Global Economy

Question 1

Golden Age of Capitalism

Answer 1

45-73, when the US spearheaded the BWS and set the gold standard, high and sustained levels of growth in both 1st and 3rd world countries

Question 2

Bretton Wood System

Answer 2

Consists of the General Agreement on Tarrifs and Trade (accelerates trade liberalistion, later WTO), International Monetary Fund and World Bank

Question 3

US Monetary Aid

Answer 3

$13b through Marshall Plan, $2.5b to Japan and $1b to Thailand, also gave military aid to countries

Question 4

US Comparative Advantages

Answer 4

Post-war rich MNCs like Ford, Pontiac and Boeing manufacturing high end consumer electronics and vehicles

Question 5

US Protectionism

Answer 5

Nixon shock of 1971 as a prelude, Japana and WE overtaking Comparative Advantages and Oil Crisis of 73 as immediate triggers

Question 6

1st Oil Shock

Answer 6

Started in 1973 when the OPEC countries decided to collectively raise price to protest against US’s support for Israel in the Yom Kippur War, oil prices increased fom $2 per barrel to $4 per barrel, then to $15 per barrel

Question 7

2nd Oil Shock

Answer 7

Started in 1979, triggered by the Iranian Revolution in 1978, oil prices doubled from $18 per barrel to $40 per barrel in just 12 months

Question 8

Taiwan’s Familism

Answer 8

Emphasis on the centrality of family, and that all SMEs run on the basis of prioritising individual families and the network of guanxi with planning in the long run

Question 9

Korea’s Confucionism

Answer 9

Emphasis on planning in foresight, working tightly as a cooperation and absolute top down control for better macro steering

Question 10

Taiwan’s Gov Planning

Answer 10

Initially: ISI to protect local infant industries, mainly focused on agriculture
Later on: SMEAB to boost number of SMEs
Policies: Striked up oil deals with Saudi to negate 73 oil shock

Question 11

Korea’s Gov Planning

Answer 11

Initially: ISI to protect local infant firms, Chaebols like Samsung and LG thrived
Later on: Started joint ventures with Chaebols to control the sectors of economy
Eventually: Chaebols grew out of control and the relationship broke up
Policies: Got private oil deals from OPEC countries, like Taiwan

Question 12

Impact of Oil Shock

Answer 12

1. Hyperinflation and Stagflation, especially for the 3rd world countries, up to 15%
2. Rising COP for all industries, closure of firms
3. Reduced purchasing power
   *MORE IMPACT ON LDCs
   *BENEFITTED OPEC

Question 13

Debt Crisis

Answer 13

1982, banks were lending out money to countries without any regulations. Started when the most trustable country, Brazil, defaulted on the debt. Other latin american countries soon followed.

Question 14

Impacts of Debt Crisis

Answer 14

1. Economic slowdown, LA -9% growth
2. Reduced SOL, real wages dropped by up to 40%
3. Loss of faith in commercial banks, since many who deposited money got scammed when the banks closed due to defaults
   *Effects more or less negated on DCs
   *Even came up with Baker 85 and Brady 89 plans to help

Question 15

Keynesian Economic Management

Answer 15

Encourage government spending and boosting demand in order to promote increased supply and hence economic growth. The cycle repeats.

Question 16

Impacts of K.E.M.

Answer 16

1. Incredased growth, trade in manufactured goods increased 10x after 53
2. Created strong industrial foundation for increased demand and wages

Question 17

Impacts of K.E.M.

Answer 17

1. Incredased growth, trade in manufactured goods increased 10x after 53
2. Created strong industrial foundation for increased demand and wages

Question 18

Recovery of WE and Japan

Answer 18

Aided by US for post-WW2 recovery. Recovered quickly due to the amount of US aid. Europe Recovery Programme for WE and just aid for Japan.

Question 19

Role of WE and Japan

Answer 19

1. Traded extensively with the globe
2. Contributed funds to IMF and WB
3. Rendered aid to ASEAN countries (Japan)

Question 20

Contributing factors of growth

Answer 20

1. US
2. BWS
3. WE & Japan
4. Asian Tigers
5. Tech
6. Globalisation
7. MNCs
8. Oil
9. K.E.M.
10. Cold War

Question 21

Effects of Multi National Corporations

Answer 21

• Promoted interactions between countries
• Shared and transferred tech to countries
• Allowed local industries to be integrated into the global econs
• Total global FDI reached 115b in 67

Question 22

Nixon Shock

Answer 22

1971, when US was suffering trade and fiscal deficits. Decided to abolish the gold standard and adopt floating exchange rate.

Question 23

Monetarism

Answer 23

A belief that economic performance depends on the amount of money circulating, and that too much money will lead to inflation.
Monetarists seek to reduce inflation caused by K.E.M. through tighening of fiscal spendings and increasing interests rates to reduce loans, restricting overall money flow.

Question 24

Impacts of Monetarism

Answer 24

1. Reduced spendings
2. Increased unemployment, WE unemployment increased 9x from 60s to 80s
3. Reduced demand and growth
4. Reduced money flow in all countries

Question 25

Taiwan’s economic structure

Answer 25

• Local families did not welcome the foreign KMT
• Practiced familism and did not corporate with the government
• Gov did not bother to deal with local families as well
• Later recognized the importance of SMEs and promoted growth for EOI

Question 26

Korea’s economic structure

Answer 26

• Initial foucs on ISI (Rhee era, 45-60)
• Later collaboration of Chaebols and Gov (Park Chung Hee era, 61-79)
• Eventual break up as Park accused Chaebols of exercising monopolistic behaviours and tried to tighten control

Question 27

General trend for developing economies

Answer 27

Initially: ISI and agriculture
Later: EOI and development of comparative advantages
Eventually: Finance intensive industries