“Breaking Inequality” (2013)
An urgent and impassioned documentary made to appeal to all Americans, “Breaking Inequality” focuses on the corrupt links that tie the United States government and the country’s financial industry, and traces the history of that corruption back to 1971 when then President Richard Nixon took the country off the gold standard. The film was made on a modest budget: much of it consists of snippets from TV news media with some animation and basic title cards, all laid over by a narration from an unseen narrator.
The film does a good job of tracking the various events and economic trends that led to the 2008 global financial crisis. Where it fails though is in attributing all the problems in the American economy and society back to Nixon’s decision to break with the Bretton Woods agreement, established in 1944 to regulate the international monetary system, and end the convertibility of the US dollar into gold. This act made the US dollar a fiat currency (a currency whose existence depends entirely on laws made by government) and the world’s reserve currency. From then on, the money supply in the US began to increase, gradually at first, then practically exponentially in 2008 and beyond. Now Nixon does deserve to be vilified for the Watergate scandal and for the documents at the centre of that scandal which among other things record that in 1968 Nixon attempted to stall the US-Vietnamese peace negotiations so that he could win the Presidential election that year; but he does not bear sole responsibility, direct and indirect, for those events that occurred as a result of the US dollar being released from the gold standard. The Bretton Woods agreement itself that re-established the gold standard and fixed all global currencies to it was flawed: it was structured in a way that privileged the United States and made it the most economically powerful country in the world. At the same time, the agreement allowed the US to accumulate balance of payments deficits as global demand for the dollar in international trade meant that large amounts of it had to circulate globally. A currency that serves as both national currency and reserve currency will create tension between long-term national fiscal and monetary policy on the one hand and short-term global monetary policy on the other: policies that benefit one do not benefit the other. When the narrator says “… we live in one of the greatest countries in the world …”, his statement takes on a most unwelcome taste.
There were changes also outside the US that made the Bretton Woods agreement untenable: the rise of Germany and Japan as rival economic powers meant that the US economic position was bound to weaken with German and Japanese manufactured products often exceeding US products in quality and affordability. In addition the expansion of US military bases in many parts of the world and the Vietnam War, initiated by President John F Kennedy in the early 1960s, led to large amounts of US dollars circulating globally.
Indeed, if we go back further than 1960, before the rise of Nixon as politician, we see that the United States has had strong imperialistic ambitions since the Monroe Doctrine was proclaimed in 1823. Perhaps such ambitions had their origins even well before then, in the belief that having democracy (or whatever passed for democracy) and being a child of the Enlightenment project of the 1700s made the US a special society that must spread the ideals inherent in democracy to the rest of the world whether it liked it or not. Also the existence of indigenous peoples and slaves – both viewed as inferior in some way to white Americans racially and culturally – and the need to deal with them must surely have influenced American attitudes towards other people.
So, honest and well-intentioned that the film is, when it calls for people to support a petition calling for the restoration of the gold standard, to be presented along with the signatures to US Congress on 4 September 2013, I just wonder whether the response to the petition from US Congress and various economic and political commentators will be silence, ridicule or laughter. In pinning all its hopes on the petition, “Breaking Inequality” and its supporters risk being labelled as naïve. I hate to have to say this but the film-makers really need to bone up on 20th century economic history and the history of the evolution of debt-based monetary systems to understand better the roots of the current global monetary crisis: it is a crisis of global capitalism.