Theme II 1a Factors for the Growth of the Global Economy

Theme II 1a: Factors for the Growth of the Global Economy 1 Wealth accumulates, and men decay Oliver Goldsmith 1https://www.britannica.com/event/Bretton-Woods-Conference

Key Ideas Criteria for Significance 1. Stable international finances and monetary system 2. Liberal international trading order (Free Trade) 3. Global economic growth and development (Recovery and growth of global economy and more even development of the economies involved in the global economy) Key Results 1. Unprecedented financial stability a. 1960 November was the first speculative attack against the dollar (Only after 15 years) b. 38 Financial crises throughout global age as compared to 139 during the crsis decades 2. Unprecedented liberal trade a. 7.9% annual growth 3. Unparalleled global economic growth a. Globally 4.9% b. Developing Countries: i. 1950s: 4% ii. 1960s: 5% c. Less Developing Countries i. 1960s: 5.5% Ai. USA 1. Unaffected by the war, USA wielded significant economic and political power to lead international frameworks, setting the precedent to remove trade barriers and establish a stable exchange rate system a. Bretton-Woods System created a conducive international framework of rules and institutions. The Adjustable Peg Exchange Rate System (1 ounce of Gold was fixed to 35$ USD). Avoided unregulated currency speculation, giving US allies more confidence in the international monetary order to trade more liberally in the absence of speculation. b. USA exercised leadership in negotiating for major tariff reductions throughout the GATT rounds (legal agreement dropping tariffs). By mid-1950s, after the Kennedy Round, US took the initiatives to a 73% reduction in non-agricultural tariffs 2. The USA tolerated allies’ protectionism and accepted asymmetrical access to markets. This prevents competition between their nascent markets and the US’s veteran industries while allowing them to reap the benefits of a large American market. a. During the golden age, the value of European exports to the USA rise from 4.3 to 11.4 billion. Countries like Germany fuelled their economic miracle on the fuel of the Volkswagen Beetle, signifying Western Europe’s dependence on American markets for export volumes and revenue. b. The US did not retaliate against Japan’s MITI act of imposing quotas for foreign exchange loans. It also did not retaliate when Japan imposed tariffs of 40% on passenger car imports. By p1970s, it was exporting more than one million are to

other countries. Created a cacoon for its auto mobile industry to grow as it did not face major competition. 3. The USA provided aid in technological know hows and capital injection, giving them the capability and capacity to boost production output and advance their industries, Hence developing their growing industries a. 1949 Point Four Programme was a technical scheme to transfer US scientific and industrial know how in various fields to LDC through business