01 - Economic Development Notes (Post War Reconstruction)

Hwa Chong Institution (College): History Paper 1 Theme II: Understanding the Global Economy How did the Development of the Global Economy Impact the World? 1 What were the reasons for the growth of the global economy after WWII? Objectives: Students would be able to: • Analyze the casual relationships that underpinned the growth of the global economy • Evaluate the challenges that affected the growth of the global economy 1. Introduction: “The global economy has always existed…What keeps changing is the nature of the global economy…” - Louis Uchitelle, a journalist, 2002 What is the global economy? The dictionary definition would indicate that the global economy is the economy of the world, as an international exchange of goods and services. • In the context of your study, this would be narrowed down to the 20th century, in light of the growth that had spread to all regions of the world during the century, when world GDP per capita quintupled. Another way of defining the global economy is by examining its characteristics, and the defining characteristic of the post-World War II era has been 1. the dramatic increase in economic integration among the liberal capitalist countries, 2. an increasing number of developing countries, and; 3. during the past two decades, a number of former communist nations that are undertaking a transition to more open markets.1 The highest growth occurred in the 1960s during post-war reconstruction. In particular, shipping containers revolutionized trade in the second half of the century, by making it cheaper to transport goods, especially internationally.2 (For those interested in how shipping containers contribute to global economic growth: https://www.wnyc.org/radio/#/ondemand/346069) 1 Joseph M. Grieco The International Political Economy Since World War II Duke University. Prepared for the CIAO Curriculum Case Study Project. October 2000 2 Marc Levinson The Box: How the Shipping Container Made the World Smaller and The World Economy Bigger Princeton University Press, 7 January 2008

Hwa Chong Institution (College): History Paper 1 Theme II: Understanding the Global Economy How did the Development of the Global Economy Impact the World? 2 What are some basic economic concepts that would be good to know? 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 need to know for this topic à 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 forei