What are the factors that led to the growth of the global economy during economic reconstruction

Question 1

Role of the US (1945-1952) in providing economic aid
[Piecemeal (necessities), Monetary to Jap (increase production), Marshall Plan (increase production)]

Answer 1

1945-47 Piecemeal Aid
- $4.4B to UK, $1.9B to France, $513M to Italy to meet emergencies in essential supplies, services and repairs

1947 Monetary Aid to Japan
- $2.3B was from us assistance in the form of food (59%), industrial materials (15%) and Transportation equipment (12%)
- Land reform was carried out to increase competition
Increase exports - imports = surplus
New factories equipped with modern tech to give a competitive advantage over others
–> Production reached pre-war levels within a decade and Japanese GDP expansion was more than 9% per annum from then on

1948-1952 Marshall Plan
$13B
EU was able to obtain food, feed, fertiliser to survive and then obtain capital goods, raw materials and fuel as they transition to rebuild their economies through exports
–> Recipients of Marshall Aid experienced 15-25% increases in GNP

Question 2

Role of the US (1945-1952) in providing access to US markets

Answer 2

• US absorbed increased exports from 14% to 50% for OEEC countries in Eu
• 1958 US Trade Act to negotiate trade deals through flexible reduction of tariffs (up to 20%) in Japan
• 1959-60: US absorbed about 60% of Japan’s exports (IMF)

-1960s: US absorbed >30% of Japan’s exports

Question 3

Role of the US (1945-1952) in alleviating military burdens such that other countries can focus on their own economies

Answer 3

1949-1960 Financing defence
- Mutual Defence Assistance Prog; $1.4B to build WE defences

• Mutual Security Act, $33.4B in arms and services and $3.3B surplus weaponry (WE)
• 1951 Mutual Security Treaty, Japanese defence spending fell from 20% to 1% by 1970 to fully focus on economy

Question 4

Role of the US (1945-1952) in providing access to US markets

Answer 4

• OEEC countries; US absorbed increased exports from 14% to 50%
• Japan; 1958 US Trade Act to negotiate trade deals through flexible reduction of tariffs (up to 20%)
• 1959-60: US absorbed about 60% of Japan’s exports (IMF) and they continued to absorb>30% of Japan’s exports post 1960s

Question 5

Role of the US in laying the groundwork for crucial global cooperation in the global economy

Answer 5

1941 Atlantic Charter
Article 4 & 5
Enjoyment of all states on equal terms to trade and to raw materials of the world which are needed for their economic prosperity
Fullest collaboration to improve labor standards, economic advancement and social security

Question 6

Role of domestic governments (1945-1952) in adopting Keynesian economic principles

Answer 6

Closer oversight of sectoral direction and growth,
government provisions
- 1946: France’s Planning Commission
provided funds for capital and took on large deficits for the railway systems
- 1950 Monnet Plan with investment targets, creation of sectoral plans for various industries for economic restructuring

Question 7

Role of international institutions in 1944 BWS and 1947 GATT in promoting trade liberalisation for widespread economic growth

Answer 7

• IBRD = growth = countries more attractive to MNCs = liberalise trade through FDI and offshoring
• IMF and GDC encouraged FDIs = free capital movement
• 1947 GATT
  Created an arbiter of commercial disputes, formalising the liberalising trade regime and assuring nations
  Reduced protectionism

–> 1950-84: US FDIs globally increased by close to 18 times, from 11.8b to 233.4b
–> 1948-68: Total volume of merchandise exports from grew by 290%