial to the Republican Party in the South, a region that had been almost entirely dominated by their opponents since the Civil War. Nixon’s messaging appealed to Southern Democrats who had become disillusioned with their party’s embrace of the Civil Rights Movement, and led to a political realignment that would eventually result in Republican dominance in the region.
The Vietnam War also allowed him to package his candidacy in terms of patriotism and national pride, reinforcing the idea that Nixon was the candidate for “Real Americans.”
It’s around this period that Congress became increasingly polarized along party lines, with the percentage of members voting across the aisle virtually falling off a cliff.
While Nixon’s politics were a clear prototype for Reagan Era Republicanism, there was a stark contrast in policies. Three decisions in particular are still felt by the country today: closing the gold window, initiating the petrodollar system and encouraging agricultural growth:
- The decision to close the gold window: In response to an increasing demand among foreign creditors to redeem their dollars for gold, Nixon responded by revoking the ability to do so. If Nixon were behaving in line with true conservative ideals, he would have trimmed government spending to allay their fears, and potentially cost himself reelection. The choice he made preserved US spending power while also creating a series of damaging economic aftershocks.
- Paving the way for the petrodollar system: Nixon is most famous for removing the dollar from the gold standard, but less well known for replacing it with an equally valuable commodity. In an agreement with Saudi Arabia, the Nixon Administration promised to provide military aid to the Saudis in exchange for their agreement to only sell their oil in US dollars. The rest of OPEC followed, and the global market for dollars that was once backed by gold was now backed by oil. This allowed the US to engage in deficit spending and accrue debt without any adverse effects.
- A fundamental shift in America’s agricultural policy: In response to a rapid rise in inflation, partially aggravated by Nixon’s decision to close the gold window, the Nixon Administration shifted US agricultural policy from one where farmers were paid to grow less and control supply, to one where they were encouraged to grow as much as they could with the understanding the government would buy any surplus. This incentivized the growing of row crops, such as corn and soy, lowering food prices, providing cheaper meat, and changing the American diet.
While a loose claim can be made that US food production provided a strategic advantage against the Soviets, preservation of dollar dominance in the global economy is more clear. Any reduction in America’s capacity to fund its military could have tipped the scales in favor of the Russians during the Cold War.
Nixon’s biggest misstep in the above decisions was choosing the politically expedient strategy as opposed to what many could argue was the correct one. Nixon’s ability to polarize the electorate around racial anxiety and the war allowed him to govern by misdirection, building his election and reelection around wedge issues while the most consequential policy decisions were left out of the conversation.
Why this Matters Now
If Nixon’s goals were to establish a strong Republican majority, move domestic policy center-right, and continue to give America the stronger hand against the Soviets, you could argue his presidency was a success. The Republican Party currently has an advantage in the Senate and electoral college, and you only need look at a map to judge how things worked out for the USSR.
However, these policies also metastasized into a number of issues America will need to deal with in the coming decade. Namely:
- American Debt: The creation of artificial demand for US dollars via the petrodollar system also created a political conundrum. Americans expect low taxes and expensive government, and the two can only coexist in a dollar denominated world. The rise of China and the presence of cryptocurrencies pose a real threat to dollar dominance. Any skilled politician interested in reelection wouldn’t dare make the reforms necessary to correct this, yet the consequences of the US Dollar losing its status as the world’s reserve currency would be disastrous.
- Income Inequality: Just as there’s a correlation from the closing of the gold window to the rise of deficit spending and the national debt, there’s also a correlation with the rise in income inequality in the United States. Expansionary monetary policy has continued to inflate the prices of assets—namely stocks—meaning a person’s wealth has grown in proportion to the amount of extra money they have to invest, as opposed to the number of hours they work.
- The Obesity Epidemic: The “get big or get out” agricultural reforms of Nixon’s Secretary of Agriculture, Earl Butz, led to the reduction of food costs in America as well as increasing the amount of corn and meat into the American diet. America’s rise in obesity since the 1970s is traceable to that policy decision.
- Spillover Environmental Effects: With its focus on overproduction, Nixon’s agricultural policy also encouraged the use of petroleum based fertilizers and discouraged the restorative practice of letting fields lie fallow. As a result, we face an impending ecological disaster in the form of the degradation of topsoil in the Farm Belt and agricultural runoff in the Mississippi creating the Gulf of Mexico’s Dead Zone.
- Racialized Politics: FDR can be blamed for kicking the can of racial justice down the road by building a coalition of working class voters in the North and segregationist Democrats in the South. Nixon can be blamed for filling that can with gas, lighting it on fire, and throwing it into a crowded room. The intentional use of racial anxieties to build his coalition paved the way for the “tough on crime” policies that resulted in America’s incarceration rate rising from under one half of one percent in 1972 to over 2% today and a War on Drugs that has been, at best, a stalemate. Both have had a disproportionately negative impact on people of color.
In short, Americans are poorer, fatter, and don’t get along as well as a result.
How we Fix It
The issue with fixing it isn’t a lack of knowledge over the problems, it’s a system that makes it politically advantageous not to fix them. Nixon was one of the most skilled—if not the most—politicians of the post World War II era, and his use of polarization to win elections says more of the kind of decision-making the US system incentivizes than the man himself.
Polarization is only an effective strategy if you have one opponent, and America’s two party dynamic enables this. It’s less effective when there are more than two choices on the ballot, as being the lesser of two evils isn’t as effective when voters have a third choice.
One system that has shown to reduce the effectiveness of polarization is ranked choice voting, which makes it easier for voters to choose from more than two candidates in elections. Rather than determining how to best split the electorate to win office, candidates are required to find the consensus opinion among voters.
While we can debate the motives and effects of Nixon’s policies, reopening relations with China, navigating American monetary policy to a post-gold era, and transforming the electorate in the way he did require remarkable amounts of skill, drive and determination. If Nixon’s motivations were centered around consensus rather than division, those talents might have put America on a more positive long-term trajectory.
That same level of political talent exists in America today, and they’re running the same playbook with far less to show for it. By changing our electoral system to motivate politicians to find the things we agree on rather than those which divide us, we could expect this talent to be put to better use.
Dan Sally is a father, activist, and creator of You Don’t Have to Yell, a non-partisan political podcast that defangs today’s most contentious political issues by exploring the history behind them, where Americans can find common ground, and the reforms necessary to make American politics less divisive and more productive.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of Rank the Vote, its members, supporters, funders, or affiliates.