US Flashcards
How has the US state shaped the global economy wrt bretton woods
- established Bretton Woods system in 1971 that brought about currency stability and increased global trade from
- -> Between 1948 and 1968, the total volume of merchandise exports from non-communist countries grew by 290%
- backed the system: guaranteed exchange of USD for gold
- ended the system
How US state shaped the world economy wrt global economic architecture
- influential in established IMF in 1947 and IBRD in 1945
- major part of running these organizations: veto power in IMF (17.78% of contributions)
US state: How cold war agenda shaped the economy
- US aided a lot of countries so they would not fall to communism
eg Marshall Plan: spent $15 billion in europe. crucial for their recovery, Dodge plan and patronage in japan
- Spent on security in other countries so they they wouldnt have to divert economic resources (NATO in 1949, SEATO in 1954)
- also helped to reintegrate former communist countries later (china and soviet)
US state: US Federal reserve influence
influence economic development in other countries
- allows countries like HK and Thailand to peg their currency to it
- sets interest rates (eg Volcker shock caused debt crisis and inflation worldwide)
US state analysis
-Good in the earlier years, bad after (wrt to Nixon shock and raising interest rates) → ultimately what the US state wants is to benefit US because economic health affects election outcomes
o Marshall aid was due to Cold War agenda → benefit themselves
-Thus US’s influence was a reflection of their own economic health
How US market shape global economy
- Access to US markets was key to economic development, eg every country
- when US bought less, it caused problems, eg weakening USD, new protectionism, high inflation and unemployment resulted in decrease in trade and thus gdp for all countries (since US market is the biggest)
US markets analysis
- US market most important in the years immediately following WW2
- Reliance inevitably declined as other economies grew and became trading partners
- But not very decline because US is still a major trading power
US banks and companies (2)
Engines of growth for other countries by expanding there (provide employment , etc)
o Nike, Texas instruments the first major investor in JTC that provided 500 jobs
o By 1967, there were 3646 US companies operating overseas
- US banks invested in other countries, allowed other countries’ firms to grow by providing capital
o US accounted for 85% of all FDI flows
Qualify??
Other countries had to participate too
- eg keynes and bretton wood
declining importance (see point)
Why did US dominate?
- because of its size - 50% of the worlds GDP after WW2
- had the capacity to dominate (competitors set back by war. After reconstruction, GDP in europe was what it was in US in 1905)
- chose to dominate
(eg bc they chose to cold war means they had to manage the world economy)
Why did it decline? + stat on how much
-US gdp was 50% of the world’s Gdp in 1950, but 25% in 1975
- Other economies recovering - competitors began to have trade surpluses with US
- world exports grew by 290% from 1948 to 1968 - other countries grew and were not so dependant on US anymore
- global economy became more globalised and not all developments began in the US
- eg 1987 stock market crash began in hk
qualify US’s declining importance
- US still heavily influences IMF and World Bank, still a powerful voice. But other countries also have voice
- US companies and banks are still important in the global economy, eg Microsoft, Apple, etc, banks like JP Morgan, Citi. Just that others are also strong
overall US analysis
- adjustment in the global economy was inevitable
- more that the other economies caught up rather than US declined
- The world still needs American demand now, just as it did in 1945
Rolly’s favourite point
ultimately the downfall of US predominance was the result of the new world order
- dictated that the rise of some = the fall of others
- US willingness to shortchange itself (eg strong USD, R&D for japan) and its inability to adapt to new technologies efficiently
