Making of a Global World 5 Flashcards
explain the ww2
The Second World War broke out a mere two decades after the
end of the First World War. It was fought between the Axis powers
(mainly Nazi Germany, Japan and Italy) and the Allies (Britain,
France, the Soviet Union and the US). It was a war waged for six
years on many fronts, in many places, over land, on sea, in the air
how did ww2 affect the people
Once again death and destruction was enormous. At least 60 million
people, or about 3 per cent of the world’s 1939 population, are
believed to have been killed, directly or indirectly, as a result of the
war. Millions more were injured
where did the deaths happene
Unlike in earlier wars, most of these deaths took place outside the
battlefields. Many more civilians than soldiers died from war-related
causes. Vast parts of Europe and Asia were devastated, and several
cities were destroyed by aerial bombardment or relentless
artillery attacks. The war caused an immense amount of economic
devastation and social disruption. Reconstruction promised to
be long and difficult.
what were the 2 factors that shaped post ww2 reconstruction
Two crucial influences shaped post-war
reconstruction. The first was the US’s
emergence as the dominant economic, political
and military power in the Western world. The
second was the dominance of the Soviet
Union. It had made huge sacrifices to defeat
Nazi Germany, and transformed itself from
a backward agricultural country into a world
power during the very years when the capitalist
world was trapped in the Great Depression.
what two lessons were learnt from post-war experience?
Economists and politicians drew two key lessons from inter-war
economic experiences.
First, an industrial society based on mass
production cannot be sustained without mass consumption. But to
ensure mass consumption, there was a need for high and stable
incomes. Incomes could not be stable if employment was unstable.
Thus stable incomes also required steady, full employment.
But markets alone could not guarantee full employment.
Therefore governments would have to step in to minimise fluctuations of price, output and employment. Economic stability
could be ensured only through the intervention of the government.
The second lesson related to a country’s economic links with
the outside world. The goal of full employment could only be
achieved if governments had power to control flows of goods,
capital and labour.
what was the goal of post-war economic system
Thus in brief, the main aim of the post-war international economic
system was to preserve economic stability and full employment in
the industrial world. Its framework was agreed upon at the United
Nations Monetary and Financial Conference held in July 1944 at
Bretton Woods in New Hampshire, USA.
what were the bretton woods institutions?
The Bretton Woods conference established the International Monetary
Fund (IMF) to deal with external surpluses and deficits of its member
nations. The International Bank for Reconstruction and Development
(popularly known as the World Bank) was set up to finance postwar reconstruction. The IMF and the World Bank are referred to
as the Bretton Woods institutions or sometimes the Bretton Woods
twins. The post-war international economic system is also often
described as the Bretton Woods system.
when did bretten woods instuirution start wokring?
The IMF and the World Bank commenced financial operations
in 1947. Decision-making in these institutions is controlled by
the Western industrial powers. The US has an effective right of
veto over key IMF and World Bank decisions.
what is the international monetary system?
The international monetary system is the system linking national
currencies and monetary system. The Bretton Woods system was
based on fixed exchange rates. In this system, national currencies,
for example the Indian rupee, were pegged to the dollar at a fixed
exchange rate. The dollar itself was anchored to gold at a fixed
price of $35 per ounce of gold.
what did the bretten woods instituitons lead to?
The Bretton Woods system inaugurated an era of unprecedented
growth of trade and incomes for the Western industrial nations and
Japan. World trade grew annually at over 8 per cent between 1950
and 1970 and incomes at nearly 5 per cent. The growth was also
mostly stable, without large fluctuations. For much of this period
the unemployment rate, for example, averaged less than 5 per cent
in most industrial countries.
what did the bretton woods also lead to?
These decades also saw the worldwide spread of technology and
enterprise. Developing countries were in a hurry to catch up with
the advanced industrial countries. Therefore, they invested vast
amounts of capital, importing industrial plant and equipment
featuring modern technology.
what were the state of colonised countries at end of ww2
When the Second World War ended, large parts of the world were
still under European colonial rule. Over the next two decades most
colonies in Asia and Africa emerged as free, independent nations.
They were, however, overburdened by poverty and a lack of
resources, and their economies and societies were handicapped by
long periods of colonial rule.
how did imf and world bank shift towards developing countrie s
The IMF and the World Bank were designed to meet the financial
needs of the industrial countries. They were not equipped to cope
with the challenge of poverty and lack of development in the former
colonies. But as Europe and Japan rapidly rebuilt their economies,
they grew less dependent on the IMF and the World Bank. Thus
from the late 1950s the Bretton Woods institutions began to shift
their attention more towards developing countries.
how were the developing countries still under the westernc ountries hands? give an example?
As colonies, many of the less developed regions of the world had
been part of Western empires. Now, ironically, as newly independent
countries facing urgent pressures to lift their populations out of
poverty, they came under the guidance of international agencies
dominated by the former colonial powers. Even after many years
of decolonisation, the former colonial powers still controlled vital
resources such as minerals and land in many of their former colonies.
Large corporations of other powerful countries, for example the
US, also often managed to secure rights to exploit developing
countries’ natural resources very cheaply.
what led to the formation of nieo?
At the same time, most developing countries did not benefit from
the fast growth the Western economies experienced in the 1950s
and 1960s. Therefore they organised themselves as a group – the
Group of 77 (or G-77) – to demand a new international economic
order (NIEO).
what is the nieo
By the NIEO they meant a system that would give
them real control over their natural resources, more development
assistance, fairer prices for raw materials, and better access for their
manufactured goods in developed countries’ markets.
Despite years of stable and rapid growth, not all was well in
this post-war world. illuminate
Despite years of stable and rapid growth, not all was well in
this post-war world. From the 1960s the rising costs of its
overseas involvements weakened the US’s finances and competitive
strength. The US dollar now no longer commanded confidence
as the world’s principal currency. It could not maintain its value
in relation to gold. This eventually led to the collapse of the
system of fixed exchange rates and the introduction of a system
of floating exchange rates.
how did the world economic system change in the mid 1970’s
rom the mid-1970s the international financial system also changed
in important ways. Earlier, developing countries could turn to
international institutions for loans and development assistance. But
now they were forced to borrow from Western commercial banks
and private lending institutions. This led to periodic debt crises in
the developing world, and lower incomes and increased poverty,
especially in Africa and Latin America.
how was the industrial world hit by employment
The industrial world was also hit by unemployment that began
rising from the mid-1970s and remained high until the early 1990s.
From the late 1970s MNCs also began to shift production operations
to low-wage Asian countries.
what enabled china to come back to the economy
China had been cut off from the post-war world economy since
its revolution in 1949. But new economic policies in China and
the collapse of the Soviet Union and Soviet-style communism in
Eastern Europe brought many countries back into the fold of the
world economy
what was the importance of low wages in asian countries esp. china?
Wages were relatively low in countries like China. Thus they became
attractive destinations for investment by foreign MNCs competing
to capture world markets. Have you noticed that most of the TVs,
mobile phones, and toys we see in the shops seem to be made in
China? This is because of the low-cost structure of the Chinese
economy, most importantly its low wages.
The relocation of industry to low-wage countries stimulated world
trade and capital flows. In the last two decades the world’s economic
geography has been transformed as countries such as India, China
and Brazil have undergone rapid economic transformation.
what are exchange rates?
They link national currencies
for purposes of international trade. There are
broadly two kinds of exchange rates: fixed
exchange rate and floating exchange rate
what are fixed exchange rates
When exchange rates
are fixed and governments intervene to prevent
movements in them
what are flexible or floating exchange rates
These rates
fluctuate depending on demand and supply of
currencies in foreign exchange markets, in
principle without interference by governments
what are tariffs
Tax imposed on a country’s imports
from the rest of the world. Tariffs are
levied at the point of entry, i.e., at the border
or the airport.
