GAC

Question 1

Factors for the GAC (1945-1973)

Answer 1

A. Role of the USA
B. The Bretton Woods System (BWS); Fixed Exchange rate, World Bank, IMF
C. MNC Activity
D. Rise of Keynesian and Mixed economies
E. WE / Japan as major trading partners

Question 2

Role of the USA in GAC

Answer 2

American markets tapped on for WE and Japan to fuel reconstruction
Trading partner for LDCs like in Latin America and Asia
FDI; Half the worlds FDI of about US$200 Billion came from USA
Led to a transfer of technology and techniques
***Direct aid of $14 Billion in Marshall Plan and Reverse course Plan; $3.4 billion spent on raw materials

Question 3

Role of the BWS

Answer 3

Fixed Exchange Rate: 1958 USD gold peg; $35 USD fixed to ounce of gold (And countries pegged their currencies to this)
+ IMF: Pool of funds nations could borrow from for liquidity to correct deficits and support currency (But USA provided more than 30% and received largest power over IMF resources)
World Bank: $10 Billion in capital to aid (lend) in investments, but largely overshadowed by USA
-But had role in aiding LDCs; lent $1 Billion annually
GATT: Trade liberalisation through agreements; MFN treatment to offer tariff reductions, especially Kennedy Round (1967) reduced tariffs by 9%

Question 4

Role of WE

Answer 4

Formation of the EEC (1957); common agricultural policy to reduce tariffs
ECSC; pooled together coal and steel resources
Led to promotion of reduction of tariffs and quotas
Accepted full convertibility of currency
Provided $50 billion to the LDCs for infrastructure development

Question 5

Role of the Keynesian Economies

Answer 5

Expansion of governments roles into economy, committed to intervention
Deficit spending as crucial ingredient to revive stagnant economies
Europe: heavy investment into infrastructure and provision of social security networks
Led to more willing and productive work force.
Japan: MITI established to create broad framework for industrial policy, identifying key areas for growth and directing investment into these areas. Resurrected economy and protected key industries (mostly tolerated by the USA)

Question 6

Role of MNCs

Answer 6

Brought tech transfers to other countries to catch up, helped convergence of US and WE tech
MNCs invested $200 Billion around the world by 1973 and became leading edge
However largely concentrated in DCs and only 20% of FDI went into LDCs