Showing posts with label World War II. Show all posts
Showing posts with label World War II. Show all posts

Monday, October 3, 2011

Arnold Schwarzenegger

Schwarzenegger was born in Thal, Austria, a small village bordering the Styrian capital Graz, and was christened Arnold Alois Schwarzenegger.[6] His parents were the local police chief, Gustav Schwarzenegger (1907–72), and Aurelia (née Jadrny; 1922–1998). His father served in World War II, after he voluntarily applied to join the Nazi Party in 1938.[7] He served with the German Army as a Hauptfeldwebel of the Feldgendarmerie and was discharged in 1943 after contracting malaria. They were married on October 20, 1945 – Gustav was 38, and Aurelia was a 23-year-old widow with a son, Meinhard. According to Schwarzenegger, both of his parents were very strict: "Back then in Austria it was a very different world, if we did something bad or we disobeyed our parents, the rod was not spared."[8] He grew up in a Roman Catholic family who attended mass every Sunday.[9][10]
Gustav had a preference for his stepson Meinhard, over his son, Arnold.[11] His favoritism was "strong and blatant," which stemmed from unfounded suspicion that Arnold was not his child.[12] Schwarzenegger has said his father had "no patience for listening or understanding your problems."[9] Schwarzenegger had a good relationship with his mother and kept in touch with her until her death.[13] In later life, Schwarzenegger commissioned the Simon Wiesenthal Center to research his father's wartime record, which came up with no evidence of atrocities despite Gustav's membership in the Nazi Party and SA.[11] Schwarzenegger's father's background received wide press attention during the 2003 California recall campaign.[14] At school, Schwarzenegger was apparently in the middle but stood out for his "cheerful, good-humored and exuberant" character.[9] Money was a problem in their household; Schwarzenegger recalled that one of the highlights of his youth was when the family bought a refrigerator.[12]
As a boy, Schwarzenegger played several sports, heavily influenced by his father.[9] He picked up his first barbell in 1960, when his football coach took his team to a local gym.[6] At the age of 14, he chose bodybuilding over football (soccer) as a career.[15][16] Schwarzenegger has responded to a question asking if he was 13 when he started weightlifting: "I actually started weight training when I was 15, but I'd been participating in sports, like soccer, for years, so I felt that although I was slim, I was well-developed, at least enough so that I could start going to the gym and start Olympic lifting."[8] However, his official website biography claims: "At 14, he started an intensive training program with Dan Farmer, studied psychology at 15 (to learn more about the power of mind over body) and at 17, officially started his competitive career."[17] During a speech in 2001, he said, "My own plan formed when I was 14 years old. My father had wanted me to be a police officer like he was. My mother wanted me to go to trade school."[18] Schwarzenegger took to visiting a gym in Graz, where he also frequented the local movie theaters to see bodybuilding idols such as Reg Park, Steve Reeves and Johnny Weissmuller on the big screen. "I was inspired by individuals like Reg Park and Steve Reeves."[8] When Reeves died in 2000, Schwarzenegger fondly remembered him: "As a teenager, I grew up with Steve Reeves. His remarkable accomplishments allowed me a sense of what was possible, when others around me didn't always understand my dreams ... Steve Reeves has been part of everything I've ever been fortunate enough to achieve." In 1961, Schwarzenegger met former Mr. Austria Kurt Marnul, who invited him to train at the gym in Graz.[6] He was so dedicated as a youngster that he broke into the local gym on weekends, when it was usually closed, so that he could train. "It would make me sick to miss a workout ... I knew I couldn't look at myself in the mirror the next morning if I didn't do it."[8] When Schwarzenegger was asked about his first movie experience as a boy, he replied, "I was very young, but I remember my father taking me to the Austrian theaters and seeing some newsreels. The first real movie I saw, that I distinctly remember, was a John Wayne movie."[8]
In 1971, his brother Meinhard died in a car accident.[6] Meinhard had been drinking and was killed instantly. Schwarzenegger did not attend his funeral.[12] Meinhard was due to marry Erika Knapp, and the couple had a three-year-old son, Patrick. Schwarzenegger would pay for Patrick's education and help him to immigrate to the United States.[12] Gustav died the following year from a stroke.[6] In Pumping Iron, Schwarzenegger claimed that he did not attend his father's funeral because he was training for a bodybuilding contest. Later, he and the film's producer said this story was taken from another bodybuilder for the purpose of showing the extremes that some would go to for their sport and to make Schwarzenegger's image more cold and machine-like in order to fan controversy for the film.[19] Barbara Baker, his first serious girlfriend, has said he informed her of his father's death without emotion and that he never spoke of his brother.[20] Over time, he has given at least three versions of why he was absent from his father's funeral.[12]
In an interview with Fortune in 2004, Schwarzenegger told how he suffered what "would now be called child abuse" at the hands of his father:[7][21]
My hair was pulled. I was hit with belts. So was the kid next door. It was just the way it was. Many of the children I've seen were broken by their parents, which was the German-Austrian mentality. They didn't want to create an individual. It was all about conforming. I was one who did not conform, and whose will could not be broken. Therefore, I became a rebel. Every time I got hit, and every time someone said, 'you can't do this,' I said, 'this is not going to be for much longer, because I'm going to move out of here. I want to be rich. I want to be somebody.'
Early adulthood
Schwarzenegger served in the Austrian Army in 1965 to fulfill the one year of service required at the time of all 18-year-old Austrian males.[6][17] During his army service, he won the Junior Mr. Europe contest.[16] He went AWOL during basic training so he could take part in the competition and spent a week in military prison: "Participating in the competition meant so much to me that I didn't carefully think through the consequences." He won another bodybuilding contest in Graz, at Steirer Hof Hotel (where he had placed second). He was voted best built man of Europe, which made him famous.
"The Mr. Universe title was my ticket to America – the land of opportunity, where I could become a star and get rich."[18] Schwarzenegger made his first plane trip in 1966, attending the NABBA Mr. Universe competition in London.[17] He would come in second in the Mr. Universe competition, not having the muscle definition of American winner Chester Yorton.[17]
Charles "Wag" Bennett, one of the judges at the 1966 competition, was impressed with Schwarzenegger and he offered to coach him. As Schwarzenegger had little money, Bennett invited him to stay in his crowded family home above one of his two gyms in Forest Gate, London, England. Yorton's leg definition had been judged superior, and Schwarzenegger, under a training program devised by Bennett, concentrated on improving the muscle definition and power in his legs. Staying in the East End of London helped Schwarzenegger improve his rudimentary grasp of the English language.[22][23] Also in 1966, Schwarzenegger had the opportunity to meet childhood idol Reg Park, who became his friend and mentor.[24] The training paid off and, in 1967, Schwarzenegger won the title for the first time, becoming the youngest ever Mr. Universe at the age of 20.[17] He would go on to win the title a further three times.[16] Schwarzenegger then flew back to Munich, training for four to six hours daily, attending business school and working in a health club (Rolf Putzinger's gym where he worked and trained from 1966–1968), returning in 1968 to London to win his next Mr. Universe title.[17] He frequently told Roger C. Field, a friend in Munich at that time, "I'm going to become the greatest actor!"
Move to the U.S.


Schwarzenegger with President Ronald Reagan in 1984.
Schwarzenegger, who dreamed of moving to the U.S. since the age of 10, and saw bodybuilding as the avenue through which to do so,[25] realized his dream by moving to the United States in September 1968 at the age of 21, speaking little English.[6][16] "Naturally, when I came to this country, my accent was very bad, and my accent was also very strong, which was an obstacle as I began to pursue acting."[8] There he trained at Gold's Gym in Venice, Los Angeles, California, under Joe Weider. From 1970 to 1974, one of Schwarzenegger's weight training partners was Ric Drasin, a professional wrestler who designed the original Gold's Gym logo in 1973.[26] Schwarzenegger also became good friends with professional wrestler "Superstar" Billy Graham. In 1970, at age 23, he captured his first Mr. Olympia title in New York, and would go on to win the title a total of seven times.[17]
Immigration law firm Siskind & Susser have stated that Schwarzenegger may have been an illegal immigrant at some point in the late 1960s or early 1970s because of violations in the terms of his visa.[27] LA Weekly would later say in 2002 that Schwarzenegger is the most famous immigrant in America, who "overcame a thick Austrian accent and transcended the unlikely background of bodybuilding to become the biggest movie star in the world in the 1990s".[25]
In 1977, Schwarzenegger's autobiography/weight-training guide Arnold: The Education of a Bodybuilder was published and became a huge success.[6] After taking English classes at Santa Monica College in California, he earned a BA by correspondence from the University of Wisconsin–Superior, where he graduated Business and International Economics, in 1979.[6]
Bodybuilding career

Arnold Schwarzenegger
Personal Info
Nickname The Austrian Oak
Born July 30, 1947 (age 64)
Thal, Styria, Austria
Height 6 ft 2 in (1.88 m)[28]
Weight 250 pounds (113 kg)
Professional Career
Pro-debut NABBA Mr. Universe, 1968
Best win IFBB Mr. Olympia, 1970–1975, 1980, Seven Times
Predecessor Sergio Oliva ('69), Frank Zane ('79)
Successor Franco Columbu ('76, '81)
Active Retired 1980
See also: Bodybuilding competitions featuring Arnold Schwarzenegger
Schwarzenegger is considered among the most important figures in the history of bodybuilding, and his legacy is commemorated in the Arnold Classic annual bodybuilding competition. Schwarzenegger has remained a prominent face in the bodybuilding sport long after his retirement, in part because of his ownership of gyms and fitness magazines. He has presided over numerous contests and awards shows.
For many years, he wrote a monthly column for the bodybuilding magazines Muscle & Fitness and Flex. Shortly after being elected Governor, he was appointed executive editor of both magazines, in a largely symbolic capacity. The magazines agreed to donate $250,000 a year to the Governor's various physical fitness initiatives. The magazine MuscleMag International has a monthly two-page article on him, and refers to him as "The King".
One of the first competitions he won was the Junior Mr. Europe contest in 1965.[6] He won Mr. Europe the following year, at age 19.[6][17] He would go on to compete in, and win, many bodybuilding contests, as well as some weightlifting contests, including five Mr. Universe (4 – NABBA [England], 1 – IFBB [USA]) wins, and seven Mr. Olympia wins, a record which would stand until Lee Haney won his eighth consecutive Mr. Olympia title in 1991.
Schwarzenegger continues to work out even today. When asked about his personal training during the 2011 Arnold Classic he said that he was still working out a half an hour with weights every day.[29]
Competition Weight: 240 lb (110 kg) (top 250 lb [113 kg])
Off Season Weight: 260 lb (120 kg)
Strongman
In 1967, Schwarzenegger competed in and won the Munich stone-lifting contest, in which a stone weighing 508 German pounds (254 kg/560 lbs.) is lifted between the legs while standing on two foot rests.
Mr. Olympia


Schwarzenegger presented awards at the USA Weightlifting Hall of Fame in 2011 in Columbus, Ohio. In photo: 1987 world champion American Karyn Marshall.
Schwarzenegger's goal was to become the greatest bodybuilder in the world, which meant becoming Mr. Olympia.[6][17] His first attempt was in 1969, when he lost to three-time champion Sergio Oliva. However, Schwarzenegger came back in 1970 and won the competition, making him the youngest ever Mr. Olympia at the age of 23, a record he holds to this day.[17]
He continued his winning streak in the 1971–74 competitions.[17] In 1975, Schwarzenegger was once again in top form, and won the title for the sixth consecutive time,[17] beating Franco Columbu. After the 1975 Mr. Olympia contest, Schwarzenegger announced his retirement from professional bodybuilding.[17]
Months before the 1975 Mr. Olympia contest, filmmakers George Butler and Robert Fiore persuaded Schwarzenegger to compete, in order to film his training in the bodybuilding documentary called Pumping Iron. Schwarzenegger had only three months to prepare for the competition, after losing significant weight to appear in the film Stay Hungry with Jeff Bridges. Lou Ferrigno proved not to be a threat, and a lighter-than-usual Schwarzenegger convincingly won the 1975 Mr. Olympia.
Schwarzenegger came out of retirement, however, to compete in the 1980 Mr. Olympia.[6] Schwarzenegger was training for his role in Conan, and he got into such good shape because of the running, horseback riding and sword training, that he decided he wanted to win the Mr. Olympia contest one last time. He kept this plan a secret, in the event that a training accident would prevent his entry and cause him to lose face. Schwarzenegger had been hired to provide color commentary for network television, when he announced at the eleventh hour that while he was there: "Why not compete?" Schwarzenegger ended up winning the event with only seven weeks of preparation. After being declared Mr. Olympia for a seventh time, Schwarzenegger then officially retired from competition.
Steroid use
Schwarzenegger has admitted to using performance-enhancing anabolic steroids while they were legal, writing in 1977 that "steroids were helpful to me in maintaining muscle size while on a strict diet in preparation for a contest. I did not use them for muscle growth, but rather for muscle maintenance when cutting up."[30] He has called the drugs "tissue building."[31]
In 1999, Schwarzenegger sued Dr. Willi Heepe, a German doctor who publicly predicted his early death on the basis of a link between his steroid use and his later heart problems. As the doctor had never examined him personally, Schwarzenegger collected a US$10,000 libel judgment against him in a German court.[32] In 1999, Schwarzenegger also sued and settled with The Globe, a U.S. tabloid which had made similar predictions about the bodybuilder's future health.[33]
Height
His official height of 6'2" (1.88 m) has been brought into question by several articles. In his bodybuilding days in the late 1960s, he was measured to be 6'1.5" (1.87 m), a height confirmed by his fellow bodybuilders.[34][35] However, in 1988 both the Daily Mail and Time Out magazine mentioned that Schwarzenegger appeared noticeably shorter.[36] More recently, before running for Governor, Schwarzenegger's height was once again questioned in an article by the Chicago Reader.[37] As Governor, Schwarzenegger engaged in a light-hearted exchange with Assemblyman Herb Wesson over their heights. At one point Wesson made an unsuccessful attempt to, in his own words, "[s]ettle this once and for all and find out how tall he is"[38] by using a tailor's tape measure on the Governor. Schwarzenegger retaliated by placing a pillow stitched with the words "Need a lift?" on the five-foot-five inch (165 cm) Wesson's chair before a negotiating session in his office.[39] Bob Mulholland also claimed Arnold was 5'10" (1.78 m) and that he wore risers in his boots.[40] The debate on Schwarzenegger's height has spawned a website solely dedicated to the issue,[41] and his page remains one of the most active on CelebHeights.com, a website which discusses the heights of celebrities.[34]
Acting career

See also: Arnold Schwarzenegger filmography and List of awards and nominations received by Arnold Schwarzenegger
Arnold Schwarzenegger

Other names Arnold Strong
Arnie
Occupation Actor, director, producer
Years active 1970–2006, 2009–present (acting)
Schwarzenegger wanted to move from bodybuilding into acting, finally achieving it when he was chosen to play the role of Hercules in 1970's Hercules in New York. Credited under the name "Arnold Strong," his accent in the film was so thick that his lines were dubbed after production.[16] His second film appearance was as a deaf mute hit-man for the mob in director Robert Altman's The Long Goodbye (1973), which was followed by a much more significant part in the film Stay Hungry (1976), for which he was awarded a Golden Globe for New Male Star of the Year. Schwarzenegger has discussed his early struggles in developing his acting career. "It was very difficult for me in the beginning – I was told by agents and casting people that my body was 'too weird', that I had a funny accent, and that my name was too long. You name it, and they told me I had to change it. Basically, everywhere I turned, I was told that I had no chance."[8]
Schwarzenegger drew attention and boosted his profile in the bodybuilding film Pumping Iron (1977),[15][16] elements of which were dramatized. In 1991, Schwarzenegger purchased the rights to the film, its outtakes, and associated still photography.[42] Schwarzenegger auditioned for the title role of The Incredible Hulk, but did not win the role because of his height. Later, Lou Ferrigno got the part of Dr. David Banner's alter ego. Schwarzenegger appeared with Kirk Douglas and Ann-Margret in the 1979 comedy The Villain. In 1980 he starred in a biographical film of the 1950s actress Jayne Mansfield as Mansfield's husband, Mickey Hargitay.
Schwarzenegger's breakthrough film was the sword-and-sorcery epic Conan the Barbarian in 1982, which was a box-office hit.[15] This was followed by a sequel, Conan the Destroyer in 1984, although it was not as successful as its predecessor.[43] In 1983, Schwarzenegger starred in the promotional video "Carnival in Rio".
In 1984, he made the first of three appearances as the eponymous character and what some would say was the signature role in his acting career in director James Cameron's science fiction thriller film The Terminator.[15][16][44] Following The Terminator, Schwarzenegger made Red Sonja in 1985.[43]
During the 1980s, audiences had an appetite for action films, with both Schwarzenegger and Sylvester Stallone becoming international stars.[16] Schwarzenegger's roles reflected his sense of humor, separating his roles from more serious action hero fare. His alternative-universe comedy/thriller Last Action Hero featured a poster of the movie Terminator 2: Judgment Day which, in the fictional alternate universe, had Sylvester Stallone as its star.
He made a number of successful films: Commando (1985), Raw Deal (1986), The Running Man (1987), and Red Heat (1988). In Predator (1987), another successful film, Schwarzenegger led a cast which included future Minnesota Governor Jesse Ventura (Ventura also appeared in The Running Man and Batman & Robin with Schwarzenegger) and future candidate for governor of Kentucky Sonny Landham.


Footprints and handprints of Arnold Schwarzenegger in front of the Grauman's Chinese Theatre
Twins (1988), a comedy with Danny DeVito also proved successful. Total Recall (1990) netted Schwarzenegger $10 million and 15% of the gross, and was a science fiction script directed by Paul Verhoeven, based on the Philip K. Dick short story, "We Can Remember It for You Wholesale". Kindergarten Cop (1990) reunited him with director Ivan Reitman, who directed him in Twins.
Schwarzenegger had a brief foray into directing, first with a 1990 episode of the TV series Tales from the Crypt, entitled "The Switch", and then with the 1992 telemovie Christmas in Connecticut. He has not directed since.
Schwarzenegger's commercial peak was his return as the title character in 1991's Terminator 2: Judgment Day, which was the highest-grossing film of 1991.[citation needed] In 1993, the National Association of Theatre Owners named him the "International Star of the Decade."[6] His next film project, the 1993 self-aware action comedy spoof Last Action Hero was released opposite Jurassic Park, and did not do well at the box office. His next film, the comedy drama True Lies (1994) was a popular spy film, and saw Schwarzenegger, reunited with James Cameron, appearing opposite Jamie Lee Curtis.
That same year the comedy Junior (1994) was released, the last of his three collaborations with Ivan Reitman and again co-starring Danny DeVito and also for the second time featuring Pamela Reed. This film brought Schwarzenegger his second Golden Globe nomination, this time for Best Actor – Musical or Comedy. It was followed by the action thriller Eraser (1996), the Christmas comedy Jingle All The Way (1996) with Arnold playing the main character, Howard Langston, and the comic book-based Batman & Robin (1997), where he played the villain Mr. Freeze. This was his final film before taking time to recuperate from a back injury. Following the critical failure of Batman & Robin, Schwarzenegger's film career and box office prominence went into decline.
He returned with the supernatural thriller End of Days (1999), later followed by the action films The 6th Day (2000) and Collateral Damage (2002) all of which failed to do well at the box office. In 2003, he made his third appearance as the title character in Terminator 3: Rise of the Machines, which went on to earn over $150 million domestically.[citation needed]
In tribute to Schwarzenegger in 2002, Forum Stadtpark, a local cultural association, proposed plans to build a 25-meter (82 ft) tall Terminator statue in a park in central Graz. Schwarzenegger reportedly said he was flattered, but thought the money would be better spent on social projects and the Special Olympics.[45]
His film appearances after becoming Governor of California include a 3-second cameo appearance in The Rundown (a.k.a., Welcome to the Jungle) with The Rock, and the 2004 remake of Around the World in 80 Days, where he appeared onscreen with action star Jackie Chan for the first time. In 2005 he appeared as himself in the film The Kid & I. Schwarzenegger voiced Baron von Steuben in Episode 24 ("Valley Forge") of Liberty's Kids.
Schwarzenegger had been rumored to be appearing in Terminator Salvation as the original T-800 model, alongside Roland Kickinger. Schwarzenegger denied his involvement,[46] but it was later revealed that although he would appear briefly he would not be shooting new footage, and his image would be inserted into the movie from stock footage of the first Terminator movie.[47][48] Schwarzenegger's most recent appearance was in Sylvester Stallone's The Expendables, where he made a cameo appearance alongside Stallone and Bruce Willis.[citation needed]
Return to acting


Arnold Schwarzenegger's star on the Hollywood Walk of Fame
In January 2011, just weeks after leaving office in California, Schwarzenegger announced that he was reading several new scripts for future films, one of them being the World War II action drama With Wings as Eagles, written by Randall Wallace, based on a true story.[49][50]
On March 6, 2011, at the Arnold Seminar of the Arnold Classic, Schwarzenegger revealed that he was being courted for several films, including sequels to The Terminator and remakes of Predator and The Running Man, and that he was "packaging" a comic book character.[51] The character was later revealed to be the Governator, star of the comic book and animated series of the same name. Schwarzenegger inspired the character and co-developed it with Stan Lee, who would have produced the series. Schwarzenegger would have voiced the Governator.[52][53][54][55]
On May 20, 2011, Schwarzenegger's entertainment counsel announced that all movie projects currently in development were being halted. "Governor Schwarzenegger is focusing on personal matters and is not willing to commit to any production schedules or timelines."[56] However, the Daily Star reported on May 29 that Schwarzenegger had been offered $40 million to star in two Terminator films.[57]
On July 11, 2011 it was announced that Schwarzenegger is considering a comeback film despite his continuing legal problems.[58] He has reportedly signed to star in "Last Stand" as a dishonored Los Angeles cop.[59] On September 6, 2011 is was announced that Schwarzenegger had signed on to the The Expendables sequel in which he will play a larger role.[60]
Political career

Main article: Political career of Arnold Schwarzenegger


Vice President Dick Cheney meets with Schwarzenegger for the first time at the White House.
Early politics
Schwarzenegger has been a registered Republican for many years. As an actor, his political views were always well known as they contrasted with those of many other prominent Hollywood stars, who are generally considered to be a liberal and Democratic-leaning community. At the 2004 Republican National Convention, Schwarzenegger gave a speech and explained why he was a Republican:[61]
I finally arrived here in 1968. What a special day it was. I remember I arrived here with empty pockets but full of dreams, full of determination, full of desire. The presidential campaign was in full swing. I remember watching the Nixon-Humphrey presidential race on TV. A friend of mine who spoke German and English translated for me. I heard Humphrey saying things that sounded like socialism, which I had just left.
But then I heard Nixon speak. He was talking about free enterprise, getting the government off your back, lowering the taxes and strengthening the military. Listening to Nixon speak sounded more like a breath of fresh air. I said to my friend, I said, "What party is he?" My friend said, "He's a Republican." I said, "Then I am a Republican." And I have been a Republican ever since.
In 1985, Schwarzenegger appeared in Stop the Madness, an anti-drug music video sponsored by the Reagan administration. He first came to wide public notice as a Republican during the 1988 Presidential election, accompanying then-Vice President George H.W. Bush at a campaign rally.[62]
Schwarzenegger's first political appointment was as chairman of the President's Council on Physical Fitness and Sports, on which he served from 1990 to 1993.[6] He was nominated by George H. W. Bush, who dubbed him "Conan the Republican". He later served as Chairman for the California Governor's Council on Physical Fitness and Sports under Governor Pete Wilson. Yet, political analysts have identified Schwarzenegger as a liberal, as he has become more left-leaning since his election.[63]
Between 1993 and 1994, Schwarzenegger was a Red Cross ambassador (a ceremonial role fulfilled by celebrities), recording several television/radio public service announcements to donate blood. A small amount of interest was garnered by his wearing of a white t-shirt with the Red Cross on it, while posing with a flexed arm; the image made it into several celebrity magazines.[citation needed]
In an interview with Talk magazine in late 1999, Schwarzenegger was asked if he thought of running for office. He replied, "I think about it many times. The possibility is there, because I feel it inside."[64] The Hollywood Reporter claimed shortly after that Schwarzenegger sought to end speculation that he might run for governor of California.[64] Following his initial comments, Schwarzenegger said, "I'm in show business – I am in the middle of my career. Why would I go away from that and jump into something else?"[64]
Governor of California
Schwarzenegger announced his candidacy in the 2003 California recall election for Governor of California on the August 6, 2003 episode of The Tonight Show with Jay Leno.[16] According to Schwarzenegger, he did not decide to run until the day of the announcement:
The recall happens and people are asking me, ‘What are you going to do?’ I thought about it but decided I wasn’t going to do it. I told Maria I wasn’t running. I told everyone I wasn’t running. I wasn’t running. I just thought [en route to the Tonight Show], This will freak everyone out. It’ll be so funny. I’ll announce that I am running. I told Leno I was running. And two months later I was governor. What the fuck is that? All these people are asking me, ‘What’s your plan? Who’s on your staff?’ I didn’t have a plan. I didn’t have a staff. I wasn’t running until I went on Jay Leno.[65]
Schwarzenegger had the most name recognition in a crowded field of candidates, but he had never held public office and his political views were unknown to most Californians. His candidacy immediately became national and international news, with media outlets dubbing him the "Governator" (referring to The Terminator movies, see above) and "The Running Man" (the name of another one of his films), and calling the recall election "Total Recall" (yet another Schwarzenegger starrer). Schwarzenegger declined to participate in several debates with other recall replacement candidates, and appeared in only one debate on September 24, 2003.[66]


President George W. Bush meets with Schwarzenegger after his successful election to the California Governorship
On October 7, 2003, the recall election resulted in Governor Gray Davis being removed from office with 55.4% of the Yes vote in favor of a recall. Schwarzenegger was elected Governor of California under the second question on the ballot with 48.6% of the vote to choose a successor to Davis. Schwarzenegger defeated Democrat Cruz Bustamante, fellow Republican Tom McClintock, and others. His nearest rival, Bustamante, received 31% of the vote. In total, Schwarzenegger won the election by about 1.3 million votes. Under the regulations of the California Constitution, no runoff election was required. Schwarzenegger was the first foreign-born governor of California since Irish-born Governor John G. Downey in 1862.
As soon as Schwarzenegger was elected governor, Willie Brown said he would start a drive to recall the governor. Schwarzenegger was equally entrenched in what he considered to be his mandate in cleaning up gridlock. Building on a catchphrase from the sketch "Hans and Franz" from Saturday Night Live (which partly parodied his bodybuilding career), Schwarzenegger called the Democratic State politicians "girlie men".[67]
Schwarzenegger's early victories included repealing an unpopular increase in the vehicle registration fee as well as preventing driver's licenses being given out to illegal immigrants, but later he began to feel the backlash when powerful state unions began to oppose his various initiatives. Key among his reckoning with political realities was a special election he called in November 2005, in which four ballot measures he sponsored were defeated. Schwarzenegger accepted personal responsibility for the defeats and vowed to continue to seek consensus for the people of California. He would later comment that "no one could win if the opposition raised 160 million dollars to defeat you".
Schwarzenegger then went against the advice of fellow Republican strategists and appointed a Democrat, Susan Kennedy, as his Chief of Staff. Schwarzenegger gradually moved towards a more politically moderate position, determined to build a winning legacy with only a short time to go until the next gubernatorial election.
Schwarzenegger ran for re-election against Democrat Phil Angelides, the California State Treasurer, in the 2006 elections, held on November 7, 2006. Despite a poor year nationally for the Republican party, Schwarzenegger won re-election with 56.0% of the vote compared with 38.9% for Angelides, a margin of well over one million votes.[68] In recent years, many commentators have seen Schwarzenegger as moving away from the right and towards the center of the political spectrum. After hearing a speech by Schwarzenegger at the 2006 Martin Luther King, Jr. breakfast, San Francisco mayor Gavin Newsom said that, "[H]e's becoming a Democrat [... H]e's running back, not even to the center. I would say center-left".
It was rumored that Schwarzenegger might run for the United States Senate in 2010, as his governorship would be term-limited by that time. This turned out to be false.[69][70]


With Schwarzenegger and Senator Dianne Feinstein behind him, President George W. Bush comments on wildfires and firefighting efforts in California, October 2007
Wendy Leigh, who wrote an unofficial biography on Schwarzenegger, claims he plotted his political rise from an early age using the movie business and bodybuilding as building blocks to escape a depressing home.[11] Leigh portrays Schwarzenegger as obsessed with power and quotes him as saying, "I wanted to be part of the small percentage of people who were leaders, not the large mass of followers. I think it is because I saw leaders use 100% of their potential –I was always fascinated by people in control of other people."[11] Schwarzenegger has said that it was never his intention to enter politics, but he says, "I married into a political family. You get together with them and you hear about policy, about reaching out to help people. I was exposed to the idea of being a public servant and Eunice and Sargent Shriver became my heroes."[25] Eunice Kennedy Shriver was sister of John F. Kennedy, and mother-in-law to Schwarzenegger; Sargent Shriver is husband to Eunice and father-in-law to Schwarzenegger. He cannot run for president as he is not a natural born citizen of the United States. In The Simpsons Movie (2007), he is portrayed as the President, and in the Sylvester Stallone movie, Demolition Man (1993, ten years before his first run for political office), it is revealed that a constitutional amendment passed which allowed Schwarzenegger to run for President.[citation needed]
Schwarzenegger is a dual Austria/United States citizen.[71] He holds Austrian citizenship by birth and has held U.S. citizenship since becoming naturalized in 1983. Being Austrian and thus European, he was able to win the 2007 European Voice campaigner of the year award for taking action against climate change with the California Global Warming Solutions Act of 2006 and plans to introduce an emissions trading scheme with other US states and possibly with the EU.[72] Still, Schwarzenegger has always identified with his American citizenship, and has shown great affinity for the state of California beyond his foreign birth.[citation needed]
Because of his personal wealth from his acting career, Schwarzenegger did not accept his governor's salary of $175,000 per year.[73] He stated after he left office that being governor cost him as much as $200 million in potential movie deals, but that "it was more than worth it."[citation needed]
Schwarzenegger's endorsement in the Republican primary of the 2008 U.S. Presidential election was highly sought; despite being good friends with candidates Rudy Giuliani and Senator John McCain, Schwarzenegger remained neutral throughout 2007 and early 2008. Giuliani dropped out of the Presidential race on January 30, 2008, largely because of a poor showing in Florida, and endorsed McCain. Later that night, Schwarzenegger was in the audience at a Republican debate at the Ronald Reagan Presidential Library in California. The following day, he endorsed McCain, joking, "It's Rudy's fault!" (in reference to his friendships with both candidates and that he could not make up his mind). Schwarzenegger's endorsement was thought to be a boost for Senator McCain's campaign; both spoke about their concerns for the environment and economy.[74]
In its April 2010 report, Progressive ethics watchdog group Citizens for Responsibility and Ethics in Washington named Schwarzenegger one of 11 "worst governors" in the United States because of various ethics issues throughout Schwarzenegger's term as governor.[75][76]
Governor Schwarzenegger played a significant role in opposing Proposition 66, a proposed amendment of the Californian Three Strikes Law, in November 2004. This amendment would have required the third felony to be either violent or serious to mandate a 25-years-to-life sentence. In the last week before the ballot, Schwarzenegger launched an intensive campaign[77] against Proposition 66.[78] He stated that "it would release 26,000 dangerous criminals and rapists".
Allegations of sexual and personal misconduct


Code Pink protesting against Schwarzenegger
During his initial campaign for governor, allegations of sexual and personal misconduct were raised against Schwarzenegger, dubbed "Gropegate".[79] Within the last five days before the election, news reports appeared in the Los Angeles Times recounting allegations of sexual misconduct from several individual women, six of whom eventually came forward with their personal stories.[80]
Three of the women claimed he had grabbed their breasts, a fourth said he placed his hand under her skirt on her buttock. A fifth woman claimed Schwarzenegger tried to take off her bathing suit in a hotel elevator, and the last said he pulled her onto his lap and asked her about a sex act.[79]
Schwarzenegger admitted that he has "behaved badly sometimes" and apologized, but also stated that "a lot of [what] you see in the stories is not true". This came after an interview in adult magazine Oui from 1977 surfaced, in which Schwarzenegger discussed attending sexual orgies and using substances such as marijuana.[81] Schwarzenegger is shown smoking a marijuana joint after winning Mr. Olympia in the 1975 documentary film Pumping Iron. In an interview with GQ magazine in October 2007, Schwarzenegger said, "[Marijuana] is not a drug. It's a leaf. My drug was pumping iron, trust me."[82] His spokesperson later said the comment was meant to be a joke.[82]
British television personality Anna Richardson settled a libel lawsuit in August 2006 against Schwarzenegger, his top aide, Sean Walsh, and his publicist, Sheryl Main.[83] A joint statement read: "The parties are content to put this matter behind them and are pleased that this legal dispute has now been settled."[83] Richardson claimed they tried to tarnish her reputation by dismissing her allegations that Schwarzenegger touched her breast during a press event for The 6th Day in London.[84] She claimed Walsh and Main libeled her in a Los Angeles Times article when they contended she encouraged his behavior.[83]
Citizenship
In 2005, Peter Pilz, from the Austrian Green Party, demanded that parliament revoke Schwarzenegger's Austrian citizenship. This demand was based on Article 33 of the Austrian Citizenship Act that states: A citizen, who is in the public service of a foreign country, shall be deprived of his citizenship, if he heavily damages the reputation or the interests of the Austrian Republic.[71] Pilz claimed that Schwarzenegger's actions in support of the death penalty (prohibited in Austria under Protocol 13 of the European Convention on Human Rights) had indeed done damage to Austria's reputation. Schwarzenegger explained his actions by referring to the fact that his only duty as Governor of California was to prevent an error in the judicial system.
Environmental record
On September 27, 2006 Schwarzenegger signed a bill creating the nation's first cap on greenhouse gas emissions. The law set new regulations on the amount of emissions utilities, refineries and manufacturing plants are allowed to release into the atmosphere. Schwarzenegger also signed a second global warming bill that prohibits large utilities and corporations in California from making long-term contracts with suppliers who do not meet the state's greenhouse gas emission standards. The two bills are part of a plan to reduce California's emissions by 25 percent to 1990s levels by 2020. In 2005, Schwarzenegger issued an executive order calling to reduce greenhouse gases to 80 percent below 1990 levels by 2050.[85]
Schwarzenegger signed another executive order on October 17, 2006 allowing California to work with the Northeast's Regional Greenhouse Gas Initiative. They plan to reduce carbon dioxide emissions by issuing a limited amount of carbon credits to each power plant in participating states. Any power plants that exceed emissions for the amount of carbon credits will have to purchase more credits to cover the difference. The plan is set to be in effect in 2009.[86] In addition to using his political power to fight global warming, the governor has taken steps at his home to reduce his personal carbon footprint. Schwarzenegger has adapted one of his Hummers to run on hydrogen and another to run on biofuels. He has also installed solar panels to heat his home.[87]
In respect of his contribution to the direction of the US motor industry, Schwarzenegger was invited to open the 2009 SAE World Congress in Detroit, on April 20, 2009.[88]
Electoral history
California Gubernatorial Recall Election 2003
Party Candidate Votes % ±%
Republican Arnold Schwarzenegger 4,206,284 48.6
Democratic Cruz Bustamante 2,724,874 31.5
Republican Tom McClintock 1,161,287 13.5
Green Peter Miguel Camejo 242,247 2.8
California Gubernatorial Election 2006
Party Candidate Votes % ±%
Republican Arnold Schwarzenegger 4,850,157 55.9 +7.3
Democratic Phil Angelides 3,376,732 39.0
Green Peter Miguel Camejo 205,995 2.3 -0.5
Business career

Schwarzenegger has also had a highly successful business career.[11][25] Following his move to the United States, Schwarzenegger became a "prolific goal setter" and would write his objectives at the start of the year on index cards, like starting a mail order business or buying a new car – and succeed in doing so.[20] By the age of 30, Schwarzenegger was a millionaire, well before his career in Hollywood. His financial independence came from a series of successful business ventures and investments.
Bricklaying business
In 1968, Schwarzenegger and fellow bodybuilder Franco Columbu started a bricklaying business. The business flourished thanks to the pair's marketing savvy and an increased demand following the 1971 San Fernando earthquake.[89][90][65] Schwarzenegger and Columbu used profits from their bricklaying venture to start a mail order business, selling bodybuilding and fitness-related equipment and instructional tapes.[6][89]
Real estate investing
Schwarzenegger rolled profits from the mail order business and his bodybuilding competition winnings into his first real estate investment venture: an apartment building he purchased for $10,000. He would later go on to invest in a number of real estate holding companies.[91][92]
Restaurant
In 1992, Schwarzenegger and his wife opened a restaurant in Santa Monica called Schatzi On Main. Schatzi literally means "little treasure," colloquial for "honey" or "darling" in German. In 1998, he sold his restaurant.[93]
Planet Hollywood investment
See also: Planet Hollywood
Schwarzenegger was a founding celebrity investor in the Planet Hollywood chain of international theme restaurants (modeled after the Hard Rock Cafe) along with Bruce Willis, Sylvester Stallone and Demi Moore. Schwarzenegger severed his financial ties with the business in early 2000.[94] Schwarzenegger said the company had not had the success he had hoped for, claiming he wanted to focus his attention on "new US global business ventures" and his movie career.[94]
Other ventures and investments
He also invested in a shopping mall in Columbus, Ohio. He has talked about some of those who have helped him over the years in business: "I couldn't have learned about business without a parade of teachers guiding me... from Milton Friedman to Donald Trump... and now, Les Wexner and Warren Buffett. I even learned a thing or two from Planet Hollywood, such as when to get out! And I did!"[18] He has significant ownership in Dimensional Fund Advisors, an investment firm.[95]
Personal life

Early love life
In 1969, Schwarzenegger met Barbara Outland (later Barbara Outland Baker), an English teacher he lived with until 1974.[96] Schwarzenegger talked about Barbara in his memoir in 1977: "Basically it came down to this: she was a well-balanced woman who wanted an ordinary, solid life, and I was not a well-balanced man, and hated the very idea of ordinary life."[96] Baker has described Schwarzenegger as "[a] joyful personality, totally charismatic, adventurous, and athletic" but claims towards the end of the relationship he became "insufferable – classically conceited – the world revolved around him".[97] Baker published her memoir in 2006, entitled Arnold and Me: In the Shadow of the Austrian Oak.[98] Although Baker, at times, painted an unflattering portrait of her former lover, Schwarzenegger actually contributed to the tell-all book with a foreword, and also met with Baker for three hours.[98] Baker claims, for example, that she only learned of his being unfaithful after they split, and talks of a turbulent and passionate love life.[98] Schwarzenegger has made it clear that their respective recollection of events can differ.[98] The couple first met six to eight months after his arrival in the U.S. – their first date was watching the first Apollo Moon landing on television.[20] They shared an apartment in Santa Monica for three and a half years, and having little money, would visit the beach all day, or have barbecues in the back yard.[20] Although Baker claims that when she first met him, he had "little understanding of polite society" and she found him a turn-off, she says, "He's as much a self-made man as it's possible to be –he never got encouragement from his parents, his family, his brother. He just had this huge determination to prove himself, and that was very attractive ... I'll go to my grave knowing Arnold loved me."[20]
Schwarzenegger met his next paramour, Sue Moray, a Beverly Hills hairdresser's assistant, on Venice Beach in July 1977. According to Moray, the couple led an open relationship: "We were faithful when we were both in LA ... but when he was out of town, we were free to do whatever we wanted."[12] Schwarzenegger met Maria Shriver at the Robert F. Kennedy Tennis Tournament in August 1977, and went on to have a relationship with both women until August 1978, when Moray (who knew of his relationship with Shriver) issued an ultimatum.[12]
Marriage and family


Schwarzenegger with his wife Maria Shriver at the 2007 Special Olympics in Shanghai, China
On April 26, 1986, Schwarzenegger married television journalist Maria Shriver, niece of President John F. Kennedy, in Hyannis, Massachusetts. The Rev. John Baptist Riordan performed the ceremony at St. Francis Xavier Catholic Church.[99] They have four children: Katherine Eunice Shriver Schwarzenegger (born December 13, 1989 in Los Angeles); Christina Maria Aurelia Schwarzenegger (born July 23, 1991 in Los Angeles);[100] Patrick Schwarzenegger (born September 18, 1993 in Los Angeles);[101] and Christopher Sargent Shriver Schwarzenegger (born September 27, 1997 in Los Angeles).[102] Schwarzenegger lives in a 11,000-square-foot (1,000 m2) home in Brentwood.[103][104] The divorcing couple currently own vacation homes in Sun Valley, Idaho and Hyannis Port, Massachusetts.[105] They attended St. Monica's Catholic Church.[106]
Son in serious accident
Schwarzenegger's 13-year-old son Christopher Schwarzenegger was seriously injured in a boogie-boarding accident in Malibu, on July 17, 2011. In a joint statement, Schwarzenegger and estranged wife Shriver described it as "scary," and that "he is expected to make a full recovery." Christopher had been in intensive care after suffering a collapsed lung and broken bones in the accident.[107]
Infidelity and divorce
On May 9, 2011, Shriver and Schwarzenegger separated after 25 years of marriage, with Shriver moving out of the couple's Brentwood mansion.[108][109][110] On May 16, 2011, the Los Angeles Times revealed that Schwarzenegger had fathered a son more than fourteen years earlier with an employee in their household, Mildred Patricia 'Patty' Baena.[111][112][113] "After leaving the governor's office I told my wife about this event, which occurred over a decade ago," Schwarzenegger said in a statement issued to The Times. In the statement, Schwarzenegger did not mention that he had confessed to his wife only after Shriver had confronted him with the information, which she had done after confirming with the housekeeper what she had suspected about the child.[114]
Fifty-year-old Baena, of Guatemalan origin, was employed by the family for 20 years and retired in January.[115] The pregnant Baena was working in the home while Shriver was pregnant with the youngest of the couple’s four children.[116] Baena's son with Schwarzenegger, Joseph,[117] was born on October 2, 1997;[118] Shriver gave birth to Christopher only a few days earlier on September 27, 1997.[119] Schwarzenegger found ways to spend time with this child: in one instance, in 1998, Shriver and Schwarzenegger's children unexpectedly accompanied Schwarzenegger to the lovechild's baptism;[120] and he was photographed teaching the boy how to play golf and swinging him playfully above his head.[121] Despite Schwarzenegger's interactions with the child, the boy was never told that Schwarzenegger was his father, and he was unaware of the fact until it was revealed by the press.[122] Schwarzenegger has taken financial responsibility for the child "from the start and continued to provide support."[123] KNX 1070 radio reported that he bought a new, four-bedroom house, with a pool, in Bakersfield, about 112 miles (180 km) north of Los Angeles, in 2010 for Baena and their son.[124] Baena separated from her husband, Rogelio, in 1997, a few months after Joseph's birth. She divorced Rogelio in 2008.[125] Baena's ex-husband, Rogelio Baena, says that the child's birth certificate was falsified and that he plans to sue Schwarzenegger and his ex-wife for engaging in conspiracy to falsify a public document, a serious crime in California.[126]
Schwarzenegger has consulted an attorney, Bob Kaufman. Kaufman has earlier handled divorce cases for celebrities such as Jennifer Aniston and Reese Witherspoon.[127][128] Schwarzenegger will keep the Brentwood home as part of their divorce settlement and Shriver has purchased a new home nearby so that the children may travel easily between their parents' homes. They will share custody of the two minor children.[129] Schwarzenegger came under fire after the initial petition did not include spousal support and a reimbursement of attorney's fees.[59] However, he claims this was not intentional and that he signed the initial documents without having properly read them.[59] Schwarzenegger has filed amended divorce papers remedying this.[59][130]
In the aftermath of Schwarzenegger's infidelity scandal, actress Brigitte Nielsen came forward and stated that she too had an affair with Schwarzenegger while he was in a relationship with Shriver,[131] saying, "Maybe I wouldn't have got into it if he said 'I'm going to marry Maria' and this is dead serious, but he didn't, and our affair carried on."[131]
Accidents and injuries
Schwarzenegger was born with a bicuspid aortic valve, an aortic valve with only two leaflets (a normal aortic valve has three leaflets).[132][133] Schwarzenegger opted in 1997 for a replacement heart valve made of his own transplanted tissue; medical experts predicted he would require heart valve replacement surgery in the following two to eight years as his valve would progressively degrade. Schwarzenegger apparently opted against a mechanical valve, the only permanent solution available at the time of his surgery, because it would have sharply limited his physical activity and capacity to exercise.[134]
On December 9, 2001, he broke six ribs and was hospitalized for four days after a motorcycle crash in Los Angeles.[135]
Schwarzenegger saved a drowning man's life in 2004 while on vacation in Hawaii by swimming out and bringing him back to shore.[136]
On January 8, 2006, while Schwarzenegger was riding his Harley Davidson motorcycle in Los Angeles, with his son Patrick in the sidecar, another driver backed into the street he was riding on, causing him and his son to collide with the car at a low speed. While his son and the other driver were unharmed, the governor sustained a minor injury to his lip, requiring 15 stitches. "No citations were issued", said Officer Jason Lee, a Los Angeles Police Department spokesman.[137] Schwarzenegger did not obtain his motorcycle license until July 3, 2006.[138]
Schwarzenegger tripped over his ski pole and broke his right femur while skiing in Sun Valley, Idaho, with his family on December 23, 2006.[139] On December 26, 2006, he underwent a 90-minute operation in which cables and screws were used to wire the broken bone back together. He was released from the St. John's Health Center on December 30, 2006.[140] He appeared in crutches at his inauguration.[citation needed]
Schwarzenegger's private jet made an emergency landing at Van Nuys Airport on June 19, 2009, after the pilot reported smoke coming from the cockpit, according to a statement released by the governor's press secretary. No one was harmed in the incident.[141]
Net worth

Schwarzenegger's net worth has been conservatively estimated at $100–$200 million.[142] But with his recent split from his wife, Maria Shriver in 2011, it has been estimated that his net worth has been hovering around the $400 million mark and even as high as $800 million, based on tax returns he filed in 2006.[143][144] Over the years as an investor, he invested his bodybuilding and movie earnings in an array of stocks, bonds, privately controlled companies, and real estate holdings worldwide, so a more accurate estimation of his net worth is difficult to calculate, particularly in light of declining real estate values owing to economic recessions in the United States and Europe. In June 1997, Schwarzenegger spent $38 million of his own money on a private Gulfstream Jet.[145] Schwarzenegger once said of his fortune, "Money doesn't make you happy. I now have $50 million, but I was just as happy when I had $48 million."[11] He has also stated, "I've made many millions as a businessman many times over."[18]
Activism

He bought the first Hummer manufactured for civilian use in 1992, a model so large, 6,300 lb (2,900 kg) and 7 feet (2.1 m) wide, that it is classified as a large truck and U.S. fuel economy regulations do not apply to it. During the Gubernatorial Recall campaign he announced that he would convert one of his Hummers to burn hydrogen. The conversion was reported to have cost about US$21,000. After the election, he signed an executive order to jump-start the building of hydrogen refueling plants called the California Hydrogen Highway Network, and gained a U.S. Department of Energy grant to help pay for its projected US$91,000,000 cost.[146] California took delivery of the first H2H (Hydrogen Hummer) in October 2004.[147]
On February 12, 2010, Schwarzenegger was the 18th runner on the 106th day of the Vancouver Olympic Torch relay. His leg was along the Stanley Park Seawall, and he exchanged a "torch kiss" with the next runner, Sebastian Coe.[148]
Honors

Schwarzenegger's home town of Graz had its soccer stadium named The Arnold Schwarzenegger Stadium in his honor. It is the home of both Grazer AK and Sturm Graz. After the Stanley Williams execution and street protests in Schwarzenegger's hometown, several local politicians began a campaign to remove his name from the stadium. In response, Schwarzenegger said "to spare the responsible politicians of the city of Graz further concern, I withdraw from them as of this day the right to use my name in association with the Liebenau Stadium", and set a deadline of two days to remove his name. Graz officials removed Schwarzenegger's name from the stadium in December 2005.[149] It is now officially titled UPC-Arena.
The Sun Valley Resort has a short ski trail called Arnold's Run, named after Schwarzenegger in 2001.[150] The trail is categorized as a black diamond, or most difficult, for its terrain.
People in Thal, Austria, celebrated Schwarzenegger's 60th birthday by throwing a party. Officials proclaimed "A Day for Arnold" on July 30, 2007. The mayor sent Schwarzenegger the enameled sign, Thal 145, the number of the house where Schwarzenegger was born, declaring "This belongs to him. No one here will ever be assigned that number again".[151]
Bibliography

Schwarzenegger, Arnold (1977). Arnold: Developing a Mr. Universe Physique. Schwarzenegger.
 – with Douglas Kent Hall (1977). Arnold: The Education of a Bodybuilder. New York: Simon & Schuster. ISBN 978-0-671-22879-8.
 – with Douglas Kent Hall (1979). Arnold's Bodyshaping for Women. New York: Simon & Schuster. ISBN 978-0-671-24301-2.
 – with Bill Dobbins (1981). Arnold's Bodybuilding for Men. New York: Simon & Schuster. ISBN 978-0-671-25613-5.
 – with Bill Dobbins (1998). The New Encyclopedia of Modern Bodybuilding (rev. ed.). New York: Simon & Schuster. ISBN 978-0-684-84374-2.
Andrews, Nigel (2003). True Myths: The Life and Times of Arnold Schwarzenegger: From Pumping Iron to Governor of California (rev. ed.). New York: Bloomsbury. ISBN 978-1-58234-465-2.
Blitz, Michael; and Louise Krasniewicz (2004). Why Arnold Matters: The Rise of a Cultural Icon. New York: Basic Books. ISBN 978-0-465-03752-0.
Borowitz, Andy (2004). Governor Arnold: A Photodiary of His First 100 Days in Office. New York: Simon & Schuster. ISBN 978-0-7432-6266-8.
Brandon, Karen (2004). Arnold Schwarzenegger. San Diego: Lucent Books. ISBN 978-1-59018-539-1.
Saunders, Dave (2008). "Arnie": Schwarzenegger and the Movies. London: I. B. Tauris.
Sexton, Colleen A. (2005). Arnold Schwarzenegger. Minneapolis: Lerner Publications. ISBN 978-0-8225-1634-7.
Zannos, Susan (2000). Arnold Schwarzenegger. Childs, Md.: Mitchell Lane. ISBN 978-1-883845-95-7.
Interviews
Interview in Oui magazine, August 1977 at thesmokinggun.com
Excerpts from Time Out (London) interview, 1977 at time.com
Schwarzenegger Interview on The Hour with George Stroumboulopoulos
Film
Footage of Arnold Schwarzenegger winning Mr Universe, 1969
"Arnold Schwarzenegger – Hollywood Hero" DVD ~ Todd Baker
"Pumping Iron" (25th Anniversary Special Edition) DVD ~ George Butler
Arnold Schwarzenegger at the Internet Movie Database

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Saturday, September 24, 2011

Bretton Woods system

IMF Headquarters, Washington, DC.Image via Wikipedia
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid 20th century. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states.
Preparing to rebuild the international economic system as World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and Financial Conference. The delegates deliberated upon and signed the Bretton Woods Agreements during the first three weeks of July 1944.
Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group. These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement.
The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar and the ability of the IMF to bridge temporary imbalances of payments.
On August 15, 1971, the United States unilaterally terminated convertibility of the dollar to gold. As a result, "[t]he Bretton Woods system officially ended and the dollar became fully 'fiat currency,' backed by nothing but the promise of the federal government."[1] This action, referred to as the Nixon shock, created the situation in which the United States dollar became the sole backing of currencies and a reserve currency for the member states.
Contents [hide]
1 Origins
1.1 Great Depression
1.1.1 Economic security
1.1.2 Rise of governmental intervention
1.1.3 Atlantic Charter
1.1.4 Wartime devastation of Europe and East Asia
2 Design of the financial system
2.1 Informal regimes
2.1.1 Previous regimes
2.1.2 Fixed exchange rates
2.2 Formal regimes
2.2.1 International Monetary Fund
2.2.1.1 Design
2.2.1.2 Subscriptions and quotas
2.2.1.3 Trade deficits
2.2.1.4 Par value
2.2.1.5 Operations
2.2.2 International Bank for Reconstruction and Development
3 Readjustment
3.1 Dollar shortages and the Marshall Plan
3.2 Cold War
4 Late application
4.1 U.S. balance of payments crisis
4.2 Structural changes
4.2.1 Return to convertibility
4.2.2 Growth of international currency markets
4.2.3 Decline
4.2.3.1 U.S. monetary influence
4.2.3.2 Dollar
4.3 Paralysis of international monetary management
4.3.1 Floating-rate system during 1968–1972
4.3.2 Nixon Shock
4.3.3 Smithsonian Agreement
5 Bretton Woods II
5.1 The Bretton Woods system after the 2008 crisis
6 Academic legacy
7 Pegged rates
7.1 Japanese yen
7.2 Deutsche Mark
7.3 Pound sterling
7.4 French franc
7.5 Italian lira
7.6 Spanish peseta
7.7 Dutch gulden
7.8 Belgian franc
7.9 Greek drachma
7.10 Swiss franc
7.11 Danish krone
7.12 Finnish markka
8 See also
9 Notes
10 References
11 Further reading
12 External links
[edit]Origins

The political basis for the Bretton Woods system was in the confluence of several key conditions: the shared experiences of the Great Depression, the concentration of power in a small number of states (further enhanced by the exclusion of a number of important nations because of the war).
[edit]Great Depression
A high level of agreement among the powerful on the goals and means of international economic management facilitated the decisions reached by the Bretton Woods Conference. Its foundation was based on a shared belief in capitalism. Although the developed countries' governments differed in the type of capitalism they preferred for their national economies (France, for example, preferred greater planning and state intervention (dirigisme), whereas the United States favored relatively limited state intervention), all relied primarily on market mechanisms, private ownership of means of production, and capital predominance over labor.
Thus, it is their similarities rather than their differences that appear most striking. All the participating governments at Bretton Woods agreed that the monetary chaos of the interwar period had yielded several valuable lessons.
The experience of the Great Depression was fresh on the minds of public officials. The planners at Bretton Woods hoped to avoid a repeat of the debacle of the 1930s, when intransigent insistence by creditor nations on the repayment of Allied war debts and reparations, combined with an inclination to isolationism, led to a breakdown of the international financial system and a worldwide economic depression.[2] The "beggar thy neighbor" policies of 1930s governments—using currency devaluations to increase the competitiveness of a country's export products to reduce balance of payments deficits—worsened other nations' deflationary spirals, which resulted in plummeting national incomes, shrinking demand, mass unemployment, and an overall decline in world trade. Trade in the 1930s became largely restricted to currency blocs (groups of nations that use an equivalent currency, such as the "Sterling Area" of the British Empire). These blocs retarded the international flow of capital and foreign investment opportunities. Although this strategy tended to increase government revenues in the short run, it dramatically worsened the situation in the medium and longer run.
Thus, for the international economy, planners at Bretton Woods all favored a regulated system, one that relied on a regulated market with tight controls on the value of currencies. Although they disagreed on the specific implementation of this system, all agreed on the need for tight controls.
[edit]Economic security


Cordell Hull
Also based on experience of the inter-war years, U.S. planners developed a concept of economic security — that a liberal international economic system would enhance the possibilities of postwar peace. One of those who saw such a security link was Cordell Hull, the United States Secretary of State from 1933 to 1944.[Notes 1] Hull believed that the fundamental causes of the two world wars lay in economic discrimination and trade warfare. Specifically, he had in mind the trade and exchange controls (bilateral arrangements) [3] of Nazi Germany and the imperial preference system practiced by Britain, by which members or former members of the British Empire were accorded special trade status, itself provoked by German, French, and American protectionist policies. Hull argued
[U]nhampered trade dovetailed with peace; high tariffs, trade barriers, and unfair economic competition, with war…if we could get a freer flow of trade…freer in the sense of fewer discriminations and obstructions…so that one country would not be deadly jealous of another and the living standards of all countries might rise, thereby eliminating the economic dissatisfaction that breeds war, we might have a reasonable chance of lasting peace.
—[4]
[edit]Rise of governmental intervention
The developed countries also agreed that the liberal international economic system required governmental intervention. In the aftermath of the Great Depression, public management of the economy had emerged as a primary activity of governments in the developed states.[citation needed] Employment, stability, and growth were now important subjects of public policy. In turn, the role of government in the national economy had become associated with the assumption by the state of the responsibility for assuring its citizens of a degree of economic well-being.[citation needed] The welfare state grew out of the Great Depression, which created a popular demand for governmental intervention in the economy, and out of the theoretical contributions of the Keynesian school of economics, which asserted the need for governmental intervention to maintain an adequate level of employment.[citation needed]
However, increased government intervention in domestic economy brought with it isolationist sentiment that had a profoundly negative effect on international economics.[citation needed] The priority of national goals, independent national action in the interwar period, and the failure to perceive that those national goals could not be realized without some form of international collaboration—which resulted in “beggar-thy-neighbor” policies such as high tariffs, competitive devaluations that contributed to the breakdown of the gold-based international monetary system, domestic political instability, and international war. The lesson learned was, as the principal architect of the Bretton Woods system New Dealer Harry Dexter White put it:
the absence of a high degree of economic collaboration among the leading nations will…inevitably result in economic warfare that will be but the prelude and instigator of military warfare on an even vaster scale.
—[Notes 2]
To ensure economic stability and political peace, states agreed to cooperate to closely regulate the production of their individual currencies to maintain fixed exchange rates between countries with the aim of more easily facilitating international trade.[citation needed] This was the foundation of the U.S. vision of postwar world free trade, which also involved lowering tariffs and among other things maintaining a balance of trade via fixed exchange rates that would be favorable to the capitalist system.[citation needed]
Thus, the more developed market economies agreed with the U.S. vision of post-war international economic management, which was to be designed to create and maintain an effective international monetary system and foster the reduction of barriers to trade and capital flows.[citation needed] In a sense, the new international monetary system was in fact a return to a system similar to the pre-war gold standard, only using US dollars as the world's new reserve currency until the world's gold supply could be reallocated via international trade.[citation needed] Thus, the new system would be devoid (initially) of governments meddling with their currency supply as they had during the years of economic turmoil preceding WWII. Instead, governments would closely police the production of their currencies and ensure that they would not artificially manipulate their price levels.[citation needed] If anything, Bretton Woods was in fact a return to a time devoid of increased governmental intervention in economies and currency systems.[citation needed]
[edit]Atlantic Charter


Roosevelt and Churchill during their secret meeting of August 9 – 12, 1941, in Newfoundland that resulted in the Atlantic Charter, which the U.S. and Britain officially announced two days later.
The Atlantic Charter, drafted during U.S. President Franklin D. Roosevelt's August 1941 meeting with British Prime Minister Winston Churchill on a ship in the North Atlantic, was the most notable precursor to the Bretton Woods Conference. Like Woodrow Wilson before him, whose "Fourteen Points" had outlined U.S. aims in the aftermath of the First World War, Roosevelt set forth a range of ambitious goals for the postwar world even before the U.S. had entered the Second World War. The Atlantic Charter affirmed the right of all nations to equal access to trade and raw materials. Moreover, the charter called for freedom of the seas (a principal U.S. foreign policy aim since France and Britain had first threatened U.S. shipping in the 1790s), the disarmament of aggressors, and the "establishment of a wider and more permanent system of general security."
As the war drew to a close, the Bretton Woods conference was the culmination of some two and a half years of planning for postwar reconstruction by the Treasuries of the U.S. and the UK. U.S. representatives studied with their British counterparts the reconstitution of what had been lacking between the two world wars: a system of international payments that would allow trade to be conducted without fear of sudden currency depreciation or wild fluctuations in exchange rates—ailments that had nearly paralyzed world capitalism during the Great Depression.
Without a strong European market for U.S. goods and services, most policymakers believed, the U.S. economy would be unable to sustain the prosperity it had achieved during the war.[citation needed] In addition, U.S. unions had only grudgingly accepted government-imposed restraints on their demands during the war, but they were willing to wait no longer, particularly as inflation cut into the existing wage scales with painful force. (By the end of 1945, there had already been major strikes in the automobile, electrical, and steel industries.)[citation needed]
In early 1945 Bernard Baruch described the spirit of Bretton Woods as: if we can "stop subsidization of labor and sweated competition in the export markets," as well as prevent rebuilding of war machines, "oh boy, oh boy, what long term prosperity we will have."[5] The United States [c]ould therefore use its position of influence to reopen and control the [rules of the] world economy, so as to give unhindered access to all nations' markets and materials.
[edit]Wartime devastation of Europe and East Asia
Besides that, U.S. allies—economically exhausted by the war—accepted this leadership. They needed U.S. assistance to rebuild their domestic production and to finance their international trade; indeed, they needed it to survive.[citation needed]
Before the war, the French and the British were realizing that they could no longer compete with U.S. industry in an open marketplace.[citation needed] During the 1930s, the British had created their own economic bloc to shut out U.S. goods. Churchill did not believe that he could surrender that protection after the war, so he watered down the Atlantic Charter's "free access" clause before agreeing to it.[citation needed]
Yet, the U.S. officials were determined to open their access to the British empire. The combined value of British and U.S. trade was well over half of all the world's trade in goods. For the U.S. to open global markets, it first had to split the British (trade) empire. While Britain had economically dominated the 19th century, the U.S. officials intended the second half of the 20th to be under U.S. hegemony.[6]
A Senior Official of the Bank of England commented:
One of the reasons Bretton Woods worked was that the US was clearly the most powerful country at the table and so ultimately was able to impose its will on the others, including an often-dismayed Britain. At the time, one senior official at the Bank of England described the deal reached at Bretton Woods as “the greatest blow to Britain next to the war”, largely because it underlined the way in which financial power had moved from the UK to the US.
—[7]
A devastated Britain had little choice. Two world wars had destroyed the country's principal industries that paid for the importation of half the nation's food and nearly all its raw materials except coal. The British had no choice but to ask for aid. Not until the United States signed an agreement on December 6, 1945 to grant Britain aid of $4.4 billion did the British Parliament ratify the Bretton Woods Agreements (which occurred later in December 1945).[8]
For nearly two centuries, French and U.S. interests had clashed in both the Old World and the New World.[citation needed] During the war, French mistrust of the United States was embodied by General Charles de Gaulle, president of the French provisional government.[citation needed] De Gaulle bitterly fought U.S. officials as he tried to maintain his country's colonies and diplomatic freedom of action. In turn, U.S. officials saw de Gaulle as a political extremist.[citation needed]
But in 1945 de Gaulle—at that point the leading voice of French nationalism—was forced to grudgingly ask the U.S. for a billion-dollar loan.[citation needed] Most of the request was granted; in return France promised to curtail government subsidies and currency manipulation that had given its exporters advantages in the world market.[citation needed]
On a far more profound level, as the Bretton Woods conference was convening, the greater part of the Third World remained politically and economically subordinate. Linked to the developed countries of the West economically and politically—formally and informally—these states had little choice but to acquiesce in the international economic system established for them.[citation needed] In the East, Soviet hegemony in Eastern Europe provided the foundation for a separate international economic system.[citation needed]
[edit]Design of the financial system


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Free trade relied on the free convertibility of currencies. Negotiators at the Bretton Woods conference, fresh from what they perceived as a disastrous experience with floating rates in the 1930s, concluded that major monetary fluctuations could stall the free flow of trade.
The new economic system required an accepted vehicle for investment, trade, and payments. Unlike national economies, however, the international economy lacks a central government that can issue currency and manage its use. In the past this problem had been solved through the gold standard, but the architects of Bretton Woods did not consider this option feasible for the postwar political economy. Instead, they set up a system of fixed exchange rates managed by a series of newly created international institutions using the U.S. dollar (which was a gold standard currency for central banks) as a reserve currency.
[edit]Informal regimes
[edit]Previous regimes
In the 19th and early 20th centuries gold played a key role in international monetary transactions. The gold standard was used to back currencies; the international value of currency was determined by its fixed relationship to gold; gold was used to settle international accounts. The gold standard maintained fixed exchange rates that were seen as desirable because they reduced the risk when trading with other countries.
Imbalances in international trade were theoretically rectified automatically by the gold standard. A country with a deficit would have depleted gold reserves and would thus have to reduce its money supply. The resulting fall in demand would reduce imports and the lowering of prices would boost exports; thus the deficit would be rectified. Any country experiencing inflation would lose gold and therefore would have a decrease in the amount of money available to spend. This decrease in the amount of money would act to reduce the inflationary pressure. Supplementing the use of gold in this period was the British pound. Based on the dominant British economy, the pound became a reserve, transaction, and intervention currency. But the pound was not up to the challenge of serving as the primary world currency, given the weakness of the British economy after the Second World War.
The architects of Bretton Woods had conceived of a system wherein exchange rate stability was a prime goal. Yet, in an era of more activist economic policy, governments did not seriously consider permanently fixed rates on the model of the classical gold standard of the nineteenth century. Gold production was not even sufficient to meet the demands of growing international trade and investment. And a sizeable share of the world's known gold reserves were located in the Soviet Union, which would later emerge as a Cold War rival to the United States and Western Europe.
The only currency strong enough to meet the rising demands for international currency transactions was the U.S. dollar. The strength of the U.S. economy, the fixed relationship of the dollar to gold ($35 an ounce), and the commitment of the U.S. government to convert dollars into gold at that price made the dollar as good as gold. In fact, the dollar was even better than gold: it earned interest and it was more flexible than gold.
Another view is that in the time of discount banks, discount was the interest earned on gold, and that the only way to repay interest on government bonds is by printing more dollars, thus raising the price of gold. If gold is fixed at $35 then other countries will demand gold and not accept dollars. The closing of the gold window in 1971 was the result.
[edit]Fixed exchange rates
The rules of Bretton Woods, set forth in the articles of agreement of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), provided for a system of fixed exchange rates. The rules further sought to encourage an open system by committing members to the convertibility of their respective currencies into other currencies and to free trade.
What emerged was the "pegged rate" currency regime. Members were required to establish a parity of their national currencies in terms of the reserve currency (a "peg") and to maintain exchange rates within plus or minus 1% of parity (a "band") by intervening in their foreign exchange markets (that is, buying or selling foreign money).
In theory, the reserve currency would be the bancor (a World Currency Unit that was never implemented), suggested by John Maynard Keynes; however, the United States objected and their request was granted, making the "reserve currency" the U.S. dollar. This meant that other countries would peg their currencies to the U.S. dollar, and—once convertibility was restored—would buy and sell U.S. dollars to keep market exchange rates within plus or minus 1% of parity. Thus, the U.S. dollar took over the role that gold had played under the gold standard in the international financial system. [9]
Meanwhile, to bolster faith in the dollar, the U.S. agreed separately to link the dollar to gold at the rate of $35 per ounce of gold. At this rate, foreign governments and central banks were able to exchange dollars for gold. Bretton Woods established a system of payments based on the dollar, in which all currencies were defined in relation to the dollar, itself convertible into gold, and above all, "as good as gold". The U.S. currency was now effectively the world currency, the standard to which every other currency was pegged. As the world's key currency, most international transactions were denominated in US dollars.
The U.S. dollar was the currency with the most purchasing power and it was the only currency that was backed by gold. Additionally, all European nations that had been involved in World War II were highly in debt and transferred large amounts of gold into the United States, a fact that contributed to the supremacy of the United States[citation needed]. Thus, the U.S. dollar was strongly appreciated in the rest of the world and therefore became the key currency of the Bretton Woods system.
Member countries could only change their par value with IMF approval, which was contingent on IMF determination that its balance of payments was in a "fundamental disequilibrium".
[edit]Formal regimes
The Bretton Woods Conference led to the establishment of the IMF and the IBRD (now the World Bank), which still remain powerful forces in the world economy.
As mentioned, a major point of common ground at the Conference was the goal to avoid a recurrence of the closed markets and economic warfare that had characterized the 1930s. Thus, negotiators at Bretton Woods also agreed that there was a need for an institutional forum for international cooperation on monetary matters. Already in 1944 the British economist John Maynard Keynes emphasized "the importance of rule-based regimes to stabilize business expectations"—something he accepted in the Bretton Woods system of fixed exchange rates. Currency troubles in the interwar years, it was felt, had been greatly exacerbated by the absence of any established procedure or machinery for intergovernmental consultation.
As a result of the establishment of agreed upon structures and rules of international economic interaction, conflict over economic issues was minimized, and the significance of the economic aspect of international relations seemed to recede.
[edit]International Monetary Fund
Main article: International Monetary Fund
Officially established on December 27, 1945, when the 29 participating countries at the conference of Bretton Woods signed its Articles of Agreement, the IMF was to be the keeper of the rules and the main instrument of public international management. The Fund commenced its financial operations on March 1, 1947. IMF approval was necessary for any change in exchange rates in excess of 1%. It advised countries on policies affecting the monetary system.
[edit]Design
The big question at the Bretton Woods conference with respect to the institution that would emerge as the IMF was the issue of future access to international liquidity and whether that source should be akin to a world central bank able to create new reserves at will or a more limited borrowing mechanism.


John Maynard Keynes (right) and Harry Dexter White at the inaugural meeting of the International Monetary Fund's Board of Governors in Savannah, Georgia, U.S., March 8, 1946
Although attended by 44 nations, discussions at the conference were dominated by two rival plans developed by the United States and Britain. As the chief international economist at the U.S. Treasury in 1942–44, Harry Dexter White drafted the U.S. blueprint for international access to liquidity, which competed with the plan drafted for the British Treasury by Keynes. Overall, White's scheme tended to favor incentives designed to create price stability within the world's economies, while Keynes' wanted a system that encouraged economic growth.
At the time, gaps between the White and Keynes plans seemed enormous. Outlining the difficulty of creating a system that every nation could accept in his speech at the closing plenary session of the Bretton Woods conference on July 22, 1944, Keynes stated:
We, the delegates of this Conference, Mr. President, have been trying to accomplish something very difficult to accomplish.[...] It has been our task to find a common measure, a common standard, a common rule acceptable to each and not irksome to any.
—[Notes 3]
Keynes' proposals would have established a world reserve currency (which he thought might be called "bancor") administered by a central bank vested with the possibility of creating money and with the authority to take actions on a much larger scale.
In case of balance of payments imbalances, Keynes recommended that both debtors and creditors should change their policies. As outlined by Keynes, countries with payment surpluses should increase their imports from the deficit countries and thereby create a foreign trade equilibrium. Thus, Keynes was sensitive to the problem that placing too much of the burden on the deficit country would be deflationary.
But the United States, as a likely creditor nation, and eager to take on the role of the world's economic powerhouse, balked at Keynes' plan and did not pay serious attention to it. The U.S. contingent was too concerned about inflationary pressures in the postwar economy, and White saw an imbalance as a problem only of the deficit country.
Although compromise was reached on some points, because of the overwhelming economic and military power of the United States, the participants at Bretton Woods largely agreed on White's plan.
[edit]Subscriptions and quotas
What emerged largely reflected U.S. preferences: a system of subscriptions and quotas[disambiguation needed] embedded in the IMF, which itself was to be no more than a fixed pool of national currencies and gold subscribed by each country as opposed to a world central bank capable of creating money. The Fund was charged with managing various nations' trade deficits so that they would not produce currency devaluations that would trigger a decline in imports.
The IMF is provided with a fund, composed of contributions of member countries in gold and their own currencies. The original quotas were to total $8.8 billion. When joining the IMF, members are assigned "quotas" reflecting their relative economic power, and, as a sort of credit deposit, are obliged to pay a "subscription" of an amount commensurate to the quota. The subscription is to be paid 25% in gold or currency convertible into gold (effectively the dollar, which was the only currency then still directly gold convertible for central banks) and 75% in the member's own currency.
Quota subscriptions are to form the largest source of money at the IMF's disposal. The IMF set out to use this money to grant loans to member countries with financial difficulties. Each member is then entitled to withdraw 25% of its quota immediately in case of payment problems. If this sum should be insufficient, each nation in the system is also able to request loans for foreign currency.
[edit]Trade deficits
In the event of a deficit in the current account, Fund members, when short of reserves, would be able to borrow foreign currency in amounts determined by the size of its quota. In other words, the higher the country's contribution was, the higher the sum of money it could borrow from the IMF.
Members were required to pay back debts within a period of 18 months to five years. In turn, the IMF embarked on setting up rules and procedures to keep a country from going too deeply into debt year after year. The Fund would exercise "surveillance" over other economies for the U.S. Treasury in return for its loans to prop up national currencies.
IMF loans were not comparable to loans issued by a conventional credit institution. Instead, they were effectively a chance to purchase a foreign currency with gold or the member's national currency.
The U.S.-backed IMF plan sought to end restrictions on the transfer of goods and services from one country to another, eliminate currency blocs, and lift currency exchange controls.
The IMF was designed to advance credits to countries with balance of payments deficits. Short-run balance of payment difficulties would be overcome by IMF loans, which would facilitate stable currency exchange rates. This flexibility meant a member state would not have to induce a depression to cut its national income down to such a low level that its imports would finally fall within its means. Thus, countries were to be spared the need to resort to the classical medicine of deflating themselves into drastic unemployment when faced with chronic balance of payments deficits. Before the Second World War, European nations—particularly Britain—often resorted to this.
[edit]Par value
The IMF sought to provide for occasional discontinuous exchange-rate adjustments (changing a member's par value) by international agreement. Member nations were permitted to adjust their currency exchange rate by 10%. This tended to restore equilibrium in their trade by expanding their exports and contracting imports. This would be allowed only if there was a fundamental disequilibrium. A decrease in the value of a country's money was called a devaluation, while an increase in the value of the country's money was called a revaluation.
It was envisioned that these changes in exchange rates would be quite rare. However, the concept of fundamental disequilibrium, though key to the operation of the par value system, was never defined in detail.
[edit]Operations
Never before had international monetary cooperation been attempted on a permanent institutional basis. Even more groundbreaking was the decision to allocate voting rights among governments, not on a one-state one-vote basis, but rather in proportion to quotas. Since the United States was contributing the most, U.S. leadership was the key. Under the system of weighted voting, the United States exerted a preponderant influence on the IMF. The United States held one-third of all IMF quotas at the outset, enough on its own to veto all changes to the IMF Charter.
In addition, the IMF was based in Washington, D.C., and staffed mainly by U.S. economists. It regularly exchanged personnel with the U.S. Treasury. When the IMF began operations in 1946, President Harry S. Truman named White as its first U.S. Executive Director. Since no Deputy Managing Director post had yet been created, White served occasionally as Acting Managing Director and generally played a highly influential role during the IMF's first year.
[edit]International Bank for Reconstruction and Development
Main article: International Bank for Reconstruction and Development
The agreement made no provisions for international creation of reserves. New gold production was assumed to be sufficient. In the event of structural disequilibria, it was expected that there would be national solutions, for example, an adjustment in the value of the currency or an improvement by other means of a country's competitive position. The IMF was left with few means, however, to encourage such national solutions.
It had been recognized in 1944 that the new system could only commence after a return to normalcy following the disruption of World War II. It was expected that after a brief transition period of no more than five years, the international economy would recover and the system would enter into operation.
To promote the growth of world trade and to finance the postwar reconstruction of Europe, the planners at Bretton Woods created another institution, the International Bank for Reconstruction and Development (IBRD), now the most important agency of the World Bank Group. The IBRD had an authorized capitalization of $10 billion and was expected to make loans of its own funds to underwrite private loans and to issue securities to raise new funds to make possible a speedy postwar recovery. The IBRD was to be a specialized agency of the United Nations charged with making loans for economic development purposes.
[edit]Readjustment

[edit]Dollar shortages and the Marshall Plan
The Bretton Woods arrangements were largely adhered to and ratified by the participating governments. It was expected that national monetary reserves, supplemented with necessary IMF credits, would finance any temporary balance of payments disequilibria. But this did not prove sufficient to get Europe out of its doldrums.
Postwar world capitalism suffered from a huge dollar shortage. The United States was running huge balance of trade surpluses, and the U.S. reserves were immense and growing. It was necessary to reverse this flow. Dollars had to leave the United States and become available for international use. In other words, the United States would have to reverse the natural economic processes and run a balance of payments deficit.
The modest credit facilities of the IMF were clearly insufficient to deal with Western Europe's huge balance of payments deficits. The problem was further aggravated by the reaffirmation by the IMF Board of Governors in the provision in the Bretton Woods Articles of Agreement that the IMF could make loans only for current account deficits and not for capital and reconstruction purposes. Only the United States contribution of $570 million was actually available for IBRD lending. In addition, because the only available market for IBRD bonds was the conservative Wall Street banking market, the IBRD was forced to adopt a conservative lending policy, granting loans only when repayment was assured. Given these problems, by 1947 the IMF and the IBRD themselves were admitting that they could not deal with the international monetary system's economic problems.[10]
The United States set up the European Recovery Program (Marshall Plan) to provide large-scale financial and economic aid for rebuilding Europe largely through grants rather than loans. This included countries belonging to the Soviet bloc, e.g., Poland. In a speech at Harvard University on June 5, 1947, U.S. Secretary of State George Marshall stated:
The breakdown of the business structure of Europe during the war was complete. …Europe's requirements for the next three or four years of foreign food and other essential products… principally from the United States… are so much greater than her present ability to pay that she must have substantial help or face economic, social and political deterioration of a very grave character.
—[Notes 4]
From 1947 until 1958, the U.S. deliberately encouraged an outflow of dollars, and, from 1950 on, the United States ran a balance of payments deficit with the intent of providing liquidity for the international economy. Dollars flowed out through various U.S. aid programs: the Truman Doctrine entailing aid to the pro-U.S. Greek and Turkish regimes, which were struggling to suppress communist revolution, aid to various pro-U.S. regimes in the Third World, and most important, the Marshall Plan. From 1948 to 1954 the United States provided 16 Western European countries $17 billion in grants.
To encourage long-term adjustment, the United States promoted European and Japanese trade competitiveness. Policies for economic controls on the defeated former Axis countries were scrapped. Aid to Europe and Japan was designed to rebuild productivity and export capacity. In the long run it was expected that such European and Japanese recovery would benefit the United States by widening markets for U.S. exports, and providing locations for U.S. capital expansion.
In 1956, the World Bank created the International Finance Corporation and in 1960 it created the International Development Association (IDA). Both have been controversial. Critics of the IDA argue that it was designed to head off a broader based system headed by the United Nations, and that the IDA lends without consideration for the effectiveness of the program[citation needed]. Critics also point out that the pressure to keep developing economies "open" has led to their having difficulties obtaining funds through ordinary channels, and a continual cycle of asset buy up by foreign investors and capital flight by locals[citation needed]. Defenders of the IDA pointed to its ability to make large loans for agricultural programs which aided the "Green Revolution" of the 1960s, and its functioning to stabilize and occasionally subsidize Third World governments, particularly in Latin America[citation needed].
Bretton Woods, then, created a system of triangular trade: the United States would use the convertible financial system to trade at a tremendous profit with developing nations, expanding industry and acquiring raw materials. It would use this surplus to send dollars to Europe, which would then be used to rebuild their economies, and make the United States the market for their products. This would allow the other industrialized nations to purchase products from the Third World, which reinforced the American role as the guarantor of stability. When this triangle became destabilized, Bretton Woods entered a period of crisis that ultimately led to its collapse.
[edit]Cold War
In 1945, Roosevelt and Churchill prepared the postwar era by negotiating with Joseph Stalin at Yalta about respective zones of influence; this same year Germany was divided into four occupation zones (Soviet, American, British, and French).
Harry Dexter White succeeded in getting the Soviet Union to participate in the Bretton Woods conference in 1944, but his goal was frustrated when the Soviet Union would not join the IMF. In the past, the reasons why the Soviet Union chose not to subscribe to the articles by December 1945 have been the subject of speculation. But since the release of relevant Soviet archives, it is now clear that the Soviet calculation was based on the behavior of the parties that had actually expressed their assent to the Bretton Woods Agreements.[citation needed] The extended debates about ratification that had taken place both in the UK and the U.S. were read in Moscow as evidence of the quick disintegration of the wartime alliance.[citation needed]
Facing the Soviet Union, whose power had also strengthened and whose territorial influence had expanded, the U.S. assumed the role of leader of the capitalist camp. The rise of the postwar U.S. as the world's leading industrial, monetary, and military power was rooted in the fact that the mainland U.S. was untouched by the war, in the instability of the national states in postwar Europe, and the wartime devastation of the Soviet and European economies.
Despite the economic effort imposed by such a policy, being at the center of the international market gave the U.S. unprecedented freedom of action in pursuing its foreign affairs goals. A trade surplus made it easier to keep armies abroad and to invest outside the U.S., and because other nations could not sustain foreign deployments, the U.S. had the power to decide why, when and how to intervene in global crises. The dollar continued to function as a compass to guide the health of the world economy, and exporting to the U.S. became the primary economic goal of developing or redeveloping economies. This arrangement came to be referred to as the Pax Americana, in analogy to the Pax Britannica of the late 19th century and the Pax Romana of the first. (See Globalism)
[edit]Late application

[edit]U.S. balance of payments crisis
After the end of World War II, the U.S. held $26 billion in gold reserves, of an estimated total of $40 billion (approx 60%). As world trade increased rapidly through the 1950s, the size of the gold base increased by only a few percent. In 1950, the U.S. balance of payments swung negative. The first U.S. response to the crisis was in the late 1950s when the Eisenhower administration placed import quotas on oil and other restrictions on trade outflows. More drastic measures were proposed, but not acted upon. However, with a mounting recession that began in 1958, this response alone was not sustainable. In 1960, with Kennedy's election, a decade-long effort to maintain the Bretton Woods System at the $35/ounce price was begun.
The design of the Bretton Woods System was that nations could only enforce gold convertibility on the anchor currency—the United States’ dollar. Gold convertibility enforcement was not required, but instead, allowed. Nations could forgo converting dollars to gold, and instead hold dollars. Rather than full convertibility, it provided a fixed price for sales between central banks. However, there was still an open gold market. For the Bretton Woods system to remain workable, it would either have to alter the peg of the dollar to gold, or it would have to maintain the free market price for gold near the $35 per ounce official price. The greater the gap between free market gold prices and central bank gold prices, the greater the temptation to deal with internal economic issues by buying gold at the Bretton Woods price and selling it on the open market.
In 1960 Robert Triffin, Belgian American economist, noticed that holding dollars was more valuable than gold because constant U.S. balance of payments deficits helped to keep the system liquid and fuel economic growth. What would later come to be known as Triffin's Dilemma was predicted when Triffin noted that if the U.S. failed to keep running deficits the system would lose its liquidity, not be able to keep up with the world's economic growth, and, thus, bring the system to a halt. But incurring such payment deficits also meant that, over time, the deficits would erode confidence in the dollar as the reserve currency created instability.[11]
The first effort was the creation of the London Gold Pool on November 1 of 1961 between eight nations. The theory behind the pool was that spikes in the free market price of gold, set by the morning gold fix in London, could be controlled by having a pool of gold to sell on the open market, that would then be recovered when the price of gold dropped. Gold's price spiked in response to events such as the Cuban Missile Crisis, and other smaller events, to as high as $40/ounce. The Kennedy administration drafted a radical change of the tax system to spur more production capacity and thus encourage exports. This culminated with the 1963 tax cut program, designed to maintain the $35 peg.
In 1967, there was an attack on the pound and a run on gold in the sterling area, and on November 18, 1967, the British government was forced to devalue the pound.[12] U.S. President Lyndon Baines Johnson was faced with a brutal choice, either institute protectionist measures, including travel taxes, export subsidies and slashing the budget—or accept the risk of a "run on gold" and the dollar. From Johnson's perspective: "The world supply of gold is insufficient to make the present system workable—particularly as the use of the dollar as a reserve currency is essential to create the required international liquidity to sustain world trade and growth."[13] He believed that the priorities of the United States were correct, and, although there were internal tensions in the Western alliance, that turning away from open trade would be more costly, economically and politically, than it was worth: "Our role of world leadership in a political and military sense is the only reason for our current embarrassment in an economic sense on the one hand and on the other the correction of the economic embarrassment under present monetary systems will result in an untenable position economically for our allies."[citation needed]
While West Germany agreed not to purchase gold from the U.S., and agreed to hold dollars instead, the pressure on both the dollar and the pound sterling continued. In January 1968 Johnson imposed a series of measures designed to end gold outflow, and to increase U.S. exports. This was unsuccessful, however, as in mid-March 1968 a run on gold ensued, the London Gold Pool was dissolved, and a series of meetings attempted to rescue or reform the existing system.[14] But, as long as the U.S. commitments to foreign deployment continued, particularly to Western Europe, there was little that could be done to maintain the gold peg.[citation needed][original research?]
All attempts to maintain the peg collapsed in November 1968, and a new policy program attempted to convert the Bretton Woods system into an enforcement mechanism of floating the gold peg, which would be set by either fiat policy or by a restriction to honor foreign accounts. The collapse of the gold pool and the refusal of the pool members to trade gold with private entities—on March 18, 1968 the Congress of the United States repealed the 25% requirement of gold backing of the dollar[15]—as well as the US pledge to suspend gold sales to governments that trade in the private markets,[16] led to the expansion of the private markets for international gold trade, in which the price of gold rose much higher than the official dollar price.[17] [18] The US gold reserves continued to be depleted due to the actions of some nations, notably France,[18] who continued to build up their gold reserves.
[edit]Structural changes
[edit]Return to convertibility
In the 1960s and 70s, important structural changes eventually led to the breakdown of international monetary management. One change was the development of a high level of monetary interdependence. The stage was set for monetary interdependence by the return to convertibility of the Western European currencies at the end of 1958 and of the Japanese yen in 1964. Convertibility facilitated the vast expansion of international financial transactions, which deepened monetary interdependence.
[edit]Growth of international currency markets
Another aspect of the internationalization of banking has been the emergence of international banking consortia. Since 1964 various banks had formed international syndicates, and by 1971 over three quarters of the world's largest banks had become shareholders in such syndicates. Multinational banks can and do make huge international transfers of capital not only for investment purposes but also for hedging and speculating against exchange rate fluctuations.
These new forms of monetary interdependence made possible huge capital flows. During the Bretton Woods era countries were reluctant to alter exchange rates formally even in cases of structural disequilibria. Because such changes had a direct impact on certain domestic economic groups, they came to be seen as political risks for leaders. As a result official exchange rates often became unrealistic in market terms, providing a virtually risk-free temptation for speculators. They could move from a weak to a strong currency hoping to reap profits when a revaluation occurred. If, however, monetary authorities managed to avoid revaluation, they could return to other currencies with no loss. The combination of risk-free speculation with the availability of huge sums was highly destabilizing.
[edit]Decline
[edit]U.S. monetary influence
A second structural change that undermined monetary management was the decline of U.S. hegemony. The U.S. was no longer the dominant economic power it had been for more than two decades. By the mid-1960s, the E.E.C. and Japan had become international economic powers in their own right. With total reserves exceeding those of the U.S., with higher levels of growth and trade, and with per capita income approaching that of the U.S., Europe and Japan were narrowing the gap between themselves and the United States.
The shift toward a more pluralistic distribution of economic power led to increasing dissatisfaction with the privileged role of the U.S. dollar as the international currency. As in effect the world's central banker, the U.S., through its deficit, determined the level of international liquidity. In an increasingly interdependent world, U.S. policy greatly influenced economic conditions in Europe and Japan. In addition, as long as other countries were willing to hold dollars, the U.S. could carry out massive foreign expenditures for political purposes—military activities and foreign aid—without the threat of balance-of-payments constraints.
Dissatisfaction with the political implications of the dollar system was increased by détente between the U.S. and the Soviet Union. The Soviet threat had been an important force in cementing the Western capitalist monetary system. The U.S. political and security umbrella helped make American economic domination palatable for Europe and Japan, which had been economically exhausted by the war. As gross domestic production grew in European countries, trade grew. When common security tensions lessened, this loosened the transatlantic dependence on defence concerns, and allowed latent economic tensions to surface.
[edit]Dollar
Reinforcing the relative decline in U.S. power and the dissatisfaction of Europe and Japan with the system was the continuing decline of the dollar—the foundation that had underpinned the post-1945 global trading system. The Vietnam War and the refusal of the administration of U.S. President Lyndon B. Johnson to pay for it and its Great Society programs through taxation resulted in an increased dollar outflow to pay for the military expenditures and rampant inflation, which led to the deterioration of the U.S. balance of trade position.[citation needed] In the late 1960s, the dollar was overvalued with its current trading position, while the Deutsche Mark and the yen were undervalued; and, naturally, the Germans and the Japanese had no desire to revalue and thereby make their exports more expensive, whereas the U.S. sought to maintain its international credibility by avoiding devaluation.[19] Meanwhile, the pressure on government reserves was intensified by the new international currency markets, with their vast pools of speculative capital moving around in search of quick profits.[18]
In contrast, upon the creation of Bretton Woods, with the U.S. producing half of the world's manufactured goods and holding half its reserves, the twin burdens of international management and the Cold War were possible to meet at first. Throughout the 1950s Washington sustained a balance of payments deficit to finance loans, aid, and troops for allied regimes. But during the 1960s the costs of doing so became less tolerable. By 1970 the U.S. held under 16% of international reserves. Adjustment to these changed realities was impeded by the U.S. commitment to fixed exchange rates and by the U.S. obligation to convert dollars into gold on demand.[citation needed]
[edit]Paralysis of international monetary management
[edit]Floating-rate system during 1968–1972
By 1968, the attempt to defend the dollar at a fixed peg of $35/ounce, the policy of the Eisenhower, Kennedy and Johnson administrations, had become increasingly untenable. Gold outflows from the U.S. accelerated, and despite gaining assurances from Germany and other nations to hold gold, the unbalanced fiscal spending of the Johnson administration had transformed the dollar shortage of the 1940s and 1950s into a dollar glut by the 1960s. In 1967, the IMF agreed in Rio de Janeiro to replace the tranche division set up in 1946. Special Drawing Rights were set as equal to one U.S. dollar, but were not usable for transactions other than between banks and the IMF. Nations were required to accept holding Special Drawing Rights (SDRs) equal to three times their allotment, and interest would be charged, or credited, to each nation based on their SDR holding. The original interest rate was 1.5%.
The intent of the SDR system was to prevent nations from buying pegged gold and selling it at the higher free market price, and give nations a reason to hold dollars by crediting interest, at the same time setting a clear limit to the amount of dollars that could be held. The essential conflict was that the American role as military defender of the capitalist world's economic system was recognized, but not given a specific monetary value. In effect, other nations "purchased" American defense policy by taking a loss in holding dollars. They were only willing to do this as long as they supported U.S. military policy. Because of the Vietnam War and other unpopular actions, the pro-U.S. consensus began to evaporate. The SDR agreement, in effect, monetized the value of this relationship, but did not create a market for it.
The use of SDRs as paper gold seemed to offer a way to balance the system, turning the IMF, rather than the U.S., into the world's central banker. The U.S. tightened controls over foreign investment and currency, including mandatory investment controls in 1968. In 1970, U.S. President Richard Nixon lifted import quotas on oil in an attempt to reduce energy costs; instead, however, this exacerbated dollar flight, and created pressure from petro-dollars. Still, the U.S. continued to draw down reserves. In 1971 it had a reserve deficit of $56 billion; as well, it had depleted most of its non-gold reserves and had only 22% gold coverage of foreign reserves. In short, the dollar was tremendously overvalued with respect to gold.
[edit]Nixon Shock
Main article: Nixon Shock
By the early 1970s, as the Vietnam War accelerated inflation, the United States as a whole began running a trade deficit. The crucial turning point was 1970, which saw U.S. gold coverage deteriorate from 55% to 22%. This, in the view of neoclassical economists, represented the point where holders of the dollar had lost faith in the ability of the U.S. to cut budget and trade deficits.
In 1971 more and more dollars were being printed in Washington, then being pumped overseas, to pay for government expenditure on the military and social programs. In the first six months of 1971, assets for $22 billion fled the U.S. In response, on August 15, 1971, Nixon unilaterally imposed 90-day wage and price controls, a 10% import surcharge, and most importantly "closed the gold window", making the dollar inconvertible to gold directly, except on the open market. Unusually, this decision was made without consulting members of the international monetary system or even his own State Department, and was soon dubbed the Nixon Shock.
The surcharge was dropped in December 1971 as part of a general revaluation of major currencies, which were henceforth allowed 2.25% devaluations from the agreed exchange rate. But even the more flexible official rates could not be defended against the speculators. By March 1976, all the major currencies were floating—in other words, exchange rates were no longer the principal method used by governments to administer monetary policy.
[edit]Smithsonian Agreement
The shock of August 15 was followed by efforts under U.S. leadership to develop a new system of international monetary management. Throughout the fall of 1971, there was a series of multilateral and bilateral negotiations of the Group of Ten seeking to develop a new multilateral monetary system.
On December 17 and 18, 1971, the Group of Ten, meeting in the Smithsonian Institution in Washington, created the Smithsonian Agreement, which devalued the dollar to $38/ounce, with 2.25% trading bands, and attempted to balance the world financial system using SDRs alone. It was criticized at the time, and was by design a "temporary" agreement. It failed to impose discipline on the U.S. government, and with no other credibility mechanism in place, the pressure against the dollar in gold continued.
This resulted in gold becoming a floating asset, and in 1971 it reached $44.20/ounce, in 1972 $70.30/ounce and still climbing. By 1972, currencies began abandoning even this devalued peg against the dollar, though it took a decade for all of the industrialized nations to do so. In February 1973 the Bretton Woods currency exchange markets closed, after a last-gasp devaluation of the dollar to $44/ounce, and reopened in March in a floating currency regime.
[edit]Bretton Woods II

Main article: Bretton Woods II
Dooley, Folkerts-Landau and Garber have referred to the monetary system of today as Bretton Woods II.[20] They argue that in the early 2000s, like 40 years earlier, the international system is composed of a core issuing the dominant international currency, and a periphery. The periphery is committed to export-led growth based on the maintenance of an undervalued exchange rate. In the 1960s, the core was the United States and the periphery was Europe and Japan. This old periphery has since graduated, and the new periphery is Asia. The core remains the same, the United States. The argument is that a system of pegged currencies, in which the periphery export capital to the core that provides a financial intermediary role is both stable and desirable, although this notion is controversial.[20] The term dollar hegemony was populised by Henry C.K. Liu to describe the hegemonic role of the US dollar in the globalized economy.."[21]
[edit]The Bretton Woods system after the 2008 crisis
In the wake of the Global financial crisis of 2008, policymakers and others have called for a new international monetary system that some of them also dub Bretton Woods II. On the other side, this crisis has revived the debate about Bretton Woods II.[Notes 5]
On September 26, 2008, French president, Nicolas Sarkozy, said, "we must rethink the financial system from scratch, as at Bretton Woods.”[22]
On September 24–25, 2009 US President Obama hosted the G20 in Pittsburgh. A realignment of currency exchange rates was proposed. This meeting's policy outcome could be known as the Pittsburgh Agreement of 2009, where deficit nations may devalue their currencies and surplus nations may revalue theirs upward.
In March 2010, Prime Minister Papandreou of Greece wrote an op-ed in the International Herald Tribune, in which he said: "Democratic governments worldwide must establish a new global financial architecture, as bold in its own way as Bretton Woods, as bold as the creation of the European Community and European Monetary Union. And we need it fast." In interviews coinciding with his meeting with President Obama, he indicated that Obama would raise the issue of new regulations for the international financial markets at the next G20 meetings in June and November 2010.
Over the course of the crisis the IMF progressively relaxed its stance on "free market" principles such as its guidance against using capital controls. In 2011 the IMF's managing director Dominique Strauss-Kahn stated that boosting employment and equity "much be placed at the heart" of the IMF's policy agenda. [23] The World Bank also indicated a switch towards greater emphases on job creation. [24] [25]
[edit]Academic legacy

The collapse of the Bretton Woods system led to the study in economics of credibility as a distinct field, and to the prominence of open macroeconomic models, such as the Mundell-Fleming model.[citation needed]
[edit]Pegged rates

Dates shown are those on which the rate was introduced; "*" indicates floating rate supplied by IMF[26]
[edit]Japanese yen
Date # yen = $1 US
August 1946 15
12 March 1947 50
5 July 1948 270
25 April 1949 360
20 July 1971 308
30 December 1998 115.60*
5 December 2008 92.499*
19 March 2011 80.199*
3 August 2011 77.250*


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