Golden Age Of Capitalism (GAC) Flashcards
Characteristics of global economy
1) Financial monetary system (FMS)
2) Trading order
3) Growth and development
Reasons for GAC
1) conducive framework for economic reconstruction
- BWS (fixed currency)
- IMF/WB
- GATT
2) post war economic liberalisation
- MNCs
- factors of production
- mixed economies (Japan, WE)
What did USA do?
1) major source of investment and aid
- Marshall plan: $17bil
- Investment: $40bil
Eg. Cocacola moving production to Benelux in 1947
2) initiated GATT (1947)
- By mid 1960s, USA saw 73% reduction in mon agricultural tariffs
- By early 1970s, 73% reduction of all world’s tariffs
3) fixed currency
- gave USD a real value pegged to gold. $35 = 1ounce of gold
- gave stability in FMS. Confidence to invest and trade across borders. Increased trade and investment
Other reasons (CW)
Proxy wars : Korean war (1949-1953) and Vietnam War (1966-70s) led to development of strategic bases. Eg Japan Singapore and taiwan. Greater investment in this countries for production of weapons and arms for war efforts
Increased output. Improved industrial capability
Why did USA contribute to GAC?
- POLITICAL:
- create friendly states with similar capitalist goals.
- prevent rise of communism/fascism. Believed these ideologies borne in areas with weak economic growth and prospects
ECONOMIC
- create markets for US goods
Strength/ability of USA
- largest market in the world: 50% of gross product and 60% of manufacturing output
- largely unaffected by ww2 fighting. Enriched by selling arms
= Necessary wealth and influence to establish global order with US being the leader
US investment
- Expansion of Americs’s MNCs:
Overvalued USD gave firms incentive to expand to other nations where cop is lower
Eg cocacola moving production and services to Benelux - Marshall plan (1947)
17 billion in direct grants, 40 billion in investment - Military expenditure to contain communism
Leads to increase in demand for manufactured goods and investments in key strategic bases. Eg Japan Taiwan Singapore
What did USA do? (Other than investments)
- GATT in 1947
- BWS system in 1947
Fixed currency and IMF and WB
Other reasons for GAC (5)
- Cold War politics
- expansion of mixed economics (japan, WE)
- factors of production
- MNCs and investment
- Creation of international frameworks and organisations
EG. WB, IMF, GATT
Cold war?
Increased investment from USA to its strategic bases to contain communism
- fighting in proxy wars- Korean war (1950-1953)
Vietnam war (1966-1970)
Increased demand for manufactured goods and employment
Japan’s development
MITI - ministry of international trade and industry provided low interest loans and subsides to export industries. Cheaper FOP
Protect them using infant industries policies. Eg NTBs, tariffs
Japans contribution to other nations
Normalisation of relationship with South Korea in 1965 - increase investments in SK $3353 million in aid (1980)
Foreign aid to anti community states in SEA + War reparations-
Western Europe
Keynesian economics- strive for full employment and reduced taxes for firms
Partial nationalisation of industries to provide state leadership and modernisation
Eg Britain nationalised coal mines (national coal board) , railways, internal shipping
France nationalised Air France, coal mines and banks
Creation of international organisations
GATT (1947)
IMF, WB (1947)
Availability of factors of production (CELL)
Capital: international investment in other nations.
Tech: transfer of tech from DCs to LDCs and NIEs
Diversify economy to produce wide variety of goods . Eg radios, tv
Cheap raw materials:
Import from LDCs. Eg barrel of oil cost $2.50-$3
International migration:
Shortage of labour in Europe. Immigrants welcomed from Asia and other parts of Europe 🇪🇺
