ABSTRACT
In the post-World War II period a major shift occurred in the geographical distribution of US direct investment from the under developed areas of the world to its industrial core states. The capital controls signaled the emergence of the politics of US hegemonic decline in the international system. The controls had dual strategic priorities: to place protection of the US world power position ahead of private sector expansion abroad and to maintain domestic political coalitions constructed around a minimal welfare state program. The US payments deficit itself came to undermine the reality and ideology of free trade internationalism. The deficit allowed the dollar to be the primary global reserve and transaction currency. The US payments deficit was necessary for the expansion, maintenance, and financing of the postwar US economic and politico-military hegemony under the Bretton Woods system. The bankers argued in opposition to the Interest Equalization Tax of 1963 that they should reap the benefits of the dollar's hegemony.
