The Postwar Political Economy: Institutions and Growth
* The first post-war period (1945-1975) witnessed strong economic growth and gradual increase in globalization under the Bretton Woods institutions. What do we mean by “the Bretton Woods institutions” (Background Brief: Bretton Woods Institutions)? What role did the US play in setting up these institutions and what were its motives? The Bretton Woods Institutions take their name from a multilateral conference held in July 1944 at the Bretton Woods resort in New Hampshire. The narrow definition of Bretton Woods Institutions refer to the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), while they were only part of a much broader wave of international institutional innovation, including the World Bank Group, GATT, other multilateral development banks, UN, and other multilateral international organizations. Bretton Woods System was to create a multilateral institutional framework to avoid the inter-states conflicts of the interwar years. It was also to assist in the reconstruction of a new international economic order after WWII. It was a collectively goods, a majority of which was provided by the US, to restore and secure a new world order. US played core role in the establishment, maintenance and development of the whole system. The primary motives include: 1. US believed the Bretton Woods System could help extend its allies front, and help restore the old Europe under massive destruction of WWII. 2. Bretton Woods System, as it took multilateralism as core principle, would be idealistic to settle down inter-states disputes and avoid a new world war. 3. Bretton Woods System would help coordinate collective action of member parties and prevent massive worldwide economic depression. * Since the Global Financial Crisis (2008-2009), what are the most important changes that have occurred to the global system? Generally speaking, the world economy in the foreseeable future is going to be much more dependent on the developing world than the past. Convergence in income levels is likely to continue since the crisis, reflecting both the fair performance of developing economies and the poor performance of industrial countries. The reform on international macroeconomic and financial architecture requires active role of developing countries. Yet some questions remain. The first is whether major developing countries particularly China can become an alternative engine of the world economy. The second is the dynamics of world trading system and the transformation of center-periphery character.
* Review Background Brief No. 2, so you are familiar with the main periods of globalization. In what way does the Bretton Woods system (Period 3) develop as a reaction to the problems of the Interwar Period (Period 2)? During Period 3, the US shouldered the responsibility of international institution, coordinated the trade and financial issues and facilitated interstate cooperation. It is reaction to the lack of a hegemon and dominating force that fail to sustain the stability of international order in the Interwar Period. And gradual but steady liberalization of trade and financial controls also took place, when Keynesianism was triumphant to combat the depressions. In sum, a tightened international tie was constructed as US clearly assumed the leadership and more binding international organizations were established.
* What do we mean by GDP and how does it relate to the concept of economic growth? GDP means the total “value-added”, the sum of all the value-adding activity carried out in a given geographic territory in a certain time period. It is equal to the sum of the value of all final goods and services produced in a given economy. GDP is a useful measure of the total economy size in a country at given period. Therefore by referring to the changing rate of GDP we might also acquire the growth rate of...
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