[SAJC] Reasons for the Growth of the Global Economy 2024 final

9174/01 H2 History Paper 1 Theme II: The Development of the Global Economy 1 The development of the Global Economy Topic 1: Reasons for the Growth of the Global Economy SAJC History Unit, 2024 Learning Outcomes (from the Examination Syllabus) 4 Essential Questions for this topic: 4 Guiding Questions for this topic: 4 1. Defining the term, “global economy” 5 2. The Post-WWII Economic Situation in 1945 7 2.1 Post- WWII Alignments 8 2.2 Quest for Peace and Sustained Wealth 8 3. Analysing the growth of the “global economy”: The “Golden Age of Capitalism” (1945 to ~1971) 9 3.1 Evidence Supporting 1945 to ~1971 as the “Golden Age of Capitalism” 9 3.1.1 Rates of Growth 9 3.1.2 The Rise of Industrialism 10 3.1.3 The Growth of the Automobile Industry 10 3.1.4 The Consumer Boom 11 3.1.5 Technological Innovation 11

9174/01 H2 History Paper 1 Theme II: The Development of the Global Economy 2 3.1.6 Positive Economic Indicators in the Third World 14 3.2 Evidence Undermining 1945 to ~1971 as the “Golden Age of Capitalism” 15 3.2.1 The Capitalist Bloc > The Socialist Bloc and the Third World 15 3.2.2 Onset of Economic Decline and Issues from the 1960s Onwards 17 The Late 1960s: Decline in Productivity and the Onset of Inflationary Pressures 18 The Late 1960s: U.S. Deficits and The Impending End of the Bretton Woods System 19 4. Reasons for growth of the global economy 20 4.1 The Role of the USA in the Growth of the Global Economy 20 4.1.1 The Cold War Providing the Impetus for U.S. Foreign Aid 21 4.1.2 The USA Providing Its Allies with Access to the Open Market 21 4.1.3 U.S. Leadership of the Bretton Woods System and Establishment of Key Financial Institutions 22 4.2 The Role of Mixed Economies in the Growth of the Global Economy 25 4.3 The Role of Oil in the Growth of the Global Economy 27 5. Post-War Economic Liberalisation: Economic Miracle in Western Europe 29 5.1 Role of the USA in Western Europe’s Economic Miracle 29 5.2 Role of Western Europe in the Region’s Economic Miracle 28 6. Post-War Economic Liberalisation: Economic Miracle in Japan 33 6.1 Role of the USA in Japan’s Economic Miracle 33 6.2 Role of Japan in Its Economic Miracle 34 6.2.1 The “Income Doubling” Plan 35

9174/01 H2 History Paper 1 Theme II: The Development of the Global Economy 3 6.2.2 Direct Role of the Government in Economic Growth and Development 35 6.2.3 Socio-Economic Reasons 37 6.2.4 Concluding Thoughts 38 7. Post-War Economic Liberalisation: The Rise of Multinational Corporations (MNCs) / Transnational Corporations (TNCs) 38 7.1 Reasons for the rise of MNCs Error! Bookmark not defined. 7.1.1 Lower costs of production abroad 40 7.1.2 Larger Markets 38 7.2 Benefits of MNCs / TNCs 38 7.2.1 Technological Modernisation 38 7.2.2 A New International Division of Labour 39 7.2.2 Foreign Direct Investments (FDI) 39 Case Study – FDI-driven industrial development in developing countries and the Growth of the Asian NIEs 43 The Growth of Asian NIEs 43 Role of Foreign Capital in NIEs 44 Role of the Asian NIEs in International Trade 45 8. Preliminary Analysis on the Causal Relationships That Underpinned the Growth of the Global Economy 47 8.1 Analysing the Role of Bretton Woods Institutions 47 8.2 Analysing the Role of the Cold War 48 8.3 Analysing the Role of Oil / Cheap Energy Sources 50 8.4 Analysing the Role of Multinational / Transnational Corporations 50

9174/01 H2 History Paper 1 Theme II: The Development of the Global Economy 4 8.5 Analysing the Role of the USA (versus that of Western Europe and Japan) 52 Learning Outcomes (from the Examination Syllabus) Students are able to: ● evaluate the factors that contributed to the growth of the global economy over time ● evaluate the challenges that affected the global economy over time ● evaluate the factors that contributed the factors that contributed to the economic transformation of Japan and China over time Essential Questions for this topic: • How did the global economy develop? • How did the development of the global economy impact different countries? *Questions set will not require candidates to compare the economic transformations of Japan and China Guiding Questions for this topic: • What is the definition of the term, “global economy?” • What are the factors that shaped the development of the global economy from 1945 to 2000? • When did the growth of the global economy take place? How was it like and why did it manifest the way it did? • When did the challenges in the global economy take place? How was it like and why did it manifest the way it did?

9174/01 H2 History Paper 1 Theme II: The Development of the Global Economy 5 1. Defining the term, “global economy” 1. “The global economy has always existed…What keeps changing is the nature of the global economy…” - Louis Uchitelle, a journalist, 2002 2. The definition of what constitutes a “global economy” has changed over time: the global economy is the economy of the world, as an international exchange of goods and services. What are some economic concepts that would be helpful? A. Free Trade ▪ Free trade refers to the unhindered flow of goods and services between countries. ▪ Trade can be hindered by trade barriers such as tariffs (an additional charge imposed on imports) or other policies such as subsidies, taxes and regulations that give domestic firms an advantage over foreign ones. The policy of imposing such barriers to trade is known as protectionism. B. Exchange Rates ▪ There are two types of exchange rates systems that you would need to know: The floating exchange rate system and the fixed exchanged system. ▪ The floating exchange rate system means that the value of a country’s (let’s say Singapore) currency is dependent solely on the foreign demand for that country’s products. Since demand changes daily, the value of the Singapore dollar will keep fluctuating. ▪ The fixed exchange rate system functions such that the government of the country fixes and guarantees the official price of the currency in terms of a foreign currency. Under this system, the government is committed to maintain the fixed exchange rate by using its reserves (gold and foreign exchange) to exactly offset the changes in foreign demand. 3. The definition of what constitutes a “global economy” has changed over time: a. Immediate post-1945 period: referred to the developed capitalist world, namely the USA, Western Europe, and Japan i. The Communist bloc was excluded from this “global economy” as it was politically and ideologically isolated.

9174/01 H2 History Paper 1 Theme II: The Development of the Global Economy 6 ii. The Afro-Asia developing countries were also absent as they were still under colonial rule. iii. It is in this context that the development of the international economy is laid against. All countries in the world found themselves influenced by the two superpowers (USA and USSR) and the two superpowers competed to influence everyone else, especially in the Third World after the capitalist bloc and socialist bloc were formed. iv. 1970s: Other blocs became more integrated with the developed capitalist one, resulting in the global economy witnessing greater interdependence among nations, and becoming more global in nature. v. 1990s: The Communist and Afro -Asian blocs joining the global economy in the 1970s had somewhat diluted its liberal Western capitalist nature. a. However, the 1990s would see a shift back to the global economy being more closely aligned with the liberal Western capitalist economy because of changes in the Third World such as the end of Soviet control over Eastern Europe in 1989. 4. The study of History involves periodisation, and this involves segmenting a larger block of time e.g., 1945 -2000 into smaller time periods marked by seminal events. An exploration into the