Impact of Major Global Economic Developments
1914 to Present
- Impact of Major Global Economic Developments
- The Great Depression
- Destroyed Europe and Latin America
- Reliant on American loans to recover from war
- Wave of bank failures has ripple effect around worlds’ banks
- Less effect on Africa and Asia
- Japan turns to military government – replaces civilian
- Needed natural resources – searches out territories
- International trade before WWII
- Sparked wave of protectionism
- Nations tried to shield industry and farms by imposing high tariffs
- Hawley-Smoot Tariff Act – 1930
- Spread Depression to Europe, L. America, Asia
- Destroyed ability to export to United States
- Nations tried to shield industry and farms by imposing high tariffs
- Sparked wave of protectionism
- International Trade Before WWII
- Trade had existed long before 20th century
- Scope of trade grew between WWI and Great Depression
- Causes of the global depression
- overdependence on American loans and buying
- Increase in tariffs and protectionism
- Industrial and farming surpluses leading to deflation
- Poor banking management
- World War I
- Expensive - $180 billion on war, $150 billion to rebuild
- Capitalism financed war
- Financial headquarters shifts from London to New York
- US lent Europe tons of money
- France in huge debt
- Bolsheviks refuse to pay off war debts
- Germany owes French tons of money
- Germany in huge debt – war + reparations
- Borrows from US to pay French
- France in huge debt
- Problem…these loans could never be repaid
- US lent Europe tons of money
- Stock Market crash, bank failures – no more credit to Europe
- Impact
- Political extremism
- Communist say capitalism is a mess
- Fascists want to protect enterprise and promote their nation
- Political extremism
- Destroyed Europe and Latin America
- Technology
- Move toward postindustrial economies
- Less on manufacturing, more on service, information, computers
- Move toward postindustrial economies
- Post World War II Policies – assistance by the superpowers
- Rebuilding Europe after WWII
- Soviet Bloc – COMECON - Council for Mutual Economic Assistance
- Economies nationalized/centrally planned
- Collectivization under state control
- Massive industrialization
- “socialist division of labor” – every nation focuses in a few areas
- Soviet welfare systems
- education, medical care, pensions
- Poor quality consuper goods
- Focus on heavy industry/weapons
- Maintained through political repression
- Western Europe – Marshall Plan – European Recovery Plan
- A “miracle” – helped prevent the spread of communism
- W. Germany rose from ruins – European economic powerhouse
- Technical innovation – move to postindustrial world
- Put into place social welfare systems
- Created “third way” – blend of capitalism and social-welfare
- Free trade key to economic prosperity – and world peace
- FD Roosevelt – believed in John Maynard Keynes – Keynsian
- Nations that economically interacted less likely to go to war
- Met in Bretton Woods, New Hampshire
- International Bank for Reconstruction and Development
- World Bank
- International Monetary Fund
- International Bank for Reconstruction and Development
- 1958 General Agreement on Tariffs and Trade
- USSR refused to join “Bretton Woods System”
- They are cut off from world trade
- Currency exchanges fixed on US dollar > based on gold standard
- Prosperity, modernization, recovery in Europe/Japan amazing
- Western Europe develops economic unions to protect/build Europe
- European Coal and Steel Community
- European Economic Community
- European Union
- Western Europe develops economic unions to protect/build Europe
- Soviet Bloc – COMECON - Council for Mutual Economic Assistance
- Rebuilding Europe after WWII
- Pacific Rim
- Multinational Corporations
- International trade increases
- Huge conglomerates though technically “from” a single country
- Maintained factories, subsidiaries, distribution networks around the world
- Employing foreign workers
- Selling directly to foreign markets
- Groundwork laid in 1980s and 1990s…but internet/communication/transporation made easier
- Criticism
- Exploiting regional labor
- Harming regional environments
- Preventing host economies from producing homegrown industries/mfg goods
- Regional diplomatic alliances
- European Union
- Out with divisive nationalism, support for union
- Enables Europe to boost economic strength
- Increase its diplomatic clout
- Work together to prevent war/political extremism
- First steps – economic
- 1952 – Six Nations – European Coal and Steel Company
- Belgium, Luxembourg, Netherlands, Italy, France, W. Germ
- 1957 – Treaty of Rome – European Economic Community
- Common Market
- Eliminate internal tariffs
- Encourage free movement of money, goods, services, labor
- Gradually added Britain, Ireland, Denmark
- 15 members by 1990s
- Monetary union - Euro
- 1952 – Six Nations – European Coal and Steel Company
- Out with divisive nationalism, support for union
- Association of Southeast Asian Nations – ASEAN
- Japan, Taiwan, South Korea, Indonesia, Singapore
- Mostly diplomatic in nature, but tightened economic ties
- 1991 – African Economic Community
- Mimics many goals of European Union –see above
- Organization of Petroleum Exporting Countries (OPEC)
- determines supply/demand
- Most successful and influential international coalitions in history
- Industrial Revolution huge boon to Middle East – sitting on 2/3 of oil
- When they cut prices in 1970s – billions of extra dollars to accounts
- Saudi Arabia uses to modernize infrastructure
- Since 1970s, tough to keep in line, someone always breaks deal
- Individual nations still have huge power
- Soviet Union and allies and China remained relatively isolated
- European Union
- Economic Crisis – West in the 1970s
- West in the 1970s
- Energy shortages
- Oil embargo of 1973 damaged economy
- Recession
- Unemployment
- Slowdown of the West
- Stagflation – rare combination of inflation and stagnation
- Energy shortages
- Eastern Europe
- Difficult transition from communism to capitalism
- Devaluing of the U.S. Dollar
- Detached money from gold standard > monetary instability
- Eastern Bloc not killed by OPEC’s embargo, but…
- Inefficiency
- Food shortages
- Cost of the arms race
- Governmental corruption
- 1971 – Nixon takes US off the gold standard
- West in the 1970s
- Economic Globalization During the 1990s
- Causes
- Chronologically/causally linked to fall of Soviet Union
- Linked to democratization of the developing world
- Explosion of computer technology/Internet activity
- Electronic transfer of money
- Group of Seven – G-7, then G-8
- US, Canada, Great Britain, Japan, Germany, France, Italy, Russia
- Meet more often
- World Trade Organization (WTO) – regulates economic interaction of 100+ nation
- Regional economic unions more important
- North American Free Trade Agreement – NAFTA
- Western Europe – Maastricht Treaty
- Common monetary system
- Creation of single currency
- Establishment of European Central Bank
- Common policy making for
- Immigration
- Environmental protection
- Foreign affairs and security issues
- Benefits of Globalization
- Created great wealth/led to prosperity
- Free trade helps to preserve peace
- Costs of Globalization
- So interconnected – negative trend sin one region adversely affect world
- Nations unwilling to turn of economic policies to WTO
- Leads to constant state of change/economic instability
- Seeking profits, corporations constantly moving to cheap production
- Relocating to new city/country
- Best tax benefits
- Most lenient environmental standards
- Cheapest labor
- Negative effects
- lowering of wages
- Sudden unemployment
- Social stress
- Relocating to new city/country
- Seeking profits, corporations constantly moving to cheap production
- Farmers can’t compete with cheap food from other countries
- Homogenizing effects o nculture
- Indigenous cultures crushed
- Replaced with foreign, American, pop culture and values
- Major themes of 20th century economics
- active commercial and trade interactions in every region
- Great Depression – impact of decline of trade one region on others
- National tariffs in US weakened global trade
- Price/supply manipulations by oil-producing nations affect globe
- After communism, more nations implement free-market economies
- Regional trade associations organized to facilitate trade
- Mass consumerism created truly global marketplace
- Global trade by region
- Middle East
- 1960 OPEC founded to regulate oil prices, control distribution
- Southwest Asia joins international drug trade
- Asia
- 1920s – Japanese silk exports reduced – US synthetic fibres
- Interwar period – China prospered in global drug trade
- Southeast Asian rubber exports damaged
- Vietnam became one of leading rice exporters
- But…monoculture left them hungry
- Japan’s regional empire supplies food/raw materials
- 1960s/1970s – Japanese electronics/cars cut into US market
- 1970s – Korea produces cheap textiles, steel, automobiles
- 1970s – Taiwan joins global textile trade
- 1980s – Hong Kong exports clothing/heavy industry
- Singapore 4th largest port
- Indonesia exports exotic woods
- Korea exports automobiles, supertankers, electronics
- Africa
- After WWI, Africa has no money to purchase industrial goods
- South African miners prosper from gold/copper mines
- After WWII – rely on sale of minerals/cash crops
- Constant fluctuation in prices hurts economic growth
- Nigeria – oil-producing country, member of OPEC
- Africa exports native art
- Europe
- During WWI, Europe surrenders export dominance to US/Japan
- Eastern Europe remained agricultural, exported to W. Europe
- 1958 – European Economic Community (Common Market)
- Reduces tariffs between
- Common tariff policy for other world nations
- Renamed European Union in 1990s
- 2002 – member nations accept Euro
- Britain the exception
- Latin America
- WWI/European trade brought prosperity to L. America
- Forced import substitution industrialization
- Have to make up for lack of European imports
- Forced import substitution industrialization
- Great Depression kills export economy
- US Cuba’s leading trade partner till 1959 – fluctuation in world demand altered price
- Cuba’s economy tied to USSR after Cuban Revolution
- Economy falls apart after USSR dissolved
- Colombia major participant in international drug trade
- Brazil exports exotic woods
- Venezuela – member of OPEC, Mexico produces oil
- WWI/European trade brought prosperity to L. America
- North America
- WWI -= US becomes creditor nation, huge exports
- US exports reach the world
- Food, wheat, corn, fast foods
- NAFTA – 1994 – abolished tariffs between US, Canada, Mexico
- 1999 – Seattle – demonstrators protest World Trade Organization
- US + advertising led to worldwide diffusion of products/culture
- Middle East
- Causes
- The Great Depression
Subject:
US History [1]
Subject X2:
US History [1]