BRETTON WOODS
I'm taking 1971 as my starting point because that was the year Richard Nixon ended the convertibility of the dollar into gold which had been a central pillar of the post-war 'Bretton Woods' arrangement. Under Bretton Woods anyone possessing a dollar could in principle demand a fixed equivalent quantity of gold. The gold that belonged to the different participating countries was stored in 'Fort Knox'. Those of my generation will remember the near mythical status 'Fort Knox' had in the fifties and sixties as the storehouse of the world's wealth. I doubt if the term would mean anything very much to those born after, say, 1965.
The advantage of this system was that the participating countries were no longer reliant on their own individual stocks of gold to establish the value of their currencies. The value of their currency was measured in relation to the dollar backed by the total gold stocks of all the countries concerned. The advantage for the US was that it could buy imports in its own currency, which was pretty well universally accepted. The fact that this is an advantage still enjoyed by the dollar indicates that maybe the idea of gold as a guarantor of value was a convenient fiction.
The significance of 1971 is, then, that it marked the end of this fiction, the end of the long history of gold as a guarantor of the value of money. The gold standard presented at least the illusion that paper money represented something 'real' and could not just be issued at will by banks and governments. It was a discipline which, however, tended to be suspended in times of crisis such as wars and financial crises as, for example, the 1930s. But it was regarded as an ideal to be aimed for because a currency based on gold would have a secure internationally recognised value. It gave a country the ability to be an important player in the international economy. But it had severe disadvantages in restricting the availability of money in the local economy. Hence Winston Churchill's reintroduction of the gold standard at a pre-war valuation in 1925 limited the amount of money available to pay wages and produced the General Strike of 1926. In the late nineteenth century the restriction of the dollar to gold produced William Jennings Bryan's call for 'bimetallism', so that the money supply could be expanded to include stocks of silver as well as gold. Indeed a major reason for Nixon's decision in 1971 was that the US was already producing dollars far in excess of its gold reserves in response to the needs of the Vietnam war and President Johnson's 'great society' reforms. This was leading other countries, notably France, to worry about the real value of the dollar and to begin a process of claiming the gold equivalent of their dollar holdings.
However unsatisfactory it might have been to red Socialists, the Bretton Woods arrangement, which freed individual European countries from the need to tie their currency to their own gold stocks, was favourable to a fairly steady improvement in the living conditions of the working class. Central banks were closely tied to government policies which, throughout Europe, posed full employment as one of their principle aims. It is important to recognise that this was not a specifically 'Socialist' ambition. In Britain the Conservative Party had opposed the introduction of the Labour Party's post war welfare reforms, but in power through the 1950s and early 1960s, they continued to implement them.