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Trade builds Globalization The EIC existed because of the demand of things like tea
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The goal of all this was a favorable balance of trade.. …exporting more than was imported
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However, as countries try to do this they risk a worldwide reduction in trade volume. This equals depression and a loss of productivity
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Before 1945 much trade was done in regional or exclusive blocs
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The British had the Imperial Preference system Commonwealth Countries were given better deals
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Japan did this with East Asia (Their WWII Empire was called the “The Greater East Asia Co-Prosperity Sphere”)
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The US used the Monroe Doctrine to obtain favorable trade with Latin and South America
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After 1945 a major goal of the US, and FDR, was a de-construction of this and a return to truly free trade
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The beginning of a fully negotiated monetary and trading regime. Designed to prevent a repeat of post WWI collapse of the international economy
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Two key words: Regulated market Currency control
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The US and the UK studied the problems that had led to the Great Depression Wild fluctuations in exchange rates Sudden currency devaluation
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The US worried that there would be no strong market for US goods and services after the war Enter the Marshall Plan
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The Marshall Plan was designed to pump recovery monies into Europe. In 2008 terms, almost 300 billion was given in both loans and gifts to Europe.
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It became a cornerstone of Cold War policy as well. Money was offered to Eastern Europe and the USSR It was declined, of course.
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The Soviets tried a similar program but it failed to stimulate as much as the massive US influx of cash did.
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The Marshall plan was a cornerstone of Military strategy as well. A revitalized Germany was an integral part of the Marshall Plan And a major fear of the Soviets
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In the next two decades, Europe surpassed pre-war agricultural production and industrial capacity increased by almost 35 percent.
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Noam Chomsky The amount of American dollars given to France and the Netherlands equaled the funds these countries used to finance their military forces in southeast Asia
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The Marshall plan played a large role in setting the stage for global economic management on a scale unprecedented. Bretton Woods built a regime that included…
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To manage world trade, several organizations were set up. GATT IMF WTO
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Major tasks: Reduction of trade and tariff barriers Was superseded in 1995 by…
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Further liberalization of trading regimes Poor states possess a veto Economists believe that big states may reform blocs to control their trade better
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The IMF was designed to regulate a monetary regime Competitive devaluations were forbidden (This is where a state makes itself more attractive for international markets)
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Designed to maintain international liquidity Provides cash inflow to states with insufficient cash flows. Do this by making short term loans
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If you take a loan, the IMF will impose “pre conditionality” These are essentially economic performance targets that need to be in place for an IMF loan
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Structural Adjustment Program Basically, the IMF wants a troubled government to sell off anything it can to help balance books. In the past these sales were at highly discounted prices to Western States.
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These are implemented by the IMF and do things like.. ..raise taxes ..lower corporate taxes Budget restrictions
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Argentina- Budget restrictions helped to implode the ability to finance any public good. Kenya-Opened up the Central bank to corruption by easing currency restrictions.
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Designed as a multi-lateral capital investment corporation after 1945. The purpose was to re-build war torn economies
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Later it switched from lending money to 3 rd world countries to… …integrating them more effectively in an open and global political enviroment.
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Throughout the 70s and 80s, many 3 rd world states borrowed heavily and were, consequently, left in debt. The capital gains expected never materialized; the interest payments took too much on already stretched economies.
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