Great Depression within the Context of Stability and Role of IMF
1. Introduction: Rising Waves of Globalization and Economic Crises Globalization is a multidimensional process. Relatively speaking, economic globalization is the integration of national economies into the international economy in order to constitute a unique global market. In this thesis, the role of WTO in the economic globalization process after 1950 and its place in contemporary economic system are studied. GATT, having an institutional and legal framework, is a macro organization which has been established after the Second World War for liberalization of world trade system. GATT has been transformed to WTO in 1995 (O'Rourke and Williamson, 2002). The functions of the WTO are the same with the GATT but have a stronger legal status. Although some serious problems within the WTO system, this positive impact have been still lasting. As for the relationship of these matters, we see that international systems stability is affected by the operations of international organizations such as IMF or World Bank. So, there is a clear link between emergence of crises and the measures taken to mediate and stabilize these possible crises. After taking all of these steps, it is vital to link antecedents of crises to their control and stabilization mechanisms (Mitchener, 2005). 2. Great Depression: Antecedents and the Context Factors
1873 Long Depression (Panic of 1873) was the first ever crises experienced before the Great Depression. Although literature refers The Great Depression of 1929 as the first international crisis, Long Depression was a deeper economic crisis embracing the world and during the depression no country could loan the others. Since The Great Depression world countries has faced many economic crisis. As a consequence of the globalization and interdependence, all countries felt the crises more or less (Calomiris and Mason, 2003). Contagious effects of the crises particularly following 1990s have resulted in the creation of new theories. Nevertheless internal economic and political instabilities of a certain country may also lead to a crisis. In case of instability, due to the great sensibility of the foreign capital, outflow of foreign capital may intensify the damages of crisis. Before the Great Depression, world witnessed another significant crises that shaped the dynamics and power structures of the world. The crisis of 1873-1896 can be considered the first general crisis of capitalism. This crisis, which was named as “Great Depression” by contemporaries, manifested itself with a persisting profitability problem arising from secular downward trend in prices and pessimistic investment conditions. However, during the crisis period, volume of production and foreign trade continued to increase with decelerating growth rate (Calomiris and Mason, 2003). During the Greta Depression period, underdeveloped countries including the Ottoman Empire and the newly emerging Turkish Republic faced serious problems because of the cessation of the capital exports from developed countries. In these countries European financial control was established to guarantee large debt payments. European financial control over the economies of underdeveloped countries led to the establishment of a new international division of labor on which the underdeveloped countries specialized on the production and exportation of primary goods (Mitchener, 2005). Moreover, deterioration of external terms of trade and rapid decline in prices of primary goods strengthened the control of international finance-capital over underdeveloped countries. However, the crisis affected these countries according to their internal conditions (Calomiris, 1993).
To overcome profitability problem associated with crisis, some mechanisms were implemented. Among them, protective tariffs, creating monopolies such as trusts and cartels, increasing productivity by developing more efficient management...
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